FIDELITY(REGISTERED TRADEMARK) ADVISOR
GOVERNMENT INVESTMENT
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 44 The auditors' opinion.
DISTRIBUTIONS 45
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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
five year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.53% 40.12% 94.36%
CL A
FIDELITY ADV GOVERNMENT INV - -6.21% 33.46% 85.13%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond -1.21% 44.88% 109.73%
General US Government Funds -1.75% 39.00% 94.06%
Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the Lehman
Brothers 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 one year average represents a peer group of 178 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.53% 6.98% 6.87%
CL A
FIDELITY ADV GOVERNMENT INV - -6.21% 5.94% 6.35%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
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
1989/10/31 9525.00 10000.00
1989/11/30 9597.35 10096.84
1989/12/31 9644.85 10113.89
1990/01/31 9539.90 9970.71
1990/02/28 9571.33 9990.60
1990/03/31 9585.49 9988.41
1990/04/30 9499.38 9900.32
1990/05/31 9777.71 10176.41
1990/06/30 9918.56 10337.52
1990/07/31 10038.78 10469.77
1990/08/31 9974.59 10323.96
1990/09/30 10040.90 10422.99
1990/10/31 10141.77 10593.28
1990/11/30 10318.60 10828.05
1990/12/31 10451.69 10995.50
1991/01/31 10566.36 11113.54
1991/02/28 10654.35 11177.15
1991/03/31 10697.17 11233.99
1991/04/30 10786.05 11357.28
1991/05/31 10842.66 11401.43
1991/06/30 10836.51 11385.26
1991/07/31 10952.67 11520.35
1991/08/31 11122.54 11787.48
1991/09/30 11323.57 12034.71
1991/10/31 11424.73 12140.08
1991/11/30 11490.77 12261.84
1991/12/31 11857.52 12679.58
1992/01/31 11696.69 12482.18
1992/02/29 11750.48 12530.93
1992/03/31 11669.88 12457.70
1992/04/30 11738.26 12536.18
1992/05/31 11953.73 12767.46
1992/06/30 12119.21 12950.42
1992/07/31 12323.84 13276.79
1992/08/31 12429.93 13400.52
1992/09/30 12545.41 13590.04
1992/10/31 12394.15 13393.96
1992/11/30 12425.51 13370.79
1992/12/31 12626.35 13595.94
1993/01/31 12842.59 13884.71
1993/02/28 13083.60 14162.77
1993/03/31 13158.61 14210.20
1993/04/30 13257.74 14319.50
1993/05/31 13278.63 14303.76
1993/06/30 13540.01 14621.17
1993/07/31 13607.06 14710.36
1993/08/31 13828.92 15038.69
1993/09/30 13854.29 15096.18
1993/10/31 13947.22 15153.24
1993/11/30 13733.87 14987.10
1993/12/31 13807.82 15045.03
1994/01/31 14048.57 15250.95
1994/02/28 13723.21 14928.08
1994/03/31 13308.46 14592.31
1994/04/30 13175.68 14477.55
1994/05/31 13189.42 14458.97
1994/06/30 13144.50 14425.74
1994/07/31 13431.07 14690.90
1994/08/31 13423.23 14693.74
1994/09/30 13234.64 14486.73
1994/10/31 13212.26 14475.80
1994/11/30 13187.07 14449.35
1994/12/31 13276.33 14537.23
1995/01/31 13514.67 14807.85
1995/02/28 13809.99 15126.57
1995/03/31 13901.52 15221.44
1995/04/30 14066.16 15420.36
1995/05/31 14613.24 16042.28
1995/06/30 14715.80 16165.35
1995/07/31 14664.13 16105.89
1995/08/31 14830.77 16295.20
1995/09/30 14965.85 16452.15
1995/10/31 15182.74 16702.66
1995/11/30 15399.33 16963.01
1995/12/31 15619.86 17203.47
1996/01/31 15700.02 17309.05
1996/02/29 15378.18 16956.46
1996/03/31 15236.20 16814.80
1996/04/30 15138.34 16707.47
1996/05/31 15106.30 16679.49
1996/06/30 15282.15 16894.81
1996/07/31 15313.00 16936.56
1996/08/31 15277.18 16898.75
1996/09/30 15519.80 17179.21
1996/10/31 15849.72 17557.16
1996/11/30 16111.02 17862.55
1996/12/31 15938.99 17680.23
1997/01/31 15951.81 17699.91
1997/02/28 15975.55 17724.17
1997/03/31 15800.73 17536.62
1997/04/30 16034.57 17789.75
1997/05/31 16151.03 17943.21
1997/06/30 16317.77 18144.54
1997/07/31 16781.54 18659.55
1997/08/31 16617.26 18475.06
1997/09/30 16854.24 18752.90
1997/10/31 17131.57 19077.30
1997/11/30 17200.99 19175.01
1997/12/31 17375.56 19375.46
1998/01/31 17635.57 19665.33
1998/02/28 17584.52 19611.99
1998/03/31 17612.87 19667.51
1998/04/30 17674.70 19756.04
1998/05/31 17849.39 19958.90
1998/06/30 18024.20 20185.81
1998/07/31 18053.37 20217.07
1998/08/31 18432.34 20743.02
1998/09/30 18903.58 21302.19
1998/10/31 18800.58 21229.62
1998/11/30 18809.62 21236.83
1998/12/31 18840.31 21284.27
1999/01/31 18964.15 21407.77
1999/02/28 18510.88 20898.66
1999/03/31 18580.10 20980.70
1999/04/30 18645.79 21028.24
1999/05/31 18461.20 20843.79
1999/06/30 18391.23 20801.36
1999/07/31 18304.42 20771.21
1999/08/31 18294.13 20770.94
1999/09/30 18499.49 20939.62
1999/10/29 18513.09 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991109 114740 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class A on
October 31, 1989, and the current 4.75% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,513 - a 85.13% 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 $20,973- a 109.73% 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
1999 1998 1997 1996
Dividend returns 5.56% 6.12% 6.19% 0.99%
Capital returns -7.09% 3.62% 1.90% 2.59%
Total returns -1.53% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.69(cents) 26.98(cents) 55.87(cents)
Annualized dividend rate 5.97% 5.71% 5.82%
30-day annualized yield 5.72% - -
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 $9.25 over the past one
month, $9.38 over the past six months and $9.60 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 five year and past 10 year total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.71% 39.47% 93.45%
CL T
FIDELITY ADV GOVERNMENT INV - -5.15% 34.58% 86.68%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond -1.21% 44.88% 109.73%
General US Government Funds -1.75% 39.00% 94.06%
Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the Lehman
Brothers 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 one year average represents a peer group of 178 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.71% 6.88% 6.82%
CL T
FIDELITY ADV GOVERNMENT INV - -5.15% 6.12% 6.44%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
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
1989/10/31 9650.00 10000.00
1989/11/30 9723.30 10096.84
1989/12/31 9771.42 10113.89
1990/01/31 9665.10 9970.71
1990/02/28 9696.94 9990.60
1990/03/31 9711.28 9988.41
1990/04/30 9624.04 9900.32
1990/05/31 9906.03 10176.41
1990/06/30 10048.72 10337.52
1990/07/31 10170.52 10469.77
1990/08/31 10105.49 10323.96
1990/09/30 10172.67 10422.99
1990/10/31 10274.86 10593.28
1990/11/30 10454.02 10828.05
1990/12/31 10588.85 10995.50
1991/01/31 10705.03 11113.54
1991/02/28 10794.17 11177.15
1991/03/31 10837.55 11233.99
1991/04/30 10927.60 11357.28
1991/05/31 10984.95 11401.43
1991/06/30 10978.72 11385.26
1991/07/31 11096.41 11520.35
1991/08/31 11268.51 11787.48
1991/09/30 11472.17 12034.71
1991/10/31 11574.66 12140.08
1991/11/30 11641.57 12261.84
1991/12/31 12013.13 12679.58
1992/01/31 11850.19 12482.18
1992/02/29 11904.69 12530.93
1992/03/31 11823.03 12457.70
1992/04/30 11892.31 12536.18
1992/05/31 12110.60 12767.46
1992/06/30 12278.25 12950.42
1992/07/31 12485.57 13276.79
1992/08/31 12593.05 13400.52
1992/09/30 12710.04 13590.04
1992/10/31 12556.80 13393.96
1992/11/30 12588.57 13370.79
1992/12/31 12792.05 13595.94
1993/01/31 13011.13 13884.71
1993/02/28 13255.30 14162.77
1993/03/31 13331.29 14210.20
1993/04/30 13431.73 14319.50
1993/05/31 13452.89 14303.76
1993/06/30 13717.70 14621.17
1993/07/31 13785.63 14710.36
1993/08/31 14010.40 15038.69
1993/09/30 14036.11 15096.18
1993/10/31 14130.25 15153.24
1993/11/30 13914.10 14987.10
1993/12/31 13989.03 15045.03
1994/01/31 14232.93 15250.95
1994/02/28 13903.31 14928.08
1994/03/31 13483.12 14592.31
1994/04/30 13348.59 14477.55
1994/05/31 13362.51 14458.97
1994/06/30 13317.00 14425.74
1994/07/31 13607.33 14690.90
1994/08/31 13599.39 14693.74
1994/09/30 13408.33 14486.73
1994/10/31 13385.65 14475.80
1994/11/30 13360.13 14449.35
1994/12/31 13450.56 14537.23
1995/01/31 13692.02 14807.85
1995/02/28 13991.22 15126.57
1995/03/31 14083.95 15221.44
1995/04/30 14250.75 15420.36
1995/05/31 14805.01 16042.28
1995/06/30 14908.92 16165.35
1995/07/31 14856.57 16105.89
1995/08/31 15025.40 16295.20
1995/09/30 15162.25 16452.15
1995/10/31 15381.99 16702.66
1995/11/30 15601.42 16963.01
1995/12/31 15824.85 17203.47
1996/01/31 15906.06 17309.05
1996/02/29 15579.99 16956.46
1996/03/31 15436.15 16814.80
1996/04/30 15337.01 16707.47
1996/05/31 15304.54 16679.49
1996/06/30 15482.70 16894.81
1996/07/31 15513.96 16936.56
1996/08/31 15477.67 16898.75
1996/09/30 15722.72 17179.21
1996/10/31 16055.45 17557.16
1996/11/30 16318.95 17862.55
1996/12/31 16160.67 17680.23
1997/01/31 16154.03 17699.91
1997/02/28 16176.95 17724.17
1997/03/31 15998.53 17536.62
1997/04/30 16216.82 17789.75
1997/05/31 16350.85 17943.21
1997/06/30 16535.82 18144.54
1997/07/31 16986.18 18659.55
1997/08/31 16817.97 18475.06
1997/09/30 17056.50 18752.90
1997/10/31 17335.76 19077.30
1997/11/30 17397.29 19175.01
1997/12/31 17568.05 19375.46
1998/01/31 17829.83 19665.33
1998/02/28 17776.83 19611.99
1998/03/31 17803.99 19667.51
1998/04/30 17865.04 19756.04
1998/05/31 18039.93 19958.90
1998/06/30 18233.75 20185.81
1998/07/31 18243.10 20217.07
1998/08/31 18605.78 20743.02
1998/09/30 19099.26 21302.19
1998/10/31 18993.74 21229.62
1998/11/30 19000.49 21236.83
1998/12/31 19030.43 21284.27
1999/01/31 19154.91 21407.77
1999/02/28 18676.91 20898.66
1999/03/31 18765.10 20980.70
1999/04/30 18830.18 21028.24
1999/05/31 18622.75 20843.79
1999/06/30 18550.53 20801.36
1999/07/31 18481.27 20771.21
1999/08/31 18449.86 20770.94
1999/09/30 18655.95 20939.62
1999/10/29 18668.39 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991111 162359 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class T on
October 31, 1989, and the current 3.50% sales charge was paid. As the
chart shows, by October 31, 1999 the value of the investment would
have grown to $18,668 - a 86.68% 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 $20,973 - a 109.73% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.48% 5.94% 6.07% 6.24% 6.99%
Capital returns -7.19% 3.62% 1.90% -1.86% 7.92%
Total returns -1.71% 9.56% 7.97% 4.38% 14.91%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.62(cents) 26.57(cents) 55.08(cents)
Annualized dividend rate 5.89% 5.63% 5.74%
30-day annualized yield 5.72% - -
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 $9.24 over the past one
month, $9.37 over the past six months and $9.60 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 one year, past
five years and past 10 years total return figures are 5%, 2% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five year and past 10 year total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -2.24% 35.09% 86.61%
CL B
FIDELITY ADV GOVERNMENT INV - -6.88% 33.09% 86.61%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -1.21% 44.88% 109.73%
General US Government Funds -1.75% 39.00% 94.06%
Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the Lehman
Brothers 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 one year average represents a peer group of 178 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -2.24% 6.20% 6.44%
CL B
FIDELITY ADV GOVERNMENT INV - -6.88% 5.88% 6.44%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
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
1989/10/31 10000.00 10000.00
1989/11/30 10075.96 10096.84
1989/12/31 10125.82 10113.89
1990/01/31 10015.65 9970.71
1990/02/28 10048.64 9990.60
1990/03/31 10063.51 9988.41
1990/04/30 9973.10 9900.32
1990/05/31 10265.32 10176.41
1990/06/30 10413.18 10337.52
1990/07/31 10539.40 10469.77
1990/08/31 10472.01 10323.96
1990/09/30 10541.62 10422.99
1990/10/31 10647.53 10593.28
1990/11/30 10833.18 10828.05
1990/12/31 10972.90 10995.50
1991/01/31 11093.30 11113.54
1991/02/28 11185.67 11177.15
1991/03/31 11230.62 11233.99
1991/04/30 11323.94 11357.28
1991/05/31 11383.37 11401.43
1991/06/30 11376.91 11385.26
1991/07/31 11498.87 11520.35
1991/08/31 11677.21 11787.48
1991/09/30 11888.26 12034.71
1991/10/31 11994.46 12140.08
1991/11/30 12063.80 12261.84
1991/12/31 12448.84 12679.58
1992/01/31 12279.99 12482.18
1992/02/29 12336.47 12530.93
1992/03/31 12251.84 12457.70
1992/04/30 12323.63 12536.18
1992/05/31 12549.85 12767.46
1992/06/30 12723.58 12950.42
1992/07/31 12938.42 13276.79
1992/08/31 13049.80 13400.52
1992/09/30 13171.03 13590.04
1992/10/31 13012.23 13393.96
1992/11/30 13045.15 13370.79
1992/12/31 13256.01 13595.94
1993/01/31 13483.04 13884.71
1993/02/28 13736.06 14162.77
1993/03/31 13814.81 14210.20
1993/04/30 13918.89 14319.50
1993/05/31 13940.82 14303.76
1993/06/30 14215.23 14621.17
1993/07/31 14285.63 14710.36
1993/08/31 14518.55 15038.69
1993/09/30 14545.19 15096.18
1993/10/31 14642.75 15153.24
1993/11/30 14418.76 14987.10
1993/12/31 14496.40 15045.03
1994/01/31 14749.15 15250.95
1994/02/28 14407.57 14928.08
1994/03/31 13972.14 14592.31
1994/04/30 13832.74 14477.55
1994/05/31 13847.16 14458.97
1994/06/30 13800.00 14425.74
1994/07/31 14076.83 14690.90
1994/08/31 14071.32 14693.74
1994/09/30 13845.66 14486.73
1994/10/31 13813.26 14475.80
1994/11/30 13777.88 14449.35
1994/12/31 13861.86 14537.23
1995/01/31 14101.69 14807.85
1995/02/28 14404.03 15126.57
1995/03/31 14490.66 15221.44
1995/04/30 14653.09 15420.36
1995/05/31 15213.82 16042.28
1995/06/30 15311.15 16165.35
1995/07/31 15247.14 16105.89
1995/08/31 15410.72 16295.20
1995/09/30 15541.52 16452.15
1995/10/31 15772.98 16702.66
1995/11/30 15988.22 16963.01
1995/12/31 16207.92 17203.47
1996/01/31 16281.58 17309.05
1996/02/29 15939.49 16956.46
1996/03/31 15784.34 16814.80
1996/04/30 15658.81 16707.47
1996/05/31 15616.26 16679.49
1996/06/30 15806.18 16894.81
1996/07/31 15829.32 16936.56
1996/08/31 15783.19 16898.75
1996/09/30 16024.94 17179.21
1996/10/31 16355.29 17557.16
1996/11/30 16616.22 17862.55
1996/12/31 16430.25 17680.23
1997/01/31 16432.61 17699.91
1997/02/28 16430.22 17724.17
1997/03/31 16257.34 17536.62
1997/04/30 16470.48 17789.75
1997/05/31 16579.75 17943.21
1997/06/30 16758.58 18144.54
1997/07/31 17206.19 18659.55
1997/08/31 17026.25 18475.06
1997/09/30 17276.82 18752.90
1997/10/31 17532.08 19077.30
1997/11/30 17585.29 19175.01
1997/12/31 17748.39 19375.46
1998/01/31 18021.64 19665.33
1998/02/28 17940.69 19611.99
1998/03/31 17958.28 19667.51
1998/04/30 18010.31 19756.04
1998/05/31 18176.86 19958.90
1998/06/30 18362.52 20185.81
1998/07/31 18380.47 20217.07
1998/08/31 18735.89 20743.02
1998/09/30 19204.42 21302.19
1998/10/31 19087.71 21229.62
1998/11/30 19084.85 21236.83
1998/12/31 19124.15 21284.27
1999/01/31 19220.07 21407.77
1999/02/28 18749.28 20898.66
1999/03/31 18808.12 20980.70
1999/04/30 18863.44 21028.24
1999/05/31 18664.85 20843.79
1999/06/30 18582.63 20801.36
1999/07/31 18483.54 20771.21
1999/08/31 18462.08 20770.94
1999/09/30 18638.49 20939.62
1999/10/29 18660.96 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991109 114938 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class B on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $18,661 - a 86.61% 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 $20,973 - a
109.73% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.85% 5.25% 5.41% 5.55% 6.15%
Capital returns -7.09% 3.62% 1.79% -1.86% 8.04%
Total returns -2.24% 8.87% 7.20% 3.69% 14.19%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.12(cents) 23.55(cents) 48.96(cents)
Annualized dividend rate 5.25% 4.99% 5.11%
30-day annualized yield 5.30% - -
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 $9.24 over the past one
month, $9.37 over the past six months, and $9.59 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 one year, past five years and past 10
years total return figures are 1%, 0%, and 0%, respectively. If
Fidelity had not reimbursed certain class expenses, the past five year
and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -2.43% 34.64% 85.98%
CL C
FIDELITY ADV GOVERNMENT INV - -3.36% 34.64% 85.98%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -1.21% 44.88% 109.73%
General US Government Funds -1.75% 39.00% 94.06%
Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to those of the Lehman
Brothers 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 one year average represents a peer group of 178 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -2.43% 6.13% 6.40%
CL C
FIDELITY ADV GOVERNMENT INV - -3.36% 6.13% 6.40%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
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
1989/10/31 10000.00 10000.00
1989/11/30 10075.96 10096.84
1989/12/31 10125.82 10113.89
1990/01/31 10015.65 9970.71
1990/02/28 10048.64 9990.60
1990/03/31 10063.51 9988.41
1990/04/30 9973.10 9900.32
1990/05/31 10265.32 10176.41
1990/06/30 10413.18 10337.52
1990/07/31 10539.40 10469.77
1990/08/31 10472.01 10323.96
1990/09/30 10541.62 10422.99
1990/10/31 10647.53 10593.28
1990/11/30 10833.18 10828.05
1990/12/31 10972.90 10995.50
1991/01/31 11093.30 11113.54
1991/02/28 11185.67 11177.15
1991/03/31 11230.62 11233.99
1991/04/30 11323.94 11357.28
1991/05/31 11383.37 11401.43
1991/06/30 11376.91 11385.26
1991/07/31 11498.87 11520.35
1991/08/31 11677.21 11787.48
1991/09/30 11888.26 12034.71
1991/10/31 11994.46 12140.08
1991/11/30 12063.80 12261.84
1991/12/31 12448.84 12679.58
1992/01/31 12279.99 12482.18
1992/02/29 12336.47 12530.93
1992/03/31 12251.84 12457.70
1992/04/30 12323.63 12536.18
1992/05/31 12549.85 12767.46
1992/06/30 12723.58 12950.42
1992/07/31 12938.42 13276.79
1992/08/31 13049.80 13400.52
1992/09/30 13171.03 13590.04
1992/10/31 13012.23 13393.96
1992/11/30 13045.15 13370.79
1992/12/31 13256.01 13595.94
1993/01/31 13483.04 13884.71
1993/02/28 13736.06 14162.77
1993/03/31 13814.81 14210.20
1993/04/30 13918.89 14319.50
1993/05/31 13940.82 14303.76
1993/06/30 14215.23 14621.17
1993/07/31 14285.63 14710.36
1993/08/31 14518.55 15038.69
1993/09/30 14545.19 15096.18
1993/10/31 14642.75 15153.24
1993/11/30 14418.76 14987.10
1993/12/31 14496.40 15045.03
1994/01/31 14749.15 15250.95
1994/02/28 14407.57 14928.08
1994/03/31 13972.14 14592.31
1994/04/30 13832.74 14477.55
1994/05/31 13847.16 14458.97
1994/06/30 13800.00 14425.74
1994/07/31 14076.83 14690.90
1994/08/31 14071.32 14693.74
1994/09/30 13845.66 14486.73
1994/10/31 13813.26 14475.80
1994/11/30 13777.88 14449.35
1994/12/31 13861.86 14537.23
1995/01/31 14101.69 14807.85
1995/02/28 14404.03 15126.57
1995/03/31 14490.66 15221.44
1995/04/30 14653.09 15420.36
1995/05/31 15213.82 16042.28
1995/06/30 15311.15 16165.35
1995/07/31 15247.14 16105.89
1995/08/31 15410.72 16295.20
1995/09/30 15541.52 16452.15
1995/10/31 15772.98 16702.66
1995/11/30 15988.22 16963.01
1995/12/31 16207.92 17203.47
1996/01/31 16281.58 17309.05
1996/02/29 15939.49 16956.46
1996/03/31 15784.34 16814.80
1996/04/30 15658.81 16707.47
1996/05/31 15616.26 16679.49
1996/06/30 15806.18 16894.81
1996/07/31 15829.32 16936.56
1996/08/31 15783.19 16898.75
1996/09/30 16024.94 17179.21
1996/10/31 16355.29 17557.16
1996/11/30 16616.22 17862.55
1996/12/31 16430.25 17680.23
1997/01/31 16432.61 17699.91
1997/02/28 16430.22 17724.17
1997/03/31 16257.34 17536.62
1997/04/30 16470.48 17789.75
1997/05/31 16579.75 17943.21
1997/06/30 16758.58 18144.54
1997/07/31 17206.19 18659.55
1997/08/31 17026.25 18475.06
1997/09/30 17276.82 18752.90
1997/10/31 17532.08 19077.30
1997/11/30 17581.08 19175.01
1997/12/31 17741.84 19375.46
1998/01/31 17994.60 19665.33
1998/02/28 17929.48 19611.99
1998/03/31 17946.49 19667.51
1998/04/30 17996.90 19756.04
1998/05/31 18161.54 19958.90
1998/06/30 18345.24 20185.81
1998/07/31 18342.83 20217.07
1998/08/31 18695.46 20743.02
1998/09/30 19179.86 21302.19
1998/10/31 19061.85 21229.62
1998/11/30 19057.76 21236.83
1998/12/31 19076.58 21284.27
1999/01/31 19189.76 21407.77
1999/02/28 18699.32 20898.66
1999/03/31 18775.55 20980.70
1999/04/30 18829.08 21028.24
1999/05/31 18609.64 20843.79
1999/06/30 18526.18 20801.36
1999/07/31 18445.59 20771.21
1999/08/31 18403.15 20770.94
1999/09/30 18597.23 20939.62
1999/10/29 18598.14 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991109 114753 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class C on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $18,598 - a 85.98% 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 $20,973 - a
109.73% 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
YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 4.76% 5.08%
Capital returns -7.19% 3.94%
Total returns -2.43% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.05(cents) 23.08(cents) 48.00(cents)
Annualized dividend rate 5.16% 4.89% 5.01%
30-day annualized yield 5.20% - -
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 $9.24 over the past one
month, $9.37 over the past six months, and $9.59 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Government Investment Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the 12-month period that ended October 31, 1999, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
- -1.53%, -1.71%, -2.24% and -2.43%, respectively. To get a sense of how
the fund did relative to its competitors, the general U.S. government
funds average returned -1.75% for the same 12-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 -1.21% for the same 12-month period.
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
roughly 20% of its investments in mortgage securities, which are not
contained in the index. Both agency and mortgage securities outpaced
their Treasury counterparts during the year, so the fund's relatively
heavy allocation to those sectors helped performance.
Q. THE PAST YEAR WITNESSED A DRAMATIC SHIFT IN THE DIRECTION OF
INTEREST RATES. HOW DID THAT SHIFT INFLUENCE YOUR STRATEGY?
A. The reversal of interest rates prompted a pronounced change in the
types of mortgage securities I emphasized. The biggest risk associated
with mortgage securities is a rapid acceleration of prepayment
activity that tends to accompany falling interest rates. That's
exactly what occurred in 1998 and early 1999 when interest rates fell
dramatically and huge waves of homeowners refinanced their mortgages.
To help mitigate the damage caused by the crush of prepayment
activity, I emphasized mortgage securities that provided some measure
of prepayment protection, such as 15-year Fannie Mae securities and
30-year Ginnie Mae securities. But when interest rates reversed course
and began to move higher, the threat of prepayments declined
dramatically. So I turned my focus toward higher-yielding mortgage
securities, selling 15-year Fannie Maes and 30-year Ginnie Maes and
purchasing 30-year 7% Fannie Mae and Freddie Mac securities.
Q. WHAT CHOICES DID YOU MAKE IN THE AGENCY SECTOR?
A. The majority of the fund's agency holdings were non-callable,
meaning they are protected from being redeemed by their issuer before
maturity. Their appeal stems from the fact that the fund can continue
to hold onto relatively high yielding bonds even when interest rates
are falling and issuers tend to step up their redemption activity.
That said, callable bonds were selling at very attractive prices at
certain points throughout the period, so I added some.
Q. ARE HIGHER YIELDS THE REASON WHY YOU ADDED MORE AGENCY SECURITIES?
A. That's right. In their quest to boost their earnings, agency
issuers dramatically stepped up issuance over the past two years. That
resulting supply glut caused agency securities to weaken. Despite
their recent disappointing performance, I held onto agency securities
for their total return potential and because they offered attractive
yields - between 40 and 60 basis points (0.40% and 0.60%) more than
Treasuries at the end of the period.
Q. WHAT'S YOUR OUTLOOK?
A. I believe that the yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries,
which is why I'll most likely keep relatively large weightings in
them. The reduction in prepayment activity most likely will continue
to be positive for mortgage securities, causing the yield spread
between mortgage and Treasury securities to narrow. Likewise, agencies
could do well to the extent that their spread relationship with
Treasuries returns to more normal levels as supply and demand trends
stabilize. While the supply of agency securities is forecast to remain
heavy next year, we could see more demand because agencies are
aggressively marketing their securities to foreign and other
non-traditional buyers. Even if spreads remain constant, the yield
advantage of mortgage and agency securities could help them to perform
better than Treasuries.
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 October 31,
1999 more than $383
million
MANAGER: Tom Silvia, since
1998; joined Fidelity in
1993
TOM SILVIA ON CHANGES IN THE
GOVERNMENT BOND MARKET:
"While higher interest rates have
been the primary factor
contributing to the performance of
various fixed-income securities so
far in 1999, supply also has played
a critical role. The supply of
Treasuries diminished, thanks
ultimately to the near decade-long
economic expansion in this country.
Continued economic growth helped
boost tax collections, create a
federal budget surplus and, in turn,
reduce the government's borrowing
needs. In fact, earlier this year the
U.S. Treasury announced that it
will abandon its traditional
November auction of 30-year
bonds, leaving only February and
August auctions. More recently,
the government announced its
intention to buy back Treasury
bonds in 2000, something that it
hasn't done in more than a
century.
"In contrast, agency securities
suffered from oversupply, which
was the key reason they lagged
Treasuries during the past year. In
an attempt to provide investors with
an alternative to safe, liquid U.S.
Treasuries, government agencies
such as Fannie Mae and Freddie
Mac have dramatically stepped up
their issuance of securities. These
agency issuers, which are public
companies, grow their revenues by
purchasing mortgage securities
and selling their own agency
securities with the goal of making
a profit."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.1 1.0
5 - 5.99% 16.0 11.9
6 - 6.99% 28.1 43.0
7 - 7.99% 18.8 9.9
8 - 8.99% 24.6 16.7
9 - 9.99% 3.8 9.6
10 - 10.99% 0.2 0.3
11 - 11.99% 0.7 0.7
12% and over 4.6 1.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING
SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 9.7 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 19.6% Mortgage Securities 22.2%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 2.1% Related Securities 2.5%
U.S. Treasury Obligations 24.9% U.S. Treasury Obligations 27.1%
U.S. Government Agency U.S. Government Agency
Obligations 51.2% Obligations 44.9%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.2% Net Other Assets 3.3%
Row: 1, Col: 1, Value: 19.6 Row: 1, Col: 1, Value: 22.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 2.1 Row: 1, Col: 3, Value: 2.5
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 24.9 Row: 1, Col: 5, Value: 27.1
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 51.2 Row: 1, Col: 7, Value: 44.9
Row: 1, Col: 8, Value: 2.2 Row: 1, Col: 8, Value: 3.3
</TABLE>
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 76.1%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 51.2%
Fannie Mae:
5.125% 2/13/04 $ 15,000,000 $ 14,259,300
5.25% 1/15/09 4,000,000 3,599,360
5.45% 2/4/02 6,000,000 5,874,000
6.25% 5/15/29 14,800,000 13,567,456
6.5% 4/29/09 10,250,000 9,758,308
Federal Farm Credit Bank:
5.7% 1/18/05 3,460,000 3,317,863
5.95% 5/18/05 2,000,000 1,938,440
Federal Home Loan Bank:
5.83% 8/25/05 8,670,000 8,342,187
5.875% 8/15/01 6,500,000 6,469,515
Financing Corp. - coupon 4,500,000 4,124,205
STRIPS 0% 4/6/01
Freddie Mac:
5.85% 2/21/06 1,000,000 955,780
6.25% 10/15/02 6,700,000 6,694,774
6.33% 9/21/05 2,800,000 2,758,000
7.625% 9/9/09 23,700,000 23,777,736
Government Loan Trusts 951,168 1,003,901
(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 3,881,291 3,995,673
Class 2-E 9.4% 5/15/02 585,453 601,559
Class T-3, 9.625% 5/15/02 309,520 318,122
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1993 C, 5.2% 10/15/04 212,444 205,578
Series 1993 D, 5.23% 5/15/05 239,787 231,177
Series 1994 A, 7.12% 4/15/06 10,510,870 10,568,681
Series 1994 F, 8.187% 12/15/04 4,335,608 4,475,055
Series 1995-A, 6.28% 6/15/04 2,064,705 2,053,094
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1994 B, 7.5% 1/26/06 200,661 206,005
Series 1994-A, 7.39% 6/26/06 5,250,000 5,317,200
Series 1997-A, 6.104% 7/15/03 2,666,666 2,638,667
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Israel Export Trust $ 218,235 $ 220,115
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% 1,629,750 1,626,784
8/15/04 (callable)
Series 1996-A1, 6.726% 1,913,043 1,910,767
9/15/10 (callable)
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) 1,700,000 1,610,699
5.65% 3/15/03 600,250 593,875
5.82% 6/15/03 (a) 8,600,000 8,335,120
6.31% 9/30/04 11,560,000 11,458,041
6.86% 4/30/04 906,750 912,695
6.9% 1/31/03 13,830,000 14,026,663
7.3% 1/31/02 1,500,000 1,531,170
8.35% 1/31/01 4,000,000 4,101,240
State of Israel (guaranteed 8,000,000 7,916,000
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
Tennessee Valley Authority 6% 1,000,000 998,280
11/1/00
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates:
Series 99-A, 5.96% 8/1/09 1,800,000 1,684,044
5.75% 8/1/06 2,100,000 1,977,570
U.S. Trade Trust Certificates 450,000 466,335
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank) 8.17%
1/15/07
TOTAL U.S. GOVERNMENT AGENCY 196,421,034
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
24.9%
U.S. Treasury Bonds:
6.5% 11/15/26 3,000,000 3,035,160
8.75% 5/15/17 15,765,000 19,437,772
8.875% 8/15/17 44,580,000 55,606,417
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
12% 8/15/13 $ 4,000,000 $ 5,483,760
14% 11/15/11 8,200,000 11,706,812
TOTAL U.S. TREASURY 95,269,921
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 291,690,955
GOVERNMENT AGENCY OBLIGATIONS
(Cost $301,024,905)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 19.6%
FANNIE MAE - 16.3%
5.5% 7/1/09 2,097,765 2,011,275
6% 9/1/08 to 11/1/09 5,970,122 5,807,445
6.5% 6/1/07 to 6/1/29 15,195,889 14,601,515
7% 4/1/26 to 9/1/29 21,629,063 21,251,221
7.5% 11/1/29 4,000,000 4,007,500
8% 10/1/29 8,000,000 8,150,000
8.25% 12/1/01 663,031 682,485
8.5% 9/1/16 to 1/1/17 82,539 85,848
9% 11/1/11 to 5/1/14 3,721,151 3,790,665
9.25% 9/1/16 33,278 35,101
9.5% 11/1/06 to 5/1/20 1,661,487 1,746,995
11.5% 6/1/19 311,723 349,230
12.5% 8/1/15 15,500 17,529
62,536,809
FREDDIE MAC - 2.0%
6.5% 5/1/08 206,401 204,168
6.775% 11/15/03 4,656,673 4,603,559
8.5% 8/1/09 to 2/1/10 226,763 232,372
9% 10/1/08 to 10/1/20 793,013 827,632
9.5% 5/1/21 to 7/1/21 526,640 558,039
10.5% 1/1/16 to 12/1/20 362,846 393,603
11% 7/1/13 to 5/1/14 394,871 428,805
12.5% 2/1/10 to 6/1/19 371,198 418,319
7,666,497
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.3%
7.5% 9/15/06 to 1/15/08 1,576,277 1,606,162
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 $ 268,988 $ 274,778
9.5% 11/15/09 to 11/15/20 820,573 871,224
10.5% 8/15/16 to 1/20/18 492,085 538,201
11% 12/15/15 to 7/15/19 320,429 357,478
11.5% 3/15/10 to 8/15/20 1,218,165 1,363,594
13.5% 7/15/11 40,796 47,036
5,058,473
TOTAL U.S. GOVERNMENT AGENCY 75,261,779
- - MORTGAGE SECURITIES
(Cost $76,020,727)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.5%
U.S. GOVERNMENT AGENCY - 1.5%
Fannie Mae planned 2,730,000 2,717,203
amortization class Series
1993-134 Class GA, 6.5%
2/25/07
Freddie Mac:
planned amortization class 1,627,379 1,699,082
Series 1141 Class G, 9%
9/15/21
Series 1535 Class PM, 7% 1,432,396 1,438,663
6/15/01
TOTAL COLLATERALIZED MORTGAGE 5,854,948
OBLIGATIONS
(Cost $5,849,675)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Fannie Mae ACES REMIC 2,276,824 2,282,517
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,296,883)
</TABLE>
CASH EQUIVALENTS - 2.1%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 8,189,636 $ 8,186,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $8,186,000)
TOTAL INVESTMENT PORTFOLIO - 383,276,199
99.9% (Cost $393,378,190)
NET OTHER ASSETS - 0.1% 245,596
NET ASSETS - 100% $ 383,521,795
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 $9,945,819 or 2.6% of net assets.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $393,999,983. Net unrealized depreciation
aggregated $10,723,784, of which $913,181 related to appreciated
investment securities and $11,636,965 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $8,649,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 383,276,199
value (including repurchase
agreements of $8,186,000)
(cost $393,378,190) - See
accompanying schedule
Cash 713
Receivable for investments 121,179
sold
Receivable for fund shares 1,611,732
sold
Interest receivable 5,624,355
TOTAL ASSETS 390,634,178
LIABILITIES
Payable for investments $ 3,989,451
purchased
Payable for fund shares 2,352,534
redeemed
Distributions payable 367,480
Accrued management fee 137,144
Distribution fees payable 147,297
Other payables and accrued 118,477
expenses
TOTAL LIABILITIES 7,112,383
NET ASSETS $ 383,521,795
Net Assets consist of:
Paid in capital $ 402,407,284
Undistributed net investment 487,308
income
Accumulated undistributed net (9,270,806)
realized gain (loss) on
investments
Net unrealized appreciation (10,101,991)
(depreciation) on investments
NET ASSETS $ 383,521,795
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.31
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($15,273,254 (divided by)
1,640,952 shares)
Maximum offering price per $9.77
share (100/95.25 of $9.31)
CLASS T: NET ASSET VALUE and $9.30
redemption price per share
($215,089,018 (divided by)
23,116,827 shares)
Maximum offering price per $9.64
share (100/96.50 of $9.30)
CLASS B: NET ASSET VALUE and $9.30
offering price per share
($94,871,265 (divided by)
10,204,595 shares) A
CLASS C: NET ASSET VALUE and $9.30
offering price price per
share ($35,652,428
(divided by) 3,832,415
shares) A
INSTITUTIONAL CLASS: NET $9.27
ASSET VALUE, offering price
and redemption price per
share ($22,635,830 (divided
by) 2,441,010 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 23,924,160
Interest
EXPENSES
Management fee $ 1,558,916
Transfer agent fees 680,432
Distribution fees 1,592,625
Accounting fees and expenses 111,672
Non-interested trustees' 481
compensation
Custodian fees and expenses 24,754
Registration fees 123,462
Audit 31,669
Legal 6,402
Total expenses before 4,130,413
reductions
Expense reductions (4,382) 4,126,031
NET INVESTMENT INCOME 19,798,129
REALIZED AND UNREALIZED GAIN (9,202,613)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (17,582,000)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (26,784,613)
NET INCREASE (DECREASE) IN $ (6,986,484)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 19,798,129 $ 12,243,044
income
Net realized gain (loss) (9,202,613) 7,666,008
Change in net unrealized (17,582,000) 482,198
appreciation (depreciation)
NET INCREASE (DECREASE) IN (6,986,484) 20,391,250
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (20,097,409) (12,201,221)
from net investment income
Share transactions - net 75,179,570 141,557,657
increase (decrease)
TOTAL INCREASE (DECREASE) 48,095,677 149,747,686
IN NET ASSETS
NET ASSETS
Beginning of period 335,426,118 185,678,432
End of period (including $ 383,521,795 $ 335,426,118
undistributed net investment
income of $487,308 and
$789,894, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .545 .545 .552 .090
Net realized and unrealized (.696) .368 .187 .241
gain (loss)
Total from investment (.151) .913 .739 .331
operations
Less Distributions
From net investment income (.559) (.563) (.559) (.091)
Net asset value, end of period $ 9.310 $ 10.020 $ 9.670 $ 9.490
TOTAL RETURN B, C (1.53)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,273 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .87% .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.73% 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 174% 243% 136% 153%
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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.020 $ 9.670 $ 9.490 $ 9.670 $ 8.960
of period
Income from Investment
Operations
Net investment income .541 C .546 C .558 C .586 C .594
Net realized and unrealized (.710) .351 .171 (.180) .701
gain (loss)
Total from investment (.169) .897 .729 .406 1.295
operations
Less Distributions
From net investment income (.551) (.547) (.549) (.586) (.585)
From net realized gain - - - - -
Total distributions (.551) (.547) (.549) (.586) (.585)
Net asset value, end of period $ 9.300 $ 10.020 $ 9.670 $ 9.490 $ 9.670
TOTAL RETURN A, B (1.71)% 9.56% 7.97% 4.38% 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 215,089 $ 212,933 $ 144,948 $ 217,883 $ 208,620
(000 omitted)
Ratio of expenses to average .96% 1.00% D 1.00% D 1.00% .89% D
net assets
Ratio of expenses to average .95% E 1.00% 1.00% .99% E .89%
net assets after expense
reductions
Ratio of net investment 5.65% 5.59% 5.88% 6.19% 6.34%
income to average net assets
Portfolio turnover rate 174% 243% 136% 153% 261%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
of period
Income from Investment
Operations
Net investment income .479 C .475 C .494 C .520 C .542
Net realized and unrealized (.699) .359 .166 (.177) .693
gain (loss)
Total from investment (.220) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.490) (.484) (.490) (.523) (.515)
Net asset value, end of period $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670
TOTAL RETURN A, B (2.24)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 94,871 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.59% 1.65% D 1.65% D 1.67% D 1.65% D
net assets
Ratio of net investment 5.01% 4.92% 5.24% 5.51% 5.58%
income to average net assets
Portfolio turnover rate 174% 243% 136% 153% 261%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .468 .450
Net realized and unrealized (.708) .398
gain (loss)
Total from investment (.240) .848
operations
Less Distributions
From net investment income (.480) (.468)
Net asset value, end of period $ 9.300 $ 10.020
TOTAL RETURN B, C (2.43)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 35,652 $ 14,954
(000 omitted)
Ratio of expenses to average 1.69% 1.75% A, F
net assets
Ratio of net investment 4.91% 4.74% A
income to average net assets
Portfolio turnover rate 174% 243%
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
YEARS ENDED OCTOBER 31, 1999 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 .567 D .570 D .580 D .604 D .197
Net realized and unrealized (.720) .352 .165 (.180) .108
gain (loss)
Total from investment (.153) .922 .745 .424 .305
operations
Less Distributions
From net investment income (.577) (.572) (.575) (.614) (.195)
Net asset value, end of period $ 9.270 $ 10.000 $ 9.650 $ 9.480 $ 9.670
TOTAL RETURN B, C (1.55)% 9.86% 8.18% 4.58% 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 22,636 $ 25,582 $ 20,366 $ 27,660 $ 14,588
(000 omitted)
Ratio of expenses to average .68% .75% F .75% F .75% F .75% A, F
net assets
Ratio of net investment 5.92% 5.84% 6.12% 6.43% 6.48% A
income to average net assets
Portfolio turnover rate 174% 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 October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust). 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. 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 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 after the customary settlement period for that security. 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 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
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $699,311,938 and $605,378,301, 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 .0920% to .3700% for the
period. The annual individual fund fee rate is 0.30%. 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 annual rate of 0.43% of
average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 WITH AFFILIATES - 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 $ 18,505 $ 21
CLASS T 532,422 4,601
CLASS B 770,739 556,963
CLASS C 270,959 239,227
$ 1,592,625 $ 800,812
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 is 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 $ 129,786 $ 42,713
CLASS T 288,656 93,888
CLASS B 330,686 330,686*
CLASS C 30,008 30,008*
$ 779,136 $ 497,295
* 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). 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 $ 25,920 .21
CLASS T 411,064 .19
CLASS B 154,471 .18
CLASS C 48,270 .18
INSTITUTIONAL CLASS 40,707 .17
$ 680,432
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.
Through an arrangement with the fund's custodian, credits realized as
a result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's custodian fees were
reduced by $4,382 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class for the periods were as
follows:
YEARS ENDED OCTOBER 31,
1999 1998A
FROM NET INVESTMENT INCOME
CLASS A $ 712,354 $ 172,525
CLASS T 12,190,847 8,994,288
CLASS B 4,349,049 1,420,172
CLASS C 1,346,657 168,316
INSTITUTIONAL CLASS 1,498,502 1,445,920
TOTAL $ 20,097,409 $ 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 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED YEARS ENDED
1999 1998A 1999 1998A
CLASS A Shares sold 849,297 $ 41,844,902 $ 8,455,738
4,350,590
Reinvestment of distributions 56,426 14,303 538,689 140,529
Shares redeemed (3,552,941) (240,354) (34,104,460) (2,383,022)
Net increase (decrease) 854,075 623,246 $ 8,279,131 $ 6,213,245
CLASS T Shares sold 17,547,111 15,886,817 $ 169,027,264 $ 156,318,393
Reinvestment of distributions 1,053,527 761,626 10,087,686 7,462,535
Shares redeemed (16,736,818) (10,390,224) (160,930,470) (101,764,593)
Net increase (decrease) 1,863,820 6,258,219 $ 18,184,480 $ 62,016,335
CLASS B Shares sold 7,298,446 6,584,605 $ 70,320,373 $ 65,367,580
Reinvestment of distributions 342,261 109,260 3,271,123 1,074,687
Shares redeemed (4,835,159) (1,239,115) (46,429,578) (12,195,223)
Net increase (decrease) 2,805,548 5,454,750 $ 27,161,918 $ 54,247,044
CLASS C Shares sold 4,078,555 1,742,987 $ 39,397,472 $ 17,267,410
Reinvestment of distributions 83,356 13,959 792,733 138,062
Shares redeemed (1,822,180) (264,262) (17,548,890) (2,621,407)
Net increase (decrease) 2,339,731 1,492,684 $ 22,641,315 $ 14,784,065
INSTITUTIONAL CLASS Shares 894,248 1,251,693 $ 8,576,171 $ 12,156,145
sold
Reinvestment of distributions 129,392 126,775 1,237,833 1,238,963
Shares redeemed (1,140,602) (930,969) (10,901,278) (9,098,140)
Net increase (decrease) (116,962) 447,499 $ (1,087,274) $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor Government Investment Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor
Government Investment Fund as of October 31, 1999, and the related
statements of operations, changes in net assets and financial
highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended October 31, 1998, and the
financial highlights for each of the years in the four-year period
ended October 31, 1998 were audited by other auditors whose report,
dated December 15, 1998, expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Government Investment Fund at October 31, 1999, the
results of its operations, the changes in its net assets, and its
financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
DISTRIBUTIONS
A total of 34.84% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88090
1.538367.102
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_FIDLEITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
GOVERNMENT INVESTMENT
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 32 The auditors' opinion.
DISTRIBUTIONS 33
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 five year and past
10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.55% 40.74% 95.23%
INST CL
LB Government Bond -1.21% 44.88% 109.73%
General US Government Funds -1.75% 39.00% 94.06%
Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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 one year average represents a peer
group of 178 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - -1.55% 7.07% 6.92%
INST CL
LB Government Bond -1.21% 7.70% 7.69%
General US Government Funds -1.75% 6.79% 6.84%
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
1989/10/31 10000.00 10000.00
1989/11/30 10075.96 10096.84
1989/12/31 10125.82 10113.89
1990/01/31 10015.65 9970.71
1990/02/28 10048.64 9990.60
1990/03/31 10063.51 9988.41
1990/04/30 9973.10 9900.32
1990/05/31 10265.32 10176.41
1990/06/30 10413.18 10337.52
1990/07/31 10539.40 10469.77
1990/08/31 10472.01 10323.96
1990/09/30 10541.62 10422.99
1990/10/31 10647.53 10593.28
1990/11/30 10833.18 10828.05
1990/12/31 10972.90 10995.50
1991/01/31 11093.30 11113.54
1991/02/28 11185.67 11177.15
1991/03/31 11230.62 11233.99
1991/04/30 11323.94 11357.28
1991/05/31 11383.37 11401.43
1991/06/30 11376.91 11385.26
1991/07/31 11498.87 11520.35
1991/08/31 11677.21 11787.48
1991/09/30 11888.26 12034.71
1991/10/31 11994.46 12140.08
1991/11/30 12063.80 12261.84
1991/12/31 12448.84 12679.58
1992/01/31 12279.99 12482.18
1992/02/29 12336.47 12530.93
1992/03/31 12251.84 12457.70
1992/04/30 12323.63 12536.18
1992/05/31 12549.85 12767.46
1992/06/30 12723.58 12950.42
1992/07/31 12938.42 13276.79
1992/08/31 13049.80 13400.52
1992/09/30 13171.03 13590.04
1992/10/31 13012.23 13393.96
1992/11/30 13045.15 13370.79
1992/12/31 13256.01 13595.94
1993/01/31 13483.04 13884.71
1993/02/28 13736.06 14162.77
1993/03/31 13814.81 14210.20
1993/04/30 13918.89 14319.50
1993/05/31 13940.82 14303.76
1993/06/30 14215.23 14621.17
1993/07/31 14285.63 14710.36
1993/08/31 14518.55 15038.69
1993/09/30 14545.19 15096.18
1993/10/31 14642.75 15153.24
1993/11/30 14418.76 14987.10
1993/12/31 14496.40 15045.03
1994/01/31 14749.15 15250.95
1994/02/28 14407.57 14928.08
1994/03/31 13972.14 14592.31
1994/04/30 13832.74 14477.55
1994/05/31 13847.16 14458.97
1994/06/30 13800.00 14425.74
1994/07/31 14100.87 14690.90
1994/08/31 14092.63 14693.74
1994/09/30 13894.64 14486.73
1994/10/31 13871.14 14475.80
1994/11/30 13844.70 14449.35
1994/12/31 13938.41 14537.23
1995/01/31 14188.63 14807.85
1995/02/28 14498.68 15126.57
1995/03/31 14594.77 15221.44
1995/04/30 14767.62 15420.36
1995/05/31 15341.98 16042.28
1995/06/30 15449.66 16165.35
1995/07/31 15396.60 16105.89
1995/08/31 15574.98 16295.20
1995/09/30 15722.01 16452.15
1995/10/31 15955.81 16702.66
1995/11/30 16187.94 16963.01
1995/12/31 16408.34 17203.47
1996/01/31 16497.51 17309.05
1996/02/29 16163.71 16956.46
1996/03/31 16019.90 16814.80
1996/04/30 15919.81 16707.47
1996/05/31 15888.73 16679.49
1996/06/30 16076.58 16894.81
1996/07/31 16112.33 16936.56
1996/08/31 16077.73 16898.75
1996/09/30 16336.19 17179.21
1996/10/31 16685.89 17557.16
1996/11/30 16966.84 17862.55
1996/12/31 16791.07 17680.23
1997/01/31 16804.48 17699.91
1997/02/28 16811.72 17724.17
1997/03/31 16648.18 17536.62
1997/04/30 16879.54 17789.75
1997/05/31 17004.78 17943.21
1997/06/30 17201.10 18144.54
1997/07/31 17674.32 18659.55
1997/08/31 17502.64 18475.06
1997/09/30 17773.54 18752.90
1997/10/31 18050.03 19077.30
1997/11/30 18118.62 19175.01
1997/12/31 18300.99 19375.46
1998/01/31 18596.68 19665.33
1998/02/28 18525.58 19611.99
1998/03/31 18557.90 19667.51
1998/04/30 18625.51 19756.04
1998/05/31 18812.20 19958.90
1998/06/30 19018.55 20185.81
1998/07/31 19051.78 20217.07
1998/08/31 19435.21 20743.02
1998/09/30 19935.26 21302.19
1998/10/31 19829.09 21229.62
1998/11/30 19840.87 21236.83
1998/12/31 19857.15 21284.27
1999/01/31 19992.71 21407.77
1999/02/28 19496.72 20898.66
1999/03/31 19592.59 20980.70
1999/04/30 19664.95 21028.24
1999/05/31 19452.23 20843.79
1999/06/30 19381.12 20801.36
1999/07/31 19313.04 20771.21
1999/08/31 19284.19 20770.94
1999/09/30 19504.85 20939.62
1999/10/29 19522.57 20973.20
IMATRL PRASUN SHR__CHT 19991031 19991119 105106 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund -
Institutional Class on October 31, 1989. As the chart shows, by
October 31, 1999, the value of the investment would have grown to
$19,523 - a 95.23% 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 $20,973 - a 109.73% 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
YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.75% 6.23% 6.39% 6.54% 2.08%
Capital returns -7.30% 3.63% 1.79% -1.96% 1.15%
Total returns -1.55% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.85(cents) 27.87(cents) 57.72(cents)
Annualized dividend rate 6.20% 5.92% 6.03%
30-day annualized yield 6.24% - -
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 $9.21 over the past one
month, $9.34 over the past six months, and $9.57 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Government Investment Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the 12-month period that ended October 31, 1999, the fund's
Institutional Class shares provided a total return of -1.55%. To get a
sense of how the fund did relative to its competitors, the general
U.S. government funds average returned -1.75% for the same 12-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 -1.21% for the same 12-month period.
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
roughly 20% of its investments in mortgage securities, which are not
contained in the index. Both agency and mortgage securities outpaced
their Treasury counterparts during the year, so the fund's relatively
heavy allocation to those sectors helped performance.
Q. THE PAST YEAR WITNESSED A DRAMATIC SHIFT IN THE DIRECTION OF
INTEREST RATES. HOW DID THAT SHIFT INFLUENCE YOUR STRATEGY?
A. The reversal of interest rates prompted a pronounced change in the
types of mortgage securities I emphasized. The biggest risk associated
with mortgage securities is a rapid acceleration of prepayment
activity that tends to accompany falling interest rates. That's
exactly what occurred in 1998 and early 1999 when interest rates fell
dramatically and huge waves of homeowners refinanced their mortgages.
To help mitigate the damage caused by the crush of prepayment
activity, I emphasized mortgage securities that provided some measure
of prepayment protection, such as 15-year Fannie Mae securities and
30-year Ginnie Mae securities. But when interest rates reversed course
and began to move higher, the threat of prepayments declined
dramatically. So I turned my focus toward higher-yielding mortgage
securities, selling 15-year Fannie Maes and 30-year Ginnie Maes and
purchasing 30-year 7% Fannie Mae and Freddie Mac securities.
Q. WHAT CHOICES DID YOU MAKE IN THE AGENCY SECTOR?
A. The majority of the fund's agency holdings were non-callable,
meaning they are protected from being redeemed by their issuer before
maturity. Their appeal stems from the fact that the fund can continue
to hold onto relatively high yielding bonds even when interest rates
are falling and issuers tend to step up their redemption activity.
That said, callable bonds were selling at very attractive prices at
certain points throughout the period, so I added some.
Q. ARE HIGHER YIELDS THE REASON WHY YOU ADDED MORE AGENCY SECURITIES?
A. That's right. In their quest to boost their earnings, agency
issuers dramatically stepped up issuance over the past two years. That
resulting supply glut caused agency securities to weaken. Despite
their recent disappointing performance, I held onto agency securities
for their total return potential and because they offered attractive
yields - between 40 and 60 basis points (0.40% and 0.60%) more than
Treasuries at the end of the period.
Q. WHAT'S YOUR OUTLOOK?
A. I believe that the yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries,
which is why I'll most likely keep relatively large weightings in
them. The reduction in prepayment activity most likely will continue
to be positive for mortgage securities, causing the yield spread
between mortgage and Treasury securities to narrow. Likewise, agencies
could do well to the extent that their spread relationship with
Treasuries returns to more normal levels as supply and demand trends
stabilize. While the supply of agency securities is forecast to remain
heavy next year, we could see more demand because agencies are
aggressively marketing their securities to foreign and other
non-traditional buyers. Even if spreads remain constant, the yield
advantage of mortgage and agency securities could help them to perform
better than Treasuries.
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 October 31,
1999 more than $383
million
MANAGER: Tom Silvia, since
1998; joined Fidelity in
1993
TOM SILVIA ON CHANGES IN THE
GOVERNMENT BOND MARKET:
"While higher interest rates have
been the primary factor
contributing to the performance of
various fixed-income securities so
far in 1999, supply also has played
a critical role. The supply of
Treasuries diminished, thanks
ultimately to the near decade-long
economic expansion in this country.
Continued economic growth helped
boost tax collections, create a
federal budget surplus and, in turn,
reduce the government's borrowing
needs. In fact, earlier this year the
U.S. Treasury announced that it
will abandon its traditional
November auction of 30-year
bonds, leaving only February and
August auctions. More recently,
the government announced its
intention to buy back Treasury
bonds in 2000, something that it
hasn't done in more than a
century.
"In contrast, agency securities
suffered from oversupply, which
was the key reason they lagged
Treasuries during the past year. In
an attempt to provide investors with
an alternative to safe, liquid U.S.
Treasuries, government agencies
such as Fannie Mae and Freddie
Mac have dramatically stepped up
their issuance of securities. These
agency issuers, which are public
companies, grow their revenues by
purchasing mortgage securities
and selling their own agency
securities with the goal of making
a profit."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.1 1.0
5 - 5.99% 16.0 11.9
6 - 6.99% 28.1 43.0
7 - 7.99% 18.8 9.9
8 - 8.99% 24.6 16.7
9 - 9.99% 3.8 9.6
10 - 10.99% 0.2 0.3
11 - 11.99% 0.7 0.7
12% and over 4.6 1.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING
SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 9.7 9.0
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 19.6% Mortgage Securities 22.2%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 2.1% Related Securities 2.5%
U.S. Treasury Obligations 24.9% U.S. Treasury Obligations 27.1%
U.S. Government Agency U.S. Government Agency
Obligations 51.2% Obligations 44.9%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.2% Net Other Assets 3.3%
Row: 1, Col: 1, Value: 19.6 Row: 1, Col: 1, Value: 22.2
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 2.1 Row: 1, Col: 3, Value: 2.5
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 24.9 Row: 1, Col: 5, Value: 27.1
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 51.2 Row: 1, Col: 7, Value: 44.9
Row: 1, Col: 8, Value: 2.2 Row: 1, Col: 8, Value: 3.3
</TABLE>
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 76.1%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 51.2%
Fannie Mae:
5.125% 2/13/04 $ 15,000,000 $ 14,259,300
5.25% 1/15/09 4,000,000 3,599,360
5.45% 2/4/02 6,000,000 5,874,000
6.25% 5/15/29 14,800,000 13,567,456
6.5% 4/29/09 10,250,000 9,758,308
Federal Farm Credit Bank:
5.7% 1/18/05 3,460,000 3,317,863
5.95% 5/18/05 2,000,000 1,938,440
Federal Home Loan Bank:
5.83% 8/25/05 8,670,000 8,342,187
5.875% 8/15/01 6,500,000 6,469,515
Financing Corp. - coupon 4,500,000 4,124,205
STRIPS 0% 4/6/01
Freddie Mac:
5.85% 2/21/06 1,000,000 955,780
6.25% 10/15/02 6,700,000 6,694,774
6.33% 9/21/05 2,800,000 2,758,000
7.625% 9/9/09 23,700,000 23,777,736
Government Loan Trusts 951,168 1,003,901
(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 3,881,291 3,995,673
Class 2-E 9.4% 5/15/02 585,453 601,559
Class T-3, 9.625% 5/15/02 309,520 318,122
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1993 C, 5.2% 10/15/04 212,444 205,578
Series 1993 D, 5.23% 5/15/05 239,787 231,177
Series 1994 A, 7.12% 4/15/06 10,510,870 10,568,681
Series 1994 F, 8.187% 12/15/04 4,335,608 4,475,055
Series 1995-A, 6.28% 6/15/04 2,064,705 2,053,094
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1994 B, 7.5% 1/26/06 200,661 206,005
Series 1994-A, 7.39% 6/26/06 5,250,000 5,317,200
Series 1997-A, 6.104% 7/15/03 2,666,666 2,638,667
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Israel Export Trust $ 218,235 $ 220,115
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% 1,629,750 1,626,784
8/15/04 (callable)
Series 1996-A1, 6.726% 1,913,043 1,910,767
9/15/10 (callable)
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) 1,700,000 1,610,699
5.65% 3/15/03 600,250 593,875
5.82% 6/15/03 (a) 8,600,000 8,335,120
6.31% 9/30/04 11,560,000 11,458,041
6.86% 4/30/04 906,750 912,695
6.9% 1/31/03 13,830,000 14,026,663
7.3% 1/31/02 1,500,000 1,531,170
8.35% 1/31/01 4,000,000 4,101,240
State of Israel (guaranteed 8,000,000 7,916,000
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
Tennessee Valley Authority 6% 1,000,000 998,280
11/1/00
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates:
Series 99-A, 5.96% 8/1/09 1,800,000 1,684,044
5.75% 8/1/06 2,100,000 1,977,570
U.S. Trade Trust Certificates 450,000 466,335
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank) 8.17%
1/15/07
TOTAL U.S. GOVERNMENT AGENCY 196,421,034
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
24.9%
U.S. Treasury Bonds:
6.5% 11/15/26 3,000,000 3,035,160
8.75% 5/15/17 15,765,000 19,437,772
8.875% 8/15/17 44,580,000 55,606,417
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
CONTINUED
U.S. Treasury Bonds: -
continued
12% 8/15/13 $ 4,000,000 $ 5,483,760
14% 11/15/11 8,200,000 11,706,812
TOTAL U.S. TREASURY 95,269,921
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 291,690,955
GOVERNMENT AGENCY OBLIGATIONS
(Cost $301,024,905)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 19.6%
FANNIE MAE - 16.3%
5.5% 7/1/09 2,097,765 2,011,275
6% 9/1/08 to 11/1/09 5,970,122 5,807,445
6.5% 6/1/07 to 6/1/29 15,195,889 14,601,515
7% 4/1/26 to 9/1/29 21,629,063 21,251,221
7.5% 11/1/29 4,000,000 4,007,500
8% 10/1/29 8,000,000 8,150,000
8.25% 12/1/01 663,031 682,485
8.5% 9/1/16 to 1/1/17 82,539 85,848
9% 11/1/11 to 5/1/14 3,721,151 3,790,665
9.25% 9/1/16 33,278 35,101
9.5% 11/1/06 to 5/1/20 1,661,487 1,746,995
11.5% 6/1/19 311,723 349,230
12.5% 8/1/15 15,500 17,529
62,536,809
FREDDIE MAC - 2.0%
6.5% 5/1/08 206,401 204,168
6.775% 11/15/03 4,656,673 4,603,559
8.5% 8/1/09 to 2/1/10 226,763 232,372
9% 10/1/08 to 10/1/20 793,013 827,632
9.5% 5/1/21 to 7/1/21 526,640 558,039
10.5% 1/1/16 to 12/1/20 362,846 393,603
11% 7/1/13 to 5/1/14 394,871 428,805
12.5% 2/1/10 to 6/1/19 371,198 418,319
7,666,497
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.3%
7.5% 9/15/06 to 1/15/08 1,576,277 1,606,162
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 $ 268,988 $ 274,778
9.5% 11/15/09 to 11/15/20 820,573 871,224
10.5% 8/15/16 to 1/20/18 492,085 538,201
11% 12/15/15 to 7/15/19 320,429 357,478
11.5% 3/15/10 to 8/15/20 1,218,165 1,363,594
13.5% 7/15/11 40,796 47,036
5,058,473
TOTAL U.S. GOVERNMENT AGENCY 75,261,779
- - MORTGAGE SECURITIES
(Cost $76,020,727)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.5%
U.S. GOVERNMENT AGENCY - 1.5%
Fannie Mae planned 2,730,000 2,717,203
amortization class Series
1993-134 Class GA, 6.5%
2/25/07
Freddie Mac:
planned amortization class 1,627,379 1,699,082
Series 1141 Class G, 9%
9/15/21
Series 1535 Class PM, 7% 1,432,396 1,438,663
6/15/01
TOTAL COLLATERALIZED MORTGAGE 5,854,948
OBLIGATIONS
(Cost $5,849,675)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Fannie Mae ACES REMIC 2,276,824 2,282,517
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,296,883)
</TABLE>
CASH EQUIVALENTS - 2.1%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 8,189,636 $ 8,186,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $8,186,000)
TOTAL INVESTMENT PORTFOLIO - 383,276,199
99.9% (Cost $393,378,190)
NET OTHER ASSETS - 0.1% 245,596
NET ASSETS - 100% $ 383,521,795
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 $9,945,819 or 2.6% of net assets.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $393,999,983. Net unrealized depreciation
aggregated $10,723,784, of which $913,181 related to appreciated
investment securities and $11,636,965 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $8,649,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 383,276,199
value (including repurchase
agreements of $8,186,000)
(cost $393,378,190) - See
accompanying schedule
Cash 713
Receivable for investments 121,179
sold
Receivable for fund shares 1,611,732
sold
Interest receivable 5,624,355
TOTAL ASSETS 390,634,178
LIABILITIES
Payable for investments $ 3,989,451
purchased
Payable for fund shares 2,352,534
redeemed
Distributions payable 367,480
Accrued management fee 137,144
Distribution fees payable 147,297
Other payables and accrued 118,477
expenses
TOTAL LIABILITIES 7,112,383
NET ASSETS $ 383,521,795
Net Assets consist of:
Paid in capital $ 402,407,284
Undistributed net investment 487,308
income
Accumulated undistributed net (9,270,806)
realized gain (loss) on
investments
Net unrealized appreciation (10,101,991)
(depreciation) on investments
NET ASSETS $ 383,521,795
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.31
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($15,273,254 (divided by)
1,640,952 shares)
Maximum offering price per $9.77
share (100/95.25 of $9.31)
CLASS T: NET ASSET VALUE and $9.30
redemption price per share
($215,089,018 (divided by)
23,116,827 shares)
Maximum offering price per $9.64
share (100/96.50 of $9.30)
CLASS B: NET ASSET VALUE and $9.30
offering price per share
($94,871,265 (divided by)
10,204,595 shares) A
CLASS C: NET ASSET VALUE and $9.30
offering price price per
share ($35,652,428
(divided by) 3,832,415
shares) A
INSTITUTIONAL CLASS: NET $9.27
ASSET VALUE, offering price
and redemption price per
share ($22,635,830 (divided
by) 2,441,010 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 23,924,160
Interest
EXPENSES
Management fee $ 1,558,916
Transfer agent fees 680,432
Distribution fees 1,592,625
Accounting fees and expenses 111,672
Non-interested trustees' 481
compensation
Custodian fees and expenses 24,754
Registration fees 123,462
Audit 31,669
Legal 6,402
Total expenses before 4,130,413
reductions
Expense reductions (4,382) 4,126,031
NET INVESTMENT INCOME 19,798,129
REALIZED AND UNREALIZED GAIN (9,202,613)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (17,582,000)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (26,784,613)
NET INCREASE (DECREASE) IN $ (6,986,484)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 19,798,129 $ 12,243,044
income
Net realized gain (loss) (9,202,613) 7,666,008
Change in net unrealized (17,582,000) 482,198
appreciation (depreciation)
NET INCREASE (DECREASE) IN (6,986,484) 20,391,250
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (20,097,409) (12,201,221)
from net investment income
Share transactions - net 75,179,570 141,557,657
increase (decrease)
TOTAL INCREASE (DECREASE) 48,095,677 149,747,686
IN NET ASSETS
NET ASSETS
Beginning of period 335,426,118 185,678,432
End of period (including $ 383,521,795 $ 335,426,118
undistributed net investment
income of $487,308 and
$789,894, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .545 .545 .552 .090
Net realized and unrealized (.696) .368 .187 .241
gain (loss)
Total from investment (.151) .913 .739 .331
operations
Less Distributions
From net investment income (.559) (.563) (.559) (.091)
Net asset value, end of period $ 9.310 $ 10.020 $ 9.670 $ 9.490
TOTAL RETURN B, C (1.53)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,273 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .87% .90% F .90% F .90% A, F
net assets
Ratio of net investment 5.73% 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 174% 243% 136% 153%
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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.020 $ 9.670 $ 9.490 $ 9.670 $ 8.960
of period
Income from Investment
Operations
Net investment income .541 C .546 C .558 C .586 C .594
Net realized and unrealized (.710) .351 .171 (.180) .701
gain (loss)
Total from investment (.169) .897 .729 .406 1.295
operations
Less Distributions
From net investment income (.551) (.547) (.549) (.586) (.585)
From net realized gain - - - - -
Total distributions (.551) (.547) (.549) (.586) (.585)
Net asset value, end of period $ 9.300 $ 10.020 $ 9.670 $ 9.490 $ 9.670
TOTAL RETURN A, B (1.71)% 9.56% 7.97% 4.38% 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 215,089 $ 212,933 $ 144,948 $ 217,883 $ 208,620
(000 omitted)
Ratio of expenses to average .96% 1.00% D 1.00% D 1.00% .89% D
net assets
Ratio of expenses to average .95% E 1.00% 1.00% .99% E .89%
net assets after expense
reductions
Ratio of net investment 5.65% 5.59% 5.88% 6.19% 6.34%
income to average net assets
Portfolio turnover rate 174% 243% 136% 153% 261%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
of period
Income from Investment
Operations
Net investment income .479 C .475 C .494 C .520 C .542
Net realized and unrealized (.699) .359 .166 (.177) .693
gain (loss)
Total from investment (.220) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.490) (.484) (.490) (.523) (.515)
Net asset value, end of period $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670
TOTAL RETURN A, B (2.24)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 94,871 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.59% 1.65% D 1.65% D 1.67% D 1.65% D
net assets
Ratio of net investment 5.01% 4.92% 5.24% 5.51% 5.58%
income to average net assets
Portfolio turnover rate 174% 243% 136% 153% 261%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .468 .450
Net realized and unrealized (.708) .398
gain (loss)
Total from investment (.240) .848
operations
Less Distributions
From net investment income (.480) (.468)
Net asset value, end of period $ 9.300 $ 10.020
TOTAL RETURN B, C (2.43)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 35,652 $ 14,954
(000 omitted)
Ratio of expenses to average 1.69% 1.75% A, F
net assets
Ratio of net investment 4.91% 4.74% A
income to average net assets
Portfolio turnover rate 174% 243%
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
YEARS ENDED OCTOBER 31, 1999 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 .567 D .570 D .580 D .604 D .197
Net realized and unrealized (.720) .352 .165 (.180) .108
gain (loss)
Total from investment (.153) .922 .745 .424 .305
operations
Less Distributions
From net investment income (.577) (.572) (.575) (.614) (.195)
Net asset value, end of period $ 9.270 $ 10.000 $ 9.650 $ 9.480 $ 9.670
TOTAL RETURN B, C (1.55)% 9.86% 8.18% 4.58% 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 22,636 $ 25,582 $ 20,366 $ 27,660 $ 14,588
(000 omitted)
Ratio of expenses to average .68% .75% F .75% F .75% F .75% A, F
net assets
Ratio of net investment 5.92% 5.84% 6.12% 6.43% 6.48% A
income to average net assets
Portfolio turnover rate 174% 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 October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust). 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. 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 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 after the customary settlement period for that security. 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 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
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $699,311,938 and $605,378,301, 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 .0920% to .3700% for the
period. The annual individual fund fee rate is 0.30%. 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 annual rate of 0.43% of
average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 WITH AFFILIATES - 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 $ 18,505 $ 21
CLASS T 532,422 4,601
CLASS B 770,739 556,963
CLASS C 270,959 239,227
$ 1,592,625 $ 800,812
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 is 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 $ 129,786 $ 42,713
CLASS T 288,656 93,888
CLASS B 330,686 330,686*
CLASS C 30,008 30,008*
$ 779,136 $ 497,295
* 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). 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 $ 25,920 .21
CLASS T 411,064 .19
CLASS B 154,471 .18
CLASS C 48,270 .18
INSTITUTIONAL CLASS 40,707 .17
$ 680,432
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.
Through an arrangement with the fund's custodian, credits realized as
a result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's custodian fees were
reduced by $4,382 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class for the periods were as
follows:
YEARS ENDED OCTOBER 31,
1999 1998A
FROM NET INVESTMENT INCOME
CLASS A $ 712,354 $ 172,525
CLASS T 12,190,847 8,994,288
CLASS B 4,349,049 1,420,172
CLASS C 1,346,657 168,316
INSTITUTIONAL CLASS 1,498,502 1,445,920
TOTAL $ 20,097,409 $ 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 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED YEARS ENDED
1999 1998A 1999 1998A
CLASS A Shares sold 849,297 $ 41,844,902 $ 8,455,738
4,350,590
Reinvestment of distributions 56,426 14,303 538,689 140,529
Shares redeemed (3,552,941) (240,354) (34,104,460) (2,383,022)
Net increase (decrease) 854,075 623,246 $ 8,279,131 $ 6,213,245
CLASS T Shares sold 17,547,111 15,886,817 $ 169,027,264 $ 156,318,393
Reinvestment of distributions 1,053,527 761,626 10,087,686 7,462,535
Shares redeemed (16,736,818) (10,390,224) (160,930,470) (101,764,593)
Net increase (decrease) 1,863,820 6,258,219 $ 18,184,480 $ 62,016,335
CLASS B Shares sold 7,298,446 6,584,605 $ 70,320,373 $ 65,367,580
Reinvestment of distributions 342,261 109,260 3,271,123 1,074,687
Shares redeemed (4,835,159) (1,239,115) (46,429,578) (12,195,223)
Net increase (decrease) 2,805,548 5,454,750 $ 27,161,918 $ 54,247,044
CLASS C Shares sold 4,078,555 1,742,987 $ 39,397,472 $ 17,267,410
Reinvestment of distributions 83,356 13,959 792,733 138,062
Shares redeemed (1,822,180) (264,262) (17,548,890) (2,621,407)
Net increase (decrease) 2,339,731 1,492,684 $ 22,641,315 $ 14,784,065
INSTITUTIONAL CLASS Shares 894,248 1,251,693 $ 8,576,171 $ 12,156,145
sold
Reinvestment of distributions 129,392 126,775 1,237,833 1,238,963
Shares redeemed (1,140,602) (930,969) (10,901,278) (9,098,140)
Net increase (decrease) (116,962) 447,499 $ (1,087,274) $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor Government Investment Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor
Government Investment Fund as of October 31, 1999, and the related
statements of operations, changes in net assets and financial
highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended October 31, 1998, and the
financial highlights for each of the years in the four-year period
ended October 31, 1998 were audited by other auditors whose report,
dated December 15, 1998, expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Government Investment Fund at October 31, 1999, the
results of its operations, the changes in its net assets, and its
financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
DISTRIBUTIONS
A total of 34.84% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88091
1.538370.102
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(REGISTERED TRADEMARK) ADVISOR
HIGH INCOME
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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 12 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT SUMMARY 15 A summary of the fund's
investments.
INVESTMENTS 16 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 31 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 39 The auditors' opinion.
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 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). If Fidelity had not reimbursed certain class expenses, the
total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED OCTOBER 31, 1999 LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL A 0.25%
FIDELITY ADV HIGH INCOME - CL -4.51%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master II -0.97%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, since the fund started on
September 7, 1999. 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 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.
This benchmark includes reinvested dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
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. These numbers will be reported once the
fund is a year old. In addition, the growth of a hypothetical $10,000
investment in the fund will appear in the fund's next report six
months from now.
TOTAL RETURN COMPONENTS
SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 1.05%
Capital returns -0.80%
Total returns 0.25%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIOD ENDED OCTOBER 31, 1999 LIFE OF CLASS
Dividends per share 10.53(cents)
Annualized dividend rate 7.14%
30-day annualized yield -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average share price of $9.97 over the life of the
class. 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 HIGH 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). If Fidelity had not reimbursed certain class expenses, the
total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED OCTOBER 31, 1999 LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL T 0.23%
FIDELITY ADV HIGH INCOME - CL -3.27%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master II -0.97%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, since the fund started on
September 7, 1999. 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 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.
This benchmark includes reinvested dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
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. These numbers will be reported once the
fund is a year old. In addition, the growth of a hypothetical $10,000
investment in the fund will appear in the fund's next report six
months from now.
TOTAL RETURN COMPONENTS
SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 1.03%
Capital returns -0.80%
Total returns 0.23%
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
PERIOD ENDED OCTOBER 31, 1999 LIFE OF CLASS
Dividends per share 10.32(cents)
Annualized dividend rate 7.00%
30-day annualized yield -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average share price of $9.97 over the life of the
class. 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 T has a longer more stable operating
history.
FIDELITY ADVISOR HIGH 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). If Fidelity had not reimbursed certain class expenses, the
total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED OCTOBER 31, 1999 LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL B 0.19%
FIDELITY ADV HIGH INCOME - CL -4.77%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II -0.97%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, since the fund started on
September 7, 1999. 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 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.
This benchmark includes reinvested dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
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. These numbers will be reported once the
fund is a year old. In addition, the growth of a hypothetical $10,000
investment in the fund will appear in the fund's next report six
months from now.
TOTAL RETURN COMPONENTS
SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 0.99%
Capital returns -0.80%
Total returns 0.19%
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
PERIOD ENDED OCTOBER 31, 1999 LIFE OF CLASS
Dividends per share 9.93(cents)
Annualized dividend rate 6.74%
30-day annualized yield -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average share price of $9.96 over the life of the
class. 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 B has a longer more stable operating
history.
FIDELITY ADVISOR HIGH 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). If Fidelity had not reimbursed certain class expenses, the
total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED OCTOBER 31, 1999 LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL C 0.08%
FIDELITY ADV HIGH INCOME - CL -0.91%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II -0.97%
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, since the fund started on
September 7, 1999. 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 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.
This benchmark includes reinvested dividends and capital gains, if
any.
AVERAGE ANNUAL TOTAL RETURNS
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. These numbers will be reported once the
fund is a year old. In addition, the growth of a hypothetical $10,000
investment in the fund will appear in the fund's next report six
months from now.
TOTAL RETURN COMPONENTS
SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 0.98%
Capital returns -0.90%
Total returns 0.08%
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
PERIOD ENDED OCTOBER 31, 1999 LIFE OF CLASS
Dividends per share 9.77(cents)
Annualized dividend rate 6.63%
30-day annualized yield -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average share price of $9.96 over the life of the
class. 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 C has a longer more stable operating
history.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic recovery in the global
economy triggered an impressive
rally in the high-yield bond market
during the first six months of the
12-month period ending October 31,
1999. In November of last year, the
third in a series of 0.25 percentage
point interest-rate cuts by the Federal
Reserve Board set the stage for
restored confidence in global
markets and an impressive rebound
in the high-yield market. To illustrate
the strength of the recovery, the
Merrill Lynch High Yield Master Index
- - a broad measure of the high-yield
market - produced a total return
of 4.48% for the 12-month period
ending October 31, 1999, despite
posting a loss of 2.69% during the
past six months. The sustained
strength in the domestic economy
combined with concerns of higher
wage pressures, caused investors
and the Fed to shift their focus back
toward inflation and the prospects
of higher interest rates over the past
six months. Following the Fed's two
rate hikes in June and August and
persistent concerns about inflation,
the rally in the high-yield market was
essentially stopped in its tracks. Even
so, the overall U.S. bond market did
not fare as well in comparison. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the
taxable bond market - returned
0.53% during the 12-month period.
(photograph of David Glancy)
An interview with David Glancy, Portfolio Manager of Fidelity Advisor
High Income Fund
Q. DAVID, HOW DID THE FUND PERFORM?
A. The fund has only been open for a short time, since September 7,
1999. From that time until October 31, 1999, the high-yield market
experienced some losses, which were the result of rising interest
rates, concerns that higher rates might weaken the economy and a
decline in liquidity. In terms of the fund's performance, the fund's
Class A, Class T, Class B and Class C shares had total returns of
0.25%, 0.23%, 0.19% and 0.08%, respectively, from inception on
September 7, 1999, through October 31, 1999. Over the same period, the
Merrill Lynch High Yield Master II Index returned -0.97%. Going
forward, we will look at the fund's performance in six- and 12-month
intervals and compare its performance to its benchmark and peer group
tracked by Lipper Inc., the high current yield funds average.
Q. WHAT CAN YOU TELL US ABOUT YOUR INVESTMENT APPROACH?
A. There are three main areas that I focus on. First, there are
high-yield debt securities, the core of the fund. I tend to look for
high-yield bonds that offer a combination of shorter maturities and
stronger credit quality. By doing so, I hope to reduce the risk that
rising interest rates or business problems could hurt the value of the
bonds. Although the fund may surrender some yield following this
approach, it should be compensated by excess returns from relatively
large positions in income-producing securities that I find to be
undervalued by the market. Second, there are leveraged equities, which
are common stocks of companies that have high-yield bonds outstanding.
From time to time, these companies offer earnings that outpace their
cost of capital. When that happens, the excess earnings increase the
underlying value of the companies' equity. When a stock's price
doesn't reflect this excess, someone who holds the stock has the
opportunity to benefit from higher gains once it does. Finally, I look
at distressed securities - meaning companies in default. While we've
kept an eye out for opportunities in that market, it has been
unattractive for some time. The distressed-debt market today is made
up primarily of non-competitive companies with operating problems that
can't be helped by an infusion of capital.
Q. HOW DO YOU SELECT SECURITIES FOR THE FUND?
A. I use a research-intensive, company-by-company, bottom-up approach.
I first look at a company's business risks, then consider its
financial risks. Once I decide a company is an attractive investment
candidate, I look at the different kinds of securities offered by the
company and how the market is pricing each one. Whether it's a bond or
a stock, I try to pick the piece that offers the best risk-adjusted
return.
Q. WHERE HAVE YOU FOUND INVESTMENT OPPORTUNITIES SINCE THE FUND
OPENED?
A. I focused the fund's investments in the telecommunications,
satellite and cable television industries. I firmly believed these
sectors offered more compelling opportunities than many alternatives
in the market. Satellite and cable companies offered average yields
with below-average business risk. Their promise has been corroborated
by investments from Microsoft and AT&T, which are trying to take
advantage of the conduit these companies provide into an increasing
number of households for entertainment, information and
communications. On the telecommunications side, deregulation has
spurred growth in companies that are seeking to compete with both
regional and long-distance telephone companies. Intense merger and
acquisition activity also has helped verify the appeal of this sector.
Q. WHAT IS YOUR OUTLOOK?
A. My focus is on making good, profitable loans, not on trying to
figure out the immediate direction of the market. I don't know whether
or not the market will recover over the next one, three or six months.
Nevertheless, I am bullish about the long-term outlook for the
high-yield market and the fund. Corporate earnings projections look
solid and there has been a significant level of positive merger and
acquisition activity. High-yield debt securities have reached very
cheap levels relative to Treasuries, high-grade corporate bonds and
equities, leaving them poised to recover and more insulated from any
potential problems that might be caused by additional increases in
interest rates.
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. The fund may
also seek capital
appreciation
START DATE: September 7, 1999
SIZE: as of October 31,
1999, more than $7 million
MANAGER: David Glancy,
since inception; joined
Fidelity in 1990
DAVID GLANCY ON WHY
HIGH-YIELD DEBT SECURITIES
CURRENTLY ARE CHEAP:
"High-yield bond prices are not as
cheap as they were at the end of
1998 or in the late 1980s, but they are
pretty close. There are several
reasons why. One is that we're late
in the business cycle. After a
significant expansion, the next move
for the economy could be down.
Since, like equities, high-yield
bonds tend to perform better during
periods of economic strength,
investors have become more
concerned about an economic
slowdown. Part of that fear comes
from the anticipation of another
short-term interest-rate increase by
the Federal Reserve Board. The Fed
has already hiked interest rates two
times since June to slow growth and
head off inflation. Another similar
move could dampen economic
growth. There also has been less
liquidity, as lending seized up in
anticipation of Y2K.
"It looks as if these factors have
already been incorporated into the
prices of high-yield securities,
presenting opportunities to invest
in good loans at significant
discounts. Unlike equities, which
have no future set price, high-yield
bonds offer a certain price to be paid
back at a certain date, provided the
issuer maintains its ability to pay
off the interest and principal.
High-yield bonds bought at today's
discount prices offer both attractive
yields and significant appreciation
potential as they near maturity,
when they must be redeemed at
par - or face - value."
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS
EQUIVALENTS)
Covad Communications Group, 3.1
Inc.
Nextel Communications, Inc. 3.0
NEXTLINK Communications, Inc. 2.7
Huntsman Corp. 2.6
Satelites Mexicanos SA de CV 2.6
14.0
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 26.1
MEDIA & LEISURE 17.5
BASIC INDUSTRIES 8.6
INDUSTRIAL MACHINERY & 6.1
EQUIPMENT
TECHNOLOGY 4.6
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 10.4
B 46.0
Caa, Ca, C 4.6
Not Rated 4.6
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 OCTOBER 31, 1999 ACCOUNT FOR 4.6% OF THE
FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 *
Nonconvertible Bonds 65.4%
Preferred Stocks 3.0%
Common Stocks 0.4%
Short-Term Investments and
Net Other Assets 31.2%
* FOREIGN INVESTMENTS 8.9%
Row: 1, Col: 1, Value: 65.40000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.4
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 31.2
Row: 1, Col: 9, Value: 0.0
Row: 1, Col: 10, Value: 0.0
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 0.0
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 65.4%
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 8.6%
CHEMICALS & PLASTICS - 6.7%
Huntsman Corp. 9.5% 7/1/07 (c) B2 $ 220,000 $ 205,699
Lyondell Chemical Co. 9.625% Ba3 150,000 148,125
5/1/07
Sterling Chemicals, Inc. B3 180,000 174,600
12.375% 7/15/06 (c)
528,424
METALS & MINING - 1.9%
Kaiser Aluminum & Chemical B1 150,000 147,000
Corp. 9.875% 2/15/02
TOTAL BASIC INDUSTRIES 675,424
FINANCE - 3.0%
CREDIT & OTHER FINANCE - 3.0%
Metris Companies, Inc. 10% Ba3 210,000 190,050
11/1/04
Olympic Financial Ltd. 11.5% B3 75,000 46,875
3/15/07
236,925
HEALTH - 2.0%
MEDICAL FACILITIES MANAGEMENT
- - 2.0%
Tenet Healthcare Corp. 8.125% Ba3 50,000 44,500
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 115,000 115,288
(c)
159,788
INDUSTRIAL MACHINERY &
EQUIPMENT - 6.1%
ELECTRICAL EQUIPMENT - 2.0%
Loral Space & Communications B1 200,000 160,000
Ltd. 9.5% 1/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
Thermadyne Manufacturing LLC B3 190,000 157,700
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 Caa1 10,000 5,000
(c)
162,700
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 2.0%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba2 $ 150,000 $ 134,250
10% 8/1/09 (c) B2 25,000 21,000
155,250
TOTAL INDUSTRIAL MACHINERY & 477,950
EQUIPMENT
MEDIA & LEISURE - 17.5%
BROADCASTING - 11.9%
Adelphia Communications Corp. B1 150,000 151,500
9.25% 10/1/02
EchoStar DBS Corp. 9.25% B2 200,000 198,000
2/1/06
International Cabletel, Inc. B3 150,000 145,125
Series A, 0% 4/15/05 (b)
Satelites Mexicanos SA de CV:
9.26% 6/30/04 (c)(d) B1 150,000 138,750
10.125% 11/1/04 B3 85,000 61,200
Telewest PLC 0% 10/1/07 (b) B1 150,000 136,500
United Pan-Europe B2 100,000 97,000
Communications NV 10.875%
8/1/09 (c)
928,075
ENTERTAINMENT - 3.2%
Alliance Gaming Corp. 10% B3 150,000 108,750
8/1/07
Harrahs Operating Co., Inc. Ba2 150,000 142,500
7.875% 12/15/05
251,250
LODGING & GAMING - 1.2%
Courtyard by Marriott II B- 100,000 94,750
LP/Courtyard II Finance Co.
10.75% 2/1/08
RESTAURANTS - 1.2%
Domino's, Inc. 10.375% 1/15/09 B3 100,000 91,750
TOTAL MEDIA & LEISURE 1,365,825
RETAIL & WHOLESALE - 0.9%
GROCERY STORES - 0.9%
Pathmark Stores, Inc. 0% Caa2 70,000 66,500
11/1/03 (b)
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
TECHNOLOGY - 4.6%
COMPUTER SERVICES & SOFTWARE
- - 3.4%
Federal Data Corp. 10.125% B3 $ 200,000 $ 140,000
8/1/05
PSINet, Inc. 11% 8/1/09 (c) B3 90,000 91,800
Verio, Inc. 11.25% 12/1/08 B3 30,000 31,275
263,075
ELECTRONICS - 1.2%
Fairchild Semiconductor Corp. B3 100,000 98,750
10.125% 3/15/07
TOTAL TECHNOLOGY 361,825
UTILITIES - 22.7%
CELLULAR - 5.3%
Globalstar LP/Globalstar Caa1 60,000 34,200
Capital Corp. 11.375%
2/15/04
McCaw International Ltd. 0% Caa1 100,000 62,500
4/15/07 (b)
Millicom International Caa1 100,000 73,000
Cellular SA 0% 6/1/06 (b)
Nextel International, Inc. 0% Caa1 100,000 53,000
4/15/08 (b)
Nextel Partners, Inc. 0% B3 150,000 92,250
2/1/09 (b)
TeleCorp PCS, Inc. 0% 4/15/09 B3 30,000 18,300
(b)(c)
Tritel PCS, Inc. 0% 5/15/09 B3 30,000 18,075
(b)(c)
Triton PCS, Inc. 0% 5/1/08 (b) Caa1 15,000 10,313
US Unwired, Inc. 0% 11/1/09 Caa1 100,000 52,750
(c)
414,388
TELEPHONE SERVICES - 17.4%
Allegiance Telecom, Inc. 0% B3 50,000 33,750
2/15/08 (b)
Covad Communications Group,
Inc.:
0% 3/15/08 (b) B3 120,000 67,500
12.5% 2/15/09 B3 170,000 168,300
e.spire Communications, Inc.:
0% 7/1/08 (b) - 30,000 10,500
13.75% 7/15/07 - 150,000 132,000
GST Network Funding, Inc. 0% - 160,000 72,800
5/1/08 (b)
GST USA, Inc. 0% 12/15/05 (b) - 190,000 144,400
ICG Holdings, Inc. 0% 9/15/05 B3 160,000 134,400
(b)
Intermedia Communications,
Inc.:
0% 5/15/06 (b) B2 150,000 123,375
8.6% 6/1/08 B2 10,000 8,925
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 9% B3 $ 100,000 $ 100,000
4/15/08
NEXTLINK Communications, Inc.:
0% 4/15/08 (b) B3 260,000 161,200
10.75% 6/1/09 B3 45,000 46,069
Rochester Tel Corp.:
9% 7/19/00 Ba2 50,000 50,250
9.07% 7/5/00 Ba2 50,000 50,250
9.1% 7/5/00 Ba2 50,000 50,250
1,353,969
TOTAL UTILITIES 1,768,357
TOTAL NONCONVERTIBLE BONDS 5,112,594
(Cost $5,162,741)
</TABLE>
COMMON STOCKS - 0.4%
SHARES
UTILITIES - 0.4%
TELEPHONE SERVICES - 0.4%
GST Telecommunications, Inc. 5,000 33,750
(a) (Cost $36,233)
NONCONVERTIBLE PREFERRED
STOCKS - 3.0%
UTILITIES - 3.0%
CELLULAR - 3.0%
Nextel Communications, Inc.:
11.125% pay-in-kind 200 205,000
Series D, 13% pay-in-kind 25 26,625
(Cost $222,219) 231,625
CASH EQUIVALENTS - 30.9%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 2,422,053 $ 2,421,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.22%,
dated 10/29/99 due 11/1/99
(Cost $2,421,000)
TOTAL INVESTMENT PORTFOLIO - 7,798,969
99.7%
(Cost $7,842,193)
NET OTHER ASSETS - 0.3% 23,552
NET ASSETS - 100% $ 7,822,521
LEGEND
(a) Non-income producing
(b) 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.
(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 $938,262
or 12.0% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investor Service, Inc.
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 0.0% BBB 0.0%
Ba 10.4% BB 10.2%
B 44.8% B 36.3%
Caa 4.6% CCC 7.5%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's
or S&P amounted to 4.6%. FMR has determined that unrated debt
securities
that are lower quality account for 4.6% of the total value of
investment in securities.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate
cost of investment securities for income tax purposes was $7,842,193.
Net unrealized depreciation aggregated $43,224, of
which $54,561 related to appreciated investment securities and $97,785
related to depreciated investment securities.
At October 31, 1999, the Fund had a capital loss carryforward of
approxi-
mately 7,000, all of which will expire on October 31, 2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 7,798,969
value (including repurchase
agreements of $2,421,000)
(cost $7,842,193) - See
accompanying schedule
Cash 21,786
Receivable for investments 61,456
sold
Receivable for fund shares 201,629
sold
Interest receivable 104,547
Prepaid expenses 77,391
Receivable from investment 36,680
adviser for expense
reductions
TOTAL ASSETS 8,302,458
LIABILITIES
Payable for investments $ 310,273
purchased
Distributions payable 7,747
Distribution fees payable 2,797
Other payables and accrued 159,120
expenses
TOTAL LIABILITIES 479,937
NET ASSETS $ 7,822,521
Net Assets consist of:
Paid in capital $ 7,869,440
Undistributed net investment 2,608
income
Accumulated undistributed net (6,303)
realized gain (loss) on
investments
Net unrealized appreciation (43,224)
(depreciation) on investments
NET ASSETS $ 7,822,521
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.92
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($738,810
(divided by) 74,457 shares)
Maximum offering price per $10.41
share (100/95.25 of $9.92)
CLASS T: NET ASSET VALUE and $9.92
redemption price per share
($2,422,278 (divided by)
244,111 shares)
Maximum offering price per $10.28
share (100/96.50 of $9.92)
CLASS B: NET ASSET VALUE and $9.92
offering price per share
($2,088,890 (divided by)
210,634 shares) A
CLASS C: NET ASSET VALUE and $9.91
offering price per share
($1,853,877 (divided by)
187,021 shares) A
INSTITUTIONAL CLASS: NET $9.92
ASSET VALUE, offering price
and redemption price per
share ($718,666 (divided by)
72,432 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
INVESTMENT INCOME $ 69,940
Interest
EXPENSES
Management fee $ 4,502
Transfer agent fees 1,358
Distribution fees 4,092
Accounting fees and expenses 8,833
Custodian fees and expenses 816
Registration fees 48,758
Audit 27,250
Total expenses before 95,609
reductions
Expense reductions (84,809) 10,800
NET INVESTMENT INCOME 59,140
REALIZED AND UNREALIZED GAIN (6,153)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (43,224)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (49,377)
NET INCREASE (DECREASE) IN $ 9,763
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 59,140
income
Net realized gain (loss) (6,153)
Change in net unrealized (43,224)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 9,763
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (56,682)
from net investment income
Share transactions - net 7,869,440
increase (decrease)
TOTAL INCREASE (DECREASE) 7,822,521
IN NET ASSETS
NET ASSETS
Beginning of period -
End of period (including $ 7,822,521
undistributed net investment
income of $2,608)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .116
Net realized and unrealized (.091)
gain (loss)
Total from investment .025
operations
Less Distributions
From net investment income (.105)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 739
(000 omitted)
Ratio of expenses to average 1.00% A, F
net assets
Ratio of net investment 7.92% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS T
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .112
Net realized and unrealized (.089)
gain (loss)
Total from investment .023
operations
Less Distributions
From net investment income (.103)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,422
(000 omitted)
Ratio of expenses to average 1.10% A, F
net assets
Ratio of net investment 7.82% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS B
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .102
Net realized and unrealized (.083)
gain (loss)
Total from investment .019
operations
Less Distributions
From net investment income (.099)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,089
(000 omitted)
Ratio of expenses to average 1.75% A, F
net assets
Ratio of net investment 7.17% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C TOTAL RETURNS DO NOT REFLECT 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 SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .101
Net realized and unrealized (.093)
gain (loss)
Total from investment .008
operations
Less Distributions
From net investment income (.098)
Net asset value, end of period $ 9.910
TOTAL RETURN B, C .08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,854
(000 omitted)
Ratio of expenses to average 1.85% A, F
net assets
Ratio of net investment 7.07% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C TOTAL RETURNS DO NOT REFLECT 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 SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .118
Net realized and unrealized (.091)
gain (loss)
Total from investment .027
operations
Less Distributions
From net investment income (.107)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 719
(000 omitted)
Ratio of expenses to average .85% A, F
net assets
Ratio of net investment 8.07% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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 October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High 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 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. The fund commenced operations on
September 7, 1999. 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. By so
qualifying, the fund will not be 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses of the funds except for the cost of
registering and qualifying shares of each class for distribution under
federal and state securities law. These registration expenses are
borne by the fund and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount, capital loss carryforwards and losses
deferred due to wash sales.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 FMR, may transfer uninvested cash
balances into one or more joint trading accounts. These balances are
invested in one or more repurchase agreements for U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total
investments in repurchase agreements through a joint trading account.
These repurchase agreements were with entities whose creditworthiness
has been reviewed and found satisfactory by FMR. The investments in
repurchase agreements through the joint trading account are summarized
as follows:
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF JOINT TRADING
DATED OCTOBER 29, 1999, DUE NOVEMBER 1, 1999
Number of dealers or banks 21
Maximum amount with one dealer or bank 12.3%
Aggregate principal amount of agreements $29,965,546,000
Aggregate maturity amount of agreements $29,978,570,459
Aggregate market value of transferred assets $30,612,732,384
Coupon rates of transferred assets 0.00% to 14.25%
Maturity dates of transferred assets 10/31/99 to 8/15/29
</TABLE>
4. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,658,210 and $2,399,670, respectively.
5. 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: .0920% 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 .57% of average net
assets.
5. 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 has 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 $ 146 $ 131
CLASS T 570 182
CLASS B 1,448 1,243
CLASS C 1,928 1,926
TOTAL $ 4,092 $ 3,482
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 is paid to securities
dealers, banks and other financial institutions.
5. 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 $ 1,541 $ 341
CLASS T 1,877 1,162
TOTAL $ 3,418 $ 1,503
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 $ 174 .18*
CLASS T 395 .17*
CLASS B 258 .16*
CLASS C 361 .19*
INSTITUTIONAL CLASS 170 .17*
TOTAL $ 1,358
* 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.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses, if
any) 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 1.00% $ 10,579
CLASS T 1.10% 24,894
CLASS B 1.75% 17,536
CLASS C 1.85% 21,037
INSTITUTIONAL CLASS 0.85% 10,763
$ 84,809
7. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
approximately 31% of the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
1999
FROM NET INVESTMENT INCOME
CLASS A $ 7,152
CLASS T 17,710
CLASS B 10,995
CLASS C 13,464
INSTITUTIONAL CLASS 7,361
TOTAL DISTRIBUTIONS $ 56,682
9. SHARE TRANSACTIONS.
Transactions for each class of shares for the period are as follows:
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 A 1999 A
CLASS A Shares sold 73,796 $ 737,552
Reinvestment of distributions 661 6,564
Net increase (decrease) 74,457 $ 744,116
CLASS T Shares sold 242,680 $ 2,421,256
Reinvestment of distributions 1,481 14,699
Shares redeemed (50) (500)
Net increase (decrease) 244,111 $ 2,435,455
CLASS B Shares sold 214,251 $ 2,135,658
Reinvestment of distributions 851 8,451
Shares redeemed (4,468) (44,468)
Net increase (decrease) 210,634 $ 2,099,641
CLASS C Shares sold 185,931 $ 1,855,443
Reinvestment of distributions 1,090 10,817
Net increase (decrease) 187,021 $ 1,866,260
INSTITUTIONAL CLASS Shares 71,695 $ 716,650
sold
Reinvestment of distributions 737 7,318
Net increase (decrease) 72,432 $ 723,968
A SHARE TRANSACTIONS ARE FOR THE PERIOD SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1999.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor High Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor High Income
Fund as of October 31, 1999, and the related statement of operations,
the statement of changes in net assets, and the financial highlights
for the period from September 7, 1999 (commencement of operations) to
October 31, 1999. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor High Income Fund at October 31, 1999, and the
results of its operations, the changes in its net assets, and its
financial highlights for the period from September 7, 1999
(commencement of operations) to October 31, 1999 in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
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
David L. Glancy, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, 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
Ned C. Lautenbach
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 Emerging Asia 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 Value Strategies 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
AHI-ANN-1299 88092
1.728715.100
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
HIGH INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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 6 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT SUMMARY 9 A summary of the fund's
investments.
INVESTMENTS 10 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.
INDEPENDENT AUDITORS' REPORT 33 The auditors' opinion.
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 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). If Fidelity had not reimbursed certain class expenses, the
total return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIOD ENDED OCTOBER 31, 1999 LIFE OF FUND
FIDELITY ADV HIGH INCOME - 0.28%
INST CL
ML High Yield Master II -0.97%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, since the fund
started on September 7, 1999. 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 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. This benchmark includes reinvested
dividends and capital gains, if any.
AVERAGE ANNUAL TOTAL RETURNS
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.
These numbers will be reported once the fund is a year old. In
addition, the growth of a hypothetical $10,000 investment in the fund
will appear in the fund's next report six months from now.
TOTAL RETURN COMPONENTS
SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 1.08%
Capital returns -0.80%
Total returns 0.28%
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
PERIOD ENDED OCTOBER 31, 1999 LIFE OF CLASS
Dividends per share 10.74(cents)
Annualized dividend rate 7.28%
30-day annualized yield -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annual dividend rate
is based on an average share price of $9.97 over the life of the
class. 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 Institutional Class has a longer more stable
operating history.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic recovery in the global
economy triggered an impressive
rally in the high-yield bond market
during the first six months of the
12-month period ending October 31,
1999. In November of last year, the
third in a series of 0.25 percentage
point interest-rate cuts by the Federal
Reserve Board set the stage for
restored confidence in global
markets and an impressive rebound
in the high-yield market. To illustrate
the strength of the recovery, the
Merrill Lynch High Yield Master Index
- - a broad measure of the high-yield
market - produced a total return
of 4.48% for the 12-month period
ending October 31, 1999, despite
posting a loss of 2.69% during the
past six months. The sustained
strength in the domestic economy
combined with concerns of higher
wage pressures, caused investors
and the Fed to shift their focus back
toward inflation and the prospects
of higher interest rates over the past
six months. Following the Fed's two
rate hikes in June and August and
persistent concerns about inflation,
the rally in the high-yield market was
essentially stopped in its tracks. Even
so, the overall U.S. bond market did
not fare as well in comparison. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the
taxable bond market - returned
0.53% during the 12-month period.
(photograph of David Glancy)
An interview with David Glancy, Portfolio Manager of Fidelity Advisor
High Income Fund
Q. DAVID, HOW DID THE FUND PERFORM?
A. The fund has only been open for a short time, since September 7,
1999. From that time until October 31, 1999, the high-yield market
experienced some losses, which were the result of rising interest
rates, concerns that higher rates might weaken the economy and a
decline in liquidity. In terms of performance, the fund's
Institutional Class shares returned 0.28% since its inception on
September 7, 1999, through October 31, 1999. Over the same period, the
Merrill Lynch High Yield Master II Index returned -0.97%,
respectively. Going forward, we will look at the fund's performance in
six- and 12-month intervals and compare its performance to its
benchmark and peer group tracked by Lipper Inc., the high current
yield funds average.
Q. WHAT CAN YOU TELL US ABOUT YOUR INVESTMENT APPROACH?
A. There are three main areas that I focus on. First, there are
high-yield debt securities, the core of the fund. I tend to look for
high-yield bonds that offer a combination of shorter maturities and
stronger credit quality. By doing so, I hope to reduce the risk that
rising interest rates or business problems could hurt the value of the
bonds. Although the fund may surrender some yield following this
approach, it should be compensated by excess returns from relatively
large positions in income-producing securities that I find to be
undervalued by the market. Second, there are leveraged equities, which
are common stocks of companies that have high-yield bonds outstanding.
From time to time, these companies offer earnings that outpace their
cost of capital. When that happens, the excess earnings increase the
underlying value of the companies' equity. When a stock's price
doesn't reflect this excess, someone who holds the stock has the
opportunity to benefit from higher gains once it does. Finally, I look
at distressed securities - meaning companies in default. While we've
kept an eye out for opportunities in that market, it has been
unattractive for some time. The distressed-debt market today is made
up primarily of non-competitive companies with operating problems that
can't be helped by an infusion of capital.
Q. HOW DO YOU SELECT SECURITIES FOR THE FUND?
A. I use a research-intensive, company-by-company, bottom-up approach.
I first look at a company's business risks, then consider its
financial risks. Once I decide a company is an attractive investment
candidate, I look at the different kinds of securities offered by the
company and how the market is pricing each one. Whether it's a bond or
a stock, I try to pick the piece that offers the best risk-adjusted
return.
Q. WHERE HAVE YOU FOUND INVESTMENT OPPORTUNITIES SINCE THE FUND
OPENED?
A. I focused the fund's investments in the telecommunications,
satellite and cable television industries. I firmly believed these
sectors offered more compelling opportunities than many alternatives
in the market. Satellite and cable companies offered average yields
with below-average business risk. Their promise has been corroborated
by investments from Microsoft and AT&T, which are trying to take
advantage of the conduit these companies provide into an increasing
number of households for entertainment, information and
communications. On the telecommunications side, deregulation has
spurred growth in companies that are seeking to compete with both
regional and long-distance telephone companies. Intense merger and
acquisition activity also has helped verify the appeal of this sector.
Q. WHAT IS YOUR OUTLOOK?
A. My focus is on making good, profitable loans, not on trying to
figure out the immediate direction of the market. I don't know whether
or not the market will recover over the next one, three or six months.
Nevertheless, I am bullish about the long-term outlook for the
high-yield market and the fund. Corporate earnings projections look
solid and there has been a significant level of positive merger and
acquisition activity. High-yield debt securities have reached very
cheap levels relative to Treasuries, high-grade corporate bonds and
equities, leaving them poised to recover and more insulated from any
potential problems that might be caused by additional increases in
interest rates.
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. The fund may
also seek capital
appreciation
START DATE: September 7, 1999
SIZE: as of October 31,
1999, more than $7 million
MANAGER: David Glancy,
since inception; joined
Fidelity in 1990
DAVID GLANCY ON WHY
HIGH-YIELD DEBT SECURITIES
CURRENTLY ARE CHEAP:
"High-yield bond prices are not as
cheap as they were at the end of
1998 or in the late 1980s, but they are
pretty close. There are several
reasons why. One is that we're late
in the business cycle. After a
significant expansion, the next move
for the economy could be down.
Since, like equities, high-yield
bonds tend to perform better during
periods of economic strength,
investors have become more
concerned about an economic
slowdown. Part of that fear comes
from the anticipation of another
short-term interest-rate increase by
the Federal Reserve Board. The Fed
has already hiked interest rates two
times since June to slow growth and
head off inflation. Another similar
move could dampen economic
growth. There also has been less
liquidity, as lending seized up in
anticipation of Y2K.
"It looks as if these factors have
already been incorporated into the
prices of high-yield securities,
presenting opportunities to invest
in good loans at significant
discounts. Unlike equities, which
have no future set price, high-yield
bonds offer a certain price to be paid
back at a certain date, provided the
issuer maintains its ability to pay
off the interest and principal.
High-yield bonds bought at today's
discount prices offer both attractive
yields and significant appreciation
potential as they near maturity,
when they must be redeemed at
par - or face - value."
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS
EQUIVALENTS)
Covad Communications Group, 3.1
Inc.
Nextel Communications, Inc. 3.0
NEXTLINK Communications, Inc. 2.7
Huntsman Corp. 2.6
Satelites Mexicanos SA de CV 2.6
14.0
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 26.1
MEDIA & LEISURE 17.5
BASIC INDUSTRIES 8.6
INDUSTRIAL MACHINERY & 6.1
EQUIPMENT
TECHNOLOGY 4.6
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 10.4
B 46.0
Caa, Ca, C 4.6
Not Rated 4.6
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 OCTOBER 31, 1999 ACCOUNT FOR 4.6% OF THE
FUND'S INVESTMENTS.
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 *
Nonconvertible Bonds 65.4%
Preferred Stocks 3.0%
Common Stocks 0.4%
Short-Term Investments and
Net Other Assets 31.2%
* FOREIGN INVESTMENTS 8.9%
Row: 1, Col: 1, Value: 65.40000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.4
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 31.2
Row: 1, Col: 9, Value: 0.0
Row: 1, Col: 10, Value: 0.0
Row: 1, Col: 1, Value: 0.0
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 0.0
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 65.4%
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 8.6%
CHEMICALS & PLASTICS - 6.7%
Huntsman Corp. 9.5% 7/1/07 (c) B2 $ 220,000 $ 205,699
Lyondell Chemical Co. 9.625% Ba3 150,000 148,125
5/1/07
Sterling Chemicals, Inc. B3 180,000 174,600
12.375% 7/15/06 (c)
528,424
METALS & MINING - 1.9%
Kaiser Aluminum & Chemical B1 150,000 147,000
Corp. 9.875% 2/15/02
TOTAL BASIC INDUSTRIES 675,424
FINANCE - 3.0%
CREDIT & OTHER FINANCE - 3.0%
Metris Companies, Inc. 10% Ba3 210,000 190,050
11/1/04
Olympic Financial Ltd. 11.5% B3 75,000 46,875
3/15/07
236,925
HEALTH - 2.0%
MEDICAL FACILITIES MANAGEMENT
- - 2.0%
Tenet Healthcare Corp. 8.125% Ba3 50,000 44,500
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 115,000 115,288
(c)
159,788
INDUSTRIAL MACHINERY &
EQUIPMENT - 6.1%
ELECTRICAL EQUIPMENT - 2.0%
Loral Space & Communications B1 200,000 160,000
Ltd. 9.5% 1/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
Thermadyne Manufacturing LLC B3 190,000 157,700
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 Caa1 10,000 5,000
(c)
162,700
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 2.0%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba2 $ 150,000 $ 134,250
10% 8/1/09 (c) B2 25,000 21,000
155,250
TOTAL INDUSTRIAL MACHINERY & 477,950
EQUIPMENT
MEDIA & LEISURE - 17.5%
BROADCASTING - 11.9%
Adelphia Communications Corp. B1 150,000 151,500
9.25% 10/1/02
EchoStar DBS Corp. 9.25% B2 200,000 198,000
2/1/06
International Cabletel, Inc. B3 150,000 145,125
Series A, 0% 4/15/05 (b)
Satelites Mexicanos SA de CV:
9.26% 6/30/04 (c)(d) B1 150,000 138,750
10.125% 11/1/04 B3 85,000 61,200
Telewest PLC 0% 10/1/07 (b) B1 150,000 136,500
United Pan-Europe B2 100,000 97,000
Communications NV 10.875%
8/1/09 (c)
928,075
ENTERTAINMENT - 3.2%
Alliance Gaming Corp. 10% B3 150,000 108,750
8/1/07
Harrahs Operating Co., Inc. Ba2 150,000 142,500
7.875% 12/15/05
251,250
LODGING & GAMING - 1.2%
Courtyard by Marriott II B- 100,000 94,750
LP/Courtyard II Finance Co.
10.75% 2/1/08
RESTAURANTS - 1.2%
Domino's, Inc. 10.375% 1/15/09 B3 100,000 91,750
TOTAL MEDIA & LEISURE 1,365,825
RETAIL & WHOLESALE - 0.9%
GROCERY STORES - 0.9%
Pathmark Stores, Inc. 0% Caa2 70,000 66,500
11/1/03 (b)
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
TECHNOLOGY - 4.6%
COMPUTER SERVICES & SOFTWARE
- - 3.4%
Federal Data Corp. 10.125% B3 $ 200,000 $ 140,000
8/1/05
PSINet, Inc. 11% 8/1/09 (c) B3 90,000 91,800
Verio, Inc. 11.25% 12/1/08 B3 30,000 31,275
263,075
ELECTRONICS - 1.2%
Fairchild Semiconductor Corp. B3 100,000 98,750
10.125% 3/15/07
TOTAL TECHNOLOGY 361,825
UTILITIES - 22.7%
CELLULAR - 5.3%
Globalstar LP/Globalstar Caa1 60,000 34,200
Capital Corp. 11.375%
2/15/04
McCaw International Ltd. 0% Caa1 100,000 62,500
4/15/07 (b)
Millicom International Caa1 100,000 73,000
Cellular SA 0% 6/1/06 (b)
Nextel International, Inc. 0% Caa1 100,000 53,000
4/15/08 (b)
Nextel Partners, Inc. 0% B3 150,000 92,250
2/1/09 (b)
TeleCorp PCS, Inc. 0% 4/15/09 B3 30,000 18,300
(b)(c)
Tritel PCS, Inc. 0% 5/15/09 B3 30,000 18,075
(b)(c)
Triton PCS, Inc. 0% 5/1/08 (b) Caa1 15,000 10,313
US Unwired, Inc. 0% 11/1/09 Caa1 100,000 52,750
(c)
414,388
TELEPHONE SERVICES - 17.4%
Allegiance Telecom, Inc. 0% B3 50,000 33,750
2/15/08 (b)
Covad Communications Group,
Inc.:
0% 3/15/08 (b) B3 120,000 67,500
12.5% 2/15/09 B3 170,000 168,300
e.spire Communications, Inc.:
0% 7/1/08 (b) - 30,000 10,500
13.75% 7/15/07 - 150,000 132,000
GST Network Funding, Inc. 0% - 160,000 72,800
5/1/08 (b)
GST USA, Inc. 0% 12/15/05 (b) - 190,000 144,400
ICG Holdings, Inc. 0% 9/15/05 B3 160,000 134,400
(b)
Intermedia Communications,
Inc.:
0% 5/15/06 (b) B2 150,000 123,375
8.6% 6/1/08 B2 10,000 8,925
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
IXC Communications, Inc. 9% B3 $ 100,000 $ 100,000
4/15/08
NEXTLINK Communications, Inc.:
0% 4/15/08 (b) B3 260,000 161,200
10.75% 6/1/09 B3 45,000 46,069
Rochester Tel Corp.:
9% 7/19/00 Ba2 50,000 50,250
9.07% 7/5/00 Ba2 50,000 50,250
9.1% 7/5/00 Ba2 50,000 50,250
1,353,969
TOTAL UTILITIES 1,768,357
TOTAL NONCONVERTIBLE BONDS 5,112,594
(Cost $5,162,741)
</TABLE>
COMMON STOCKS - 0.4%
SHARES
UTILITIES - 0.4%
TELEPHONE SERVICES - 0.4%
GST Telecommunications, Inc. 5,000 33,750
(a) (Cost $36,233)
NONCONVERTIBLE PREFERRED
STOCKS - 3.0%
UTILITIES - 3.0%
CELLULAR - 3.0%
Nextel Communications, Inc.:
11.125% pay-in-kind 200 205,000
Series D, 13% pay-in-kind 25 26,625
(Cost $222,219) 231,625
CASH EQUIVALENTS - 30.9%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 2,422,053 $ 2,421,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 5.22%,
dated 10/29/99 due 11/1/99
(Cost $2,421,000)
TOTAL INVESTMENT PORTFOLIO - 7,798,969
99.7%
(Cost $7,842,193)
NET OTHER ASSETS - 0.3% 23,552
NET ASSETS - 100% $ 7,822,521
LEGEND
(a) Non-income producing
(b) 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.
(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 $938,262
or 12.0% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investor Service, Inc.
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 0.0% BBB 0.0%
Ba 10.4% BB 10.2%
B 44.8% B 36.3%
Caa 4.6% CCC 7.5%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's
or S&P amounted to 4.6%. FMR has determined that unrated debt
securities
that are lower quality account for 4.6% of the total value of
investment in securities.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate
cost of investment securities for income tax purposes was $7,842,193.
Net unrealized depreciation aggregated $43,224, of
which $54,561 related to appreciated investment securities and $97,785
related to depreciated investment securities.
At October 31, 1999, the Fund had a capital loss carryforward of
approxi-
mately 7,000, all of which will expire on October 31, 2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 7,798,969
value (including repurchase
agreements of $2,421,000)
(cost $7,842,193) - See
accompanying schedule
Cash 21,786
Receivable for investments 61,456
sold
Receivable for fund shares 201,629
sold
Interest receivable 104,547
Prepaid expenses 77,391
Receivable from investment 36,680
adviser for expense
reductions
TOTAL ASSETS 8,302,458
LIABILITIES
Payable for investments $ 310,273
purchased
Distributions payable 7,747
Distribution fees payable 2,797
Other payables and accrued 159,120
expenses
TOTAL LIABILITIES 479,937
NET ASSETS $ 7,822,521
Net Assets consist of:
Paid in capital $ 7,869,440
Undistributed net investment 2,608
income
Accumulated undistributed net (6,303)
realized gain (loss) on
investments
Net unrealized appreciation (43,224)
(depreciation) on investments
NET ASSETS $ 7,822,521
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.92
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($738,810
(divided by) 74,457 shares)
Maximum offering price per $10.41
share (100/95.25 of $9.92)
CLASS T: NET ASSET VALUE and $9.92
redemption price per share
($2,422,278 (divided by)
244,111 shares)
Maximum offering price per $10.28
share (100/96.50 of $9.92)
CLASS B: NET ASSET VALUE and $9.92
offering price per share
($2,088,890 (divided by)
210,634 shares) A
CLASS C: NET ASSET VALUE and $9.91
offering price per share
($1,853,877 (divided by)
187,021 shares) A
INSTITUTIONAL CLASS: NET $9.92
ASSET VALUE, offering price
and redemption price per
share ($718,666 (divided by)
72,432 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
INVESTMENT INCOME $ 69,940
Interest
EXPENSES
Management fee $ 4,502
Transfer agent fees 1,358
Distribution fees 4,092
Accounting fees and expenses 8,833
Custodian fees and expenses 816
Registration fees 48,758
Audit 27,250
Total expenses before 95,609
reductions
Expense reductions (84,809) 10,800
NET INVESTMENT INCOME 59,140
REALIZED AND UNREALIZED GAIN (6,153)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (43,224)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (49,377)
NET INCREASE (DECREASE) IN $ 9,763
NET ASSETS RESULTING FROM
OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 59,140
income
Net realized gain (loss) (6,153)
Change in net unrealized (43,224)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 9,763
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (56,682)
from net investment income
Share transactions - net 7,869,440
increase (decrease)
TOTAL INCREASE (DECREASE) 7,822,521
IN NET ASSETS
NET ASSETS
Beginning of period -
End of period (including $ 7,822,521
undistributed net investment
income of $2,608)
FINANCIAL HIGHLIGHTS - CLASS A
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .116
Net realized and unrealized (.091)
gain (loss)
Total from investment .025
operations
Less Distributions
From net investment income (.105)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 739
(000 omitted)
Ratio of expenses to average 1.00% A, F
net assets
Ratio of net investment 7.92% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS T
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .112
Net realized and unrealized (.089)
gain (loss)
Total from investment .023
operations
Less Distributions
From net investment income (.103)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,422
(000 omitted)
Ratio of expenses to average 1.10% A, F
net assets
Ratio of net investment 7.82% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD 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 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS B
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .102
Net realized and unrealized (.083)
gain (loss)
Total from investment .019
operations
Less Distributions
From net investment income (.099)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,089
(000 omitted)
Ratio of expenses to average 1.75% A, F
net assets
Ratio of net investment 7.17% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C TOTAL RETURNS DO NOT REFLECT 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 SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .101
Net realized and unrealized (.093)
gain (loss)
Total from investment .008
operations
Less Distributions
From net investment income (.098)
Net asset value, end of period $ 9.910
TOTAL RETURN B, C .08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,854
(000 omitted)
Ratio of expenses to average 1.85% A, F
net assets
Ratio of net investment 7.07% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C TOTAL RETURNS DO NOT REFLECT 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 SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEAR ENDED OCTOBER 31, 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.000
period
Income from Investment
Operations
Net investment income D .118
Net realized and unrealized (.091)
gain (loss)
Total from investment .027
operations
Less Distributions
From net investment income (.107)
Net asset value, end of period $ 9.920
TOTAL RETURN B, C .28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 719
(000 omitted)
Ratio of expenses to average .85% A, F
net assets
Ratio of net investment 8.07% A
income to average net assets
Portfolio turnover rate 331% A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 7, 1999 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1999.
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 October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High 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 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. The fund commenced operations on
September 7, 1999. 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. The fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code. By so
qualifying, the fund will not be 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.
PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears
all organizational expenses of the funds except for the cost of
registering and qualifying shares of each class for distribution under
federal and state securities law. These registration expenses are
borne by the fund and amortized over one year.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for market discount, capital loss carryforwards and losses
deferred due to wash sales.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
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 FMR, may transfer uninvested cash
balances into one or more joint trading accounts. These balances are
invested in one or more repurchase agreements for U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total
investments in repurchase agreements through a joint trading account.
These repurchase agreements were with entities whose creditworthiness
has been reviewed and found satisfactory by FMR. The investments in
repurchase agreements through the joint trading account are summarized
as follows:
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF JOINT TRADING
DATED OCTOBER 29, 1999, DUE NOVEMBER 1, 1999
Number of dealers or banks 21
Maximum amount with one dealer or bank 12.3%
Aggregate principal amount of agreements $29,965,546,000
Aggregate maturity amount of agreements $29,978,570,459
Aggregate market value of transferred assets $30,612,732,384
Coupon rates of transferred assets 0.00% to 14.25%
Maturity dates of transferred assets 10/31/99 to 8/15/29
</TABLE>
4. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $7,658,210 and $2,399,670, respectively.
5. 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: .0920% 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 .57% of average net
assets.
5. 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 has 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 $ 146 $ 131
CLASS T 570 182
CLASS B 1,448 1,243
CLASS C 1,928 1,926
TOTAL $ 4,092 $ 3,482
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 is paid to securities
dealers, banks and other financial institutions.
5. 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 $ 1,541 $ 341
CLASS T 1,877 1,162
TOTAL $ 3,418 $ 1,503
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 $ 174 .18*
CLASS T 395 .17*
CLASS B 258 .16*
CLASS C 361 .19*
INSTITUTIONAL CLASS 170 .17*
TOTAL $ 1,358
* 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.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses, if
any) 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 1.00% $ 10,579
CLASS T 1.10% 24,894
CLASS B 1.75% 17,536
CLASS C 1.85% 21,037
INSTITUTIONAL CLASS 0.85% 10,763
$ 84,809
7. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
approximately 31% of the total outstanding shares of the fund.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
1999
FROM NET INVESTMENT INCOME
CLASS A $ 7,152
CLASS T 17,710
CLASS B 10,995
CLASS C 13,464
INSTITUTIONAL CLASS 7,361
TOTAL DISTRIBUTIONS $ 56,682
9. SHARE TRANSACTIONS.
Transactions for each class of shares for the period are as follows:
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 A 1999 A
CLASS A Shares sold 73,796 $ 737,552
Reinvestment of distributions 661 6,564
Net increase (decrease) 74,457 $ 744,116
CLASS T Shares sold 242,680 $ 2,421,256
Reinvestment of distributions 1,481 14,699
Shares redeemed (50) (500)
Net increase (decrease) 244,111 $ 2,435,455
CLASS B Shares sold 214,251 $ 2,135,658
Reinvestment of distributions 851 8,451
Shares redeemed (4,468) (44,468)
Net increase (decrease) 210,634 $ 2,099,641
CLASS C Shares sold 185,931 $ 1,855,443
Reinvestment of distributions 1,090 10,817
Net increase (decrease) 187,021 $ 1,866,260
INSTITUTIONAL CLASS Shares 71,695 $ 716,650
sold
Reinvestment of distributions 737 7,318
Net increase (decrease) 72,432 $ 723,968
A SHARE TRANSACTIONS ARE FOR THE PERIOD SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1999.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor High Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor High Income
Fund as of October 31, 1999, and the related statement of operations,
the statement of changes in net assets, and the financial highlights
for the period from September 7, 1999 (commencement of operations) to
October 31, 1999. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor High Income Fund at October 31, 1999, and the
results of its operations, the changes in its net assets, and its
financial highlights for the period from September 7, 1999
(commencement of operations) to October 31, 1999 in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
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
David L. Glancy, Vice President
Eric D. Roiter, Secretary
Richard A. Silver, Treasurer
Matthew N. Karstetter, Deputy Treasurer
John H. Costello, 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
Ned C. Lautenbach
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 Emerging Asia 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 Value Strategies 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
AHII-ANN-1299 88093
1.728716.100
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
MORTGAGE SECURITIES
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 32
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 3.09% 45.92% 112.06%
SECURITIES - INST CL
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Institutional Class' returns to 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 one year average
represents a peer group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 3.09% 7.85% 7.81%
SECURITIES - INST CL
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 10000.00 10000.00
1989/11/30 10096.36 10108.36
1989/12/31 10165.96 10168.18
1990/01/31 10072.30 10097.08
1990/02/28 10139.39 10156.41
1990/03/31 10147.36 10181.42
1990/04/30 10059.59 10089.97
1990/05/31 10352.04 10403.04
1990/06/30 10502.11 10567.54
1990/07/31 10654.74 10750.92
1990/08/31 10626.56 10636.68
1990/09/30 10683.28 10723.95
1990/10/31 10792.72 10845.55
1990/11/30 11028.89 11072.81
1990/12/31 11219.13 11258.40
1991/01/31 11335.55 11429.52
1991/02/28 11408.12 11525.86
1991/03/31 11484.85 11604.31
1991/04/30 11609.18 11711.20
1991/05/31 11669.53 11814.17
1991/06/30 11698.71 11824.71
1991/07/31 11866.75 12024.76
1991/08/31 12093.52 12243.44
1991/09/30 12282.32 12472.91
1991/10/31 12427.50 12679.58
1991/11/30 12503.47 12771.51
1991/12/31 12746.36 13028.19
1992/01/31 12685.05 12877.67
1992/02/29 12811.27 12999.51
1992/03/31 12722.73 12916.65
1992/04/30 12842.01 13043.64
1992/05/31 13053.97 13278.74
1992/06/30 13192.28 13435.40
1992/07/31 13169.64 13552.83
1992/08/31 13254.83 13729.35
1992/09/30 13338.04 13836.23
1992/10/31 13205.41 13714.88
1992/11/30 13269.23 13757.78
1992/12/31 13441.43 13935.52
1993/01/31 13564.06 14118.66
1993/02/28 13680.23 14261.83
1993/03/31 13769.57 14348.37
1993/04/30 13865.69 14422.41
1993/05/31 13906.75 14504.54
1993/06/30 14076.40 14615.59
1993/07/31 14153.77 14673.94
1993/08/31 14180.13 14743.07
1993/09/30 14211.11 14755.82
1993/10/31 14236.39 14798.48
1993/11/30 14206.63 14769.55
1993/12/31 14343.74 14889.19
1994/01/31 14475.84 15036.77
1994/02/28 14399.51 14931.85
1994/03/31 14236.32 14543.03
1994/04/30 14173.95 14435.89
1994/05/31 14294.61 14493.01
1994/06/30 14367.78 14461.63
1994/07/31 14597.45 14751.16
1994/08/31 14662.86 14797.74
1994/09/30 14503.93 14587.15
1994/10/31 14533.38 14578.82
1994/11/30 14518.88 14533.22
1994/12/31 14622.25 14649.18
1995/01/31 14898.69 14962.74
1995/02/28 15232.24 15344.69
1995/03/31 15296.88 15417.01
1995/04/30 15538.05 15636.19
1995/05/31 16026.94 16129.20
1995/06/30 16149.20 16220.89
1995/07/31 16185.88 16248.84
1995/08/31 16385.60 16417.01
1995/09/30 16554.99 16561.41
1995/10/31 16739.15 16708.75
1995/11/30 16924.48 16899.73
1995/12/31 17110.94 17110.81
1996/01/31 17251.03 17239.76
1996/02/29 17141.11 17096.59
1996/03/31 17078.92 17034.81
1996/04/30 17043.32 16986.76
1996/05/31 16977.33 16937.24
1996/06/30 17211.63 17170.38
1996/07/31 17273.09 17233.39
1996/08/31 17269.28 17233.15
1996/09/30 17542.59 17521.70
1996/10/31 17867.18 17865.41
1996/11/30 18143.22 18121.11
1996/12/31 18040.91 18026.23
1997/01/31 18153.82 18160.09
1997/02/28 18213.00 18220.64
1997/03/31 18041.54 18049.03
1997/04/30 18324.06 18336.85
1997/05/31 18504.31 18516.30
1997/06/30 18720.66 18732.29
1997/07/31 19041.59 19085.32
1997/08/31 19020.10 19039.96
1997/09/30 19226.07 19281.44
1997/10/31 19431.18 19495.22
1997/11/30 19495.67 19559.21
1997/12/31 19666.96 19737.44
1998/01/31 19855.41 19933.81
1998/02/28 19881.97 19975.97
1998/03/31 19965.62 20060.55
1998/04/30 20065.57 20174.06
1998/05/31 20200.79 20308.16
1998/06/30 20300.10 20405.00
1998/07/31 20380.58 20508.46
1998/08/31 20555.03 20694.53
1998/09/30 20767.20 20944.35
1998/10/31 20570.75 20917.38
1998/11/30 20724.22 21021.57
1998/12/31 20793.98 21110.81
1999/01/31 20910.12 21261.09
1999/02/28 20851.81 21177.00
1999/03/31 21007.23 21319.22
1999/04/30 21083.57 21417.59
1999/05/31 21006.16 21297.87
1999/06/30 20930.49 21222.92
1999/07/31 20816.14 21078.94
1999/08/31 20804.19 21078.19
1999/09/30 21113.95 21420.32
1999/10/29 21206.44 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093437 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Institutional
Class on October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have grown to $21,206 - a 112.06%
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 $21,544 - a 115.44% 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
EARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997
Dividend returns 6.14% 6.13% 4.30%
Capital returns -3.05% -0.27% 2.43%
Total returns 3.09% 5.86% 6.73%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.59(cents) 31.91(cents) 65.62(cents)
Annualized dividend rate 6.33% 6.03% 6.16%
30-day annualized yield 6.53% - -
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 $10.40 over the past one month, $10.50 over the past six months,
and $10.65 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares provided a total return of 3.09%. To get a
sense of how the fund did relative to its competitors, the U.S.
mortgage funds average returned 1.65% for the same 12-month period,
according to Lipper Inc. Additionally, the Lehman Brothers
Mortgage-Backed Securities Index - which tracks the types of
securities in which the fund invests - returned 2.99% for the same
12-month period.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS AND THE
LEHMAN INDEX?
A. The main contributor to the fund's strong performance was its
larger-than-average stake in commercial mortgage-backed securities
(CMBS), which performed relatively well. Commercial mortgage-backed
securities are bonds that are collateralized by mortgage loans on
commercial real estate - such as office buildings, shopping malls,
hotels and apartment buildings. At the beginning of the period, the
CMBS market had been severely punished over concerns about commercial
real-estate overbuilding and a lack of market liquidity. But the
global financial crisis of October 1998 effectively put a stop to the
financing of construction of new properties. By early 1999, liquidity
had returned and the CMBS market snapped back.
Q. PREPAYMENT ACTIVITY WAS A BIG CHALLENGE FOR THE MORTGAGE MARKET
DURING THE PAST YEAR. WHAT CHOICES DID YOU MAKE IN LIGHT OF THAT
CHALLENGE?
A. The biggest investment risk associated with mortgage securities is
a rapid acceleration in prepayment activity. That's what occurred in
1998 and early 1999 when interest rates fell dramatically and huge
waves of homeowners refinanced their mortgages. During the crush of
prepayment activity, I emphasized mortgage securities that had some
measure of prepayment protection, including 15-year Fannie Mae
securities and 30-year Ginnie Mae securities. Since homeowners with
Ginnie Mae loans have less flexibility to refinance, Ginnie Mae
securities are less sensitive to prepayments than their Fannie Mae and
Freddie Mac counterparts. Compared to homeowners with traditional
30-year loans, fewer 15-year mortgage borrowers refinance or pay off
their loans earlier. I also used "seasoned" - meaning older - mortgage
securities, which had, over time, withstood earlier waves of
prepayment. My emphasis on prepayment-resistant mortgage securities
was a plus for performance in the first several months of the period.
But in response to rising interest rates, I switched courses.
Q. TELL US ABOUT THAT SWITCH . . .
A. Higher interest rates dramatically curtailed prepayment activity.
So I sold most of the fund's stake in 15-year Fannie Maes, reduced its
stake in seasoned securities and focused instead on securities that
offered better yields. In particular, I added 30-year 7% Freddie Mac
and Fannie Mae securities.
Q. AND HOW DID THAT STRATEGY WORK OUT?
A. Unusually light demand caused Fannie Mae and Freddie Mac securities
to lag their Ginnie Mae counterparts over the past couple months. But
I continued to hold onto Fannie Mae and Freddie Mac securities because
I believe that they will outperform Ginnie Maes over time.
Furthermore, I wanted to position the fund to benefit from potential
outperformance of Fannie Mae and Freddie Mac securities once demand
returns to more normal levels.
Q. WHAT'S YOUR OUTLOOK?
A. I think that the mortgage securities market offers some very
attractive values at current levels. Even though prepayment activity
has slowed dramatically, many bonds are priced as if prepayments are
still a way of life. In other words, investors are getting compensated
- - in the form of relatively high yields - for taking on a risk that's
declined significantly in the current environment. To get the
prepayment engine going again would, by my calculations, require rates
to dip well below where they were a year ago. Given that outlook, I
believe that the best values to be found are in bonds that offer
relatively high yields, which I plan to continue searching for and
holding.
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, consistent
with prudent investment risk.
In seeking current income,
the fund may also consider
the potential for capital gain.
START DATE: December 31, 1984
SIZE: as of October 31, 1999,
more than $473 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MORTGAGE
PREPAYMENT ACTIVITY:
"Falling interest rates weighed
heavily on mortgage securities
during the past year because, as
rates declined, the rate of
mortgage prepayment
accelerated. But an analysis of
more current data shows
definitive signs that prepayment
activity has slowed in response to
higher interest rates. The MBA
Refinancing Index - one of the
most widely watched barometers
of prepayment activity - rose to a
record high of 4400 in late 1998, 44
times higher than the base
reading of 100 in 1990. During the
past year, the largest one-month
volume of mortgages issued
peaked at $80 billion.
"But rising interest rates have
dramatically curtailed
prepayment activity. At the end of
October, the MBA refinancing
activity dropped to 416, a level 10
times off its peak earlier in the
year. Also, the one-month volume
of mortgages dropped to $25
billion. Given that mortgage rates
hovered around 8% at the end of
the period, volume is likely to
decline further through the winter
months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 3.1
6 - 6.99% 47.0 45.7
7 - 7.99% 36.4 23.3
8 - 8.99% 7.8 8.4
9 - 9.99% 3.8 5.1
10% and over 3.1 3.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 8.0 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 4.7 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 76.9% Mortgage Securities 88.4%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.0% Related Securities 17.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.1% Net Other Assets (6.2%)*
Row: 1, Col: 1, Value: 76.90000000000001 Row: 1, Col: 1, Value: 88.40000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: nil Row: 1, Col: 3, Value: nil
Row: 1, Col: 4, Value: 21.0 Row: 1, Col: 4, Value: 17.8
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: nil
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: nil Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.1 Row: 1, Col: 8, Value: 0.0
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 76.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 51.9%
6% 10/1/28 to 7/1/29 $ 10,562,669 $ 9,855,604
6.5% 9/1/10 to 6/1/29 132,830,766 127,377,345
7% 3/1/19 to 9/1/29 75,047,423 73,758,602
7.5% 3/1/22 to 10/1/28 4,689,610 4,710,832
8% 1/1/07 to 11/1/29 17,960,269 18,296,623
8.25% 1/1/13 76,806 79,103
8.5% 6/1/16 to 11/1/23 3,657,034 3,794,939
8.75% 11/1/08 to 7/1/09 159,649 164,842
9% 1/1/08 to 2/1/13 583,645 605,628
9.5% 5/1/03 to 8/1/22 4,609,873 4,793,726
11% 12/1/02 to 8/1/10 1,270,775 1,375,576
12.25% 5/1/13 to 6/1/15 153,672 172,878
12.5% 11/1/14 to 3/1/16 329,243 371,774
12.75% 2/1/14 to 6/1/15 62,841 70,092
13.5% 9/1/13 to 12/1/14 133,209 153,857
14% 11/1/14 41,740 48,627
245,630,048
FREDDIE MAC - 12.4%
5% 7/1/10 2,374,483 2,199,366
6% 2/1/29 to 7/1/29 4,949,597 4,618,569
6.5% 1/1/24 to 9/1/24 22,191,188 21,477,363
7% 7/1/29 to 9/1/29 12,973,281 12,746,249
7.5% 6/1/26 to 8/1/28 3,111,718 3,125,486
8% 10/1/07 to 4/1/21 661,472 672,159
8.5% 11/1/03 to 1/1/20 1,587,836 1,639,793
9% 9/1/08 to 5/1/21 6,990,523 7,310,029
10% 1/1/09 to 5/1/19 1,177,016 1,246,705
10.5% 8/1/10 to 12/1/20 1,272,823 1,377,494
11.5% 4/1/12 65,071 71,350
12.25% 6/1/14 to 7/1/15 161,355 181,852
12.5% 5/1/12 to 12/1/14 644,783 724,276
12.75% 6/1/05 to 3/1/15 64,868 71,157
13% 1/1/11 to 6/1/15 1,049,360 1,200,158
58,662,006
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 12.6%
6.5% 5/15/28 to 1/15/29 4,296,716 4,106,028
7% 5/15/23 to 6/15/29 18,186,168 17,845,777
7.5% 7/15/05 to 9/15/27 14,743,215 14,867,495
8% 4/15/02 to 12/15/25 9,621,294 9,839,359
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
8.5% 7/15/16 to 6/15/18 $ 1,950,831 $ 2,036,256
9% 9/20/16 to 4/20/18 66,797 70,198
9.5% 6/15/09 to 12/15/24 3,175,696 3,365,633
10% 12/15/17 to 1/15/26 4,876,056 5,332,643
10.5% 8/15/00 to 2/20/18 727,758 783,752
11% 1/15/10 to 9/15/19 1,300,473 1,448,626
11.5% 10/15/10 24,927 27,740
13% 10/15/13 58,637 67,689
13.5% 7/15/11 to 10/15/14 62,056 71,790
59,862,986
TOTAL U.S. GOVERNMENT AGENCY 364,155,040
- - MORTGAGE SECURITIES
(Cost $369,673,468)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.3%
U.S. GOVERNMENT AGENCY - 4.3%
Fannie Mae REMIC Pass Through 10,000,000 9,237,500
Trust Series 1999-51 Class
LK, 6.5% 8/25/29
Fanniemae Whole Loan 6.5% 10,049,260 9,185,652
2/25/29
Freddie Mac planned 1,757,086 1,818,585
amortization class Series 70
Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 20,241,737
OBLIGATIONS
(Cost $20,048,497)
COMMERCIAL MORTGAGE
SECURITIES - 16.7%
ACP Mortgage LP Series 1 2,320,648 2,058,647
Class E, 6.8464% 2/28/28
(a)(b)
Bankers Trust II Series 5,000,000 4,987,500
1999-S1A Class D, 7.5488%
2/28/14 (a)(b)
Bankers Trust REMIC Trust 4,000,000 4,006,250
Series 1998-S1A Class F,
7.38% 11/28/02 (b)
CBM Funding Corp. sequential 2,300,000 2,269,094
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,808,125
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,052,500
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 3,498,052 3,488,761
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, $ 1,600,000 $ 1,366,624
7.1905% 4/13/31 (a)(b)
Series 1999-GSFL II Class F, 4,500,000 4,440,240
7.6634% 11/13/13 (a)(b)
Nomura Asset Securities Corp. 15,000,000 13,139,063
Series 1998-D6 Class A-4,
7.3506% 3/17/28 (b)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.3063% 2/15/34 7,900,000 7,484,016
(a)(b)
Class A-5, 6.6563% 2/15/34 5,278,196 4,944,185
(a)(b)
Structured Asset Securities 3,192,522 2,929,638
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 17,218,656
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 79,193,299
SECURITIES
(Cost $83,897,322)
</TABLE>
CASH EQUIVALENTS - 1.5%
MATURITY AMOUNT
Investments in repurchase $ 6,942,082 6,939,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $6,939,000)
TOTAL INVESTMENT PORTFOLIO - 470,529,076
99.4% (Cost $480,558,287)
NET OTHER ASSETS - 0.6% 2,974,520
NET ASSETS - 100% $ 473,503,596
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 $42,499,868 or 9.0% of net assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $480,637,465. Net unrealized depreciation
aggregated $10,108,389, of which $2,596,741 related to appreciated
investment securities and $12,705,130 related to depreciated
investment securities.
The fund hereby designates approximately $4,617,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $5,050,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 470,529,076
value (including repurchase
agreements of $6,939,000)
(cost $480,558,287) - See
accompanying schedule
Receivable for investments 9,473,896
sold
Receivable for fund shares 160,026
sold
Interest receivable 2,668,553
TOTAL ASSETS 482,831,551
LIABILITIES
Payable to custodian bank $ 30,761
Payable for investments 8,124,926
purchased
Payable for fund shares 422,322
redeemed
Distributions payable 415,052
Accrued management fee 166,857
Distribution fees payable 20,453
Other payables and accrued 147,584
expenses
TOTAL LIABILITIES 9,327,955
NET ASSETS $ 473,503,596
Net Assets consist of:
Paid in capital $ 486,801,066
Undistributed net investment 1,901,973
income
Accumulated undistributed net (5,170,232)
realized gain (loss) on
investments
Net unrealized appreciation (10,029,211)
(depreciation) on investments
NET ASSETS $ 473,503,596
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.48
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,090,255 (divided by)
294,996 shares)
Maximum offering price per $11.00
share (100/95.25 of $10.48)
CLASS T: NET ASSET VALUE and $10.48
redemption price per share
($29,051,750 (divided by)
2,771,642 shares)
Maximum offering price per $10.86
share (100/96.50 of $10.48)
CLASS B: NET ASSET VALUE and $10.48
offering price per share
($19,101,218 (divided by)
1,823,400 shares) A
INITIAL CLASS: NET ASSET $10.49
VALUE, offering price and
redemption price per share
($406,838,729 (divided by)
38,797,891 shares)
INSTITUTIONAL CLASS: NET $10.47
ASSET VALUE, offering price
and redemption price per
share ($15,421,644 (divided
by) 1,473,289 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 34,267,086
Interest
EXPENSES
Management fee $ 2,110,419
Transfer agent fees 937,977
Distribution fees 190,306
Accounting fees and expenses 161,159
Non-interested trustees' 1,708
compensation
Custodian fees and expenses 91,213
Registration fees 91,994
Audit 54,626
Legal 15,537
Miscellaneous 345
Total expenses before 3,655,284
reductions
Expense reductions (27,083) 3,628,201
NET INVESTMENT INCOME 30,638,885
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (6,155,525)
Futures contracts 534,939 (5,620,586)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,123,506)
Futures contracts 115,853
Delayed delivery commitments (183,312) (10,190,965)
NET GAIN (LOSS) (15,811,551)
NET INCREASE (DECREASE) IN $ 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,638,885 $ 32,333,262
income
Net realized gain (loss) (5,620,586) 8,605,529
Change in net unrealized (10,190,965) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,827,334 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (30,183,549) (30,575,427)
From net investment income
From net realized gain (6,924,572) (1,430,037)
TOTAL DISTRIBUTIONS (37,108,121) (32,005,464)
Share transactions - net (14,273,306) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (36,554,093) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 473,503,596 $ 510,057,689
undistributed net investment
income of $1,901,973 and
$1,699,376, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .646 .669 .170 .268
Net realized and unrealized (.336) (.061) .048 .224
gain (loss)
Total from investment .310 .608 .218 .492
operations
Less Distributions
From net investment income (.640) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.790) (.668) (.248) (.272)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .637 .665 .167 .255
Net realized and unrealized (.338) (.063) .048 .233
gain (loss)
Total from investment .299 .602 .215 .488
operations
Less Distributions
From net investment income (.629) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.779) (.662) (.245) (.268)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
</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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .567 .584 .142 .234
Net realized and unrealized (.324) (.064) .065 .214
gain (loss)
Total from investment .243 .520 .207 .448
operations
Less Distributions
From net investment income (.563) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.713) (.590) (.227) (.238)
Net asset value, end of period $ 10.480 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 183% 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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 F 1997 G 1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .674 D .700 D .176 D .678 D .729 .772
Net realized and unrealized (.342) (.056) .047 .391 (.015) .325
gain (loss)
Total from investment .332 .644 .223 1.069 .714 1.097
operations
Less Distributions
From net investment income (.662) (.664) (.173) (.689) (.724) (.737)
From net realized gain (.150) (.030) (.080) (.110) (.100) -
In excess of net realized - - - - - (.050)
gain
Total distributions (.812) (.694) (.253) (.799) (.824) (.787)
Net asset value, end of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
TOTAL RETURN B, C 3.14% 5.99% 2.05% 10.34% 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 406,839 $ 459,212 $ 494,304 $ 506,113 $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .70% .71% .72% A .73% .74% .77%
net assets
Ratio of expenses to average .70% .71% .72% A .73% .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.29% 6.34% 6.36% A 6.26% 6.75% 7.37%
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149% 221% 329%
</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 THREE MONTHS ENDED OCTOBER 31
G YEAR ENDED JULY 31
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 H 1997 G
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 .669 .693 .172 .263
Net realized and unrealized (.343) (.063) .050 .226
gain (loss)
Total from investment .326 .630 .222 .489
operations
Less Distributions
From net investment income (.656) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.806) (.690) (.252) (.279)
Net asset value, end of period $ 10.470 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
G FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 1997
H THREE MONTHS ENDED OCTOBER 31
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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) 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.
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, futures
transactions, 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 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 after the customary settlement period for that security. 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 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.
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 $875,693,626 and $942,195,101, respectively, of which U.S.
government and government agency obligations aggregated $853,484,094
and $932,362,579, respectively.
The market value of futures contracts opened and closed during the
period amounted to $29,995,764 and $39,662,629, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 $ 3,865 $ 146
CLASS T 61,872 4,924
CLASS B 124,569 89,966
$ 190,306 $ 95,036
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 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 is 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 $ 29,751 $ 10,398
CLASS T 74,991 27,421
CLASS B 68,549 68,549*
$ 173,291 $ 106,368
* 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 $ 8,236 .32
CLASS T 72,011 .29
CLASS B 28,891 .21
INITIAL CLASS 785,661 .18
INSTITUTIONAL CLASS 43,178 .24
$ 937,977
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, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) 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% $ 2,125
CLASS T 1.00% 13,483
INSTITUTIONAL CLASS .75% 454
$ 16,062
In addition, through an arrangement with the fund's custodian, 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 $11,021 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 153,223 $ 47,643
Class T 1,450,107 835,552
Class B 724,614 198,305
Initial Class 26,727,640 28,222,031
Institutional Class 1,127,965 1,271,896
Total $ 30,183,549 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,709 41,653
Class B 132,050 4,898
Initial Class 6,182,269 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,572 $ 1,430,037
Total Distributions $ 37,108,121 $ 32,005,464
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 233,326 191,569 $ 2,488,784 $ 2,113,314
Reinvestment of
distributions 11,952 3,475 127,329 38,300
Shares redeemed (120,472) (174,371) (1,280,382) (1,919,263)
Net increase (decrease) 124,806 20,673 $ 1,335,731 $ 232,351
CLASS T Shares sold 2,003,369 1,214,468 $ 21,386,352 $ 13,402,368
Reinvestment of
distributions 148,336 72,903 1,582,559 803,861
Shares redeemed (1,122,570) (874,013) (11,947,707) (9,643,136)
Net increase (decrease) 1,029,135 413,358 $ 11,021,204 $ 4,563,093
CLASS B Shares sold 1,505,268 623,528 $ 16,049,817 $ 6,874,797
Reinvestment of
distributions 63,855 14,736 679,689 162,453
Shares redeemed (461,420) (66,613) (4,891,488) (734,102)
Net increase (decrease) 1,107,703 571,651 $ 11,838,018 $ 6,303,148
INITIAL CLASS Shares sold 3,914,002 5,885,198 $ 41,964,545 $ 64,970,201
Reinvestment of
distributions 2,515,203 2,196,325 26,913,754 24,230,109
Shares redeemed (9,502,966) (11,046,014) (101,601,425) (121,871,170)
Net increase (decrease) (3,073,761) (2,964,491) $ (32,723,126) $ (32,670,860)
INSTITUTIONAL CLASS Shares 667,600 1,131,767 $ 7,141,162 $ 12,463,547
sold
Reinvestment of
distributions 70,535 61,639 754,625 679,028
Shares redeemed (1,277,677) (971,330) (13,640,920) (10,710,195)
Net increase (decrease) (539,542) 222,076 $ (5,745,133) $ 2,432,380
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Mortgage Securities Fund (formerly a fund of Fidelity
Income Fund):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Income Fund) at October 31,
1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Mortgage Securities Fund's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 1999
DISTRIBUTIONS
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88116
1.538544.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
MORTGAGE SECURITIES
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 32
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 3.09% 45.92% 112.06%
SECURITIES - INST CL
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Institutional Class' returns to 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 one year average
represents a peer group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 3.09% 7.85% 7.81%
SECURITIES - INST CL
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 10000.00 10000.00
1989/11/30 10096.36 10108.36
1989/12/31 10165.96 10168.18
1990/01/31 10072.30 10097.08
1990/02/28 10139.39 10156.41
1990/03/31 10147.36 10181.42
1990/04/30 10059.59 10089.97
1990/05/31 10352.04 10403.04
1990/06/30 10502.11 10567.54
1990/07/31 10654.74 10750.92
1990/08/31 10626.56 10636.68
1990/09/30 10683.28 10723.95
1990/10/31 10792.72 10845.55
1990/11/30 11028.89 11072.81
1990/12/31 11219.13 11258.40
1991/01/31 11335.55 11429.52
1991/02/28 11408.12 11525.86
1991/03/31 11484.85 11604.31
1991/04/30 11609.18 11711.20
1991/05/31 11669.53 11814.17
1991/06/30 11698.71 11824.71
1991/07/31 11866.75 12024.76
1991/08/31 12093.52 12243.44
1991/09/30 12282.32 12472.91
1991/10/31 12427.50 12679.58
1991/11/30 12503.47 12771.51
1991/12/31 12746.36 13028.19
1992/01/31 12685.05 12877.67
1992/02/29 12811.27 12999.51
1992/03/31 12722.73 12916.65
1992/04/30 12842.01 13043.64
1992/05/31 13053.97 13278.74
1992/06/30 13192.28 13435.40
1992/07/31 13169.64 13552.83
1992/08/31 13254.83 13729.35
1992/09/30 13338.04 13836.23
1992/10/31 13205.41 13714.88
1992/11/30 13269.23 13757.78
1992/12/31 13441.43 13935.52
1993/01/31 13564.06 14118.66
1993/02/28 13680.23 14261.83
1993/03/31 13769.57 14348.37
1993/04/30 13865.69 14422.41
1993/05/31 13906.75 14504.54
1993/06/30 14076.40 14615.59
1993/07/31 14153.77 14673.94
1993/08/31 14180.13 14743.07
1993/09/30 14211.11 14755.82
1993/10/31 14236.39 14798.48
1993/11/30 14206.63 14769.55
1993/12/31 14343.74 14889.19
1994/01/31 14475.84 15036.77
1994/02/28 14399.51 14931.85
1994/03/31 14236.32 14543.03
1994/04/30 14173.95 14435.89
1994/05/31 14294.61 14493.01
1994/06/30 14367.78 14461.63
1994/07/31 14597.45 14751.16
1994/08/31 14662.86 14797.74
1994/09/30 14503.93 14587.15
1994/10/31 14533.38 14578.82
1994/11/30 14518.88 14533.22
1994/12/31 14622.25 14649.18
1995/01/31 14898.69 14962.74
1995/02/28 15232.24 15344.69
1995/03/31 15296.88 15417.01
1995/04/30 15538.05 15636.19
1995/05/31 16026.94 16129.20
1995/06/30 16149.20 16220.89
1995/07/31 16185.88 16248.84
1995/08/31 16385.60 16417.01
1995/09/30 16554.99 16561.41
1995/10/31 16739.15 16708.75
1995/11/30 16924.48 16899.73
1995/12/31 17110.94 17110.81
1996/01/31 17251.03 17239.76
1996/02/29 17141.11 17096.59
1996/03/31 17078.92 17034.81
1996/04/30 17043.32 16986.76
1996/05/31 16977.33 16937.24
1996/06/30 17211.63 17170.38
1996/07/31 17273.09 17233.39
1996/08/31 17269.28 17233.15
1996/09/30 17542.59 17521.70
1996/10/31 17867.18 17865.41
1996/11/30 18143.22 18121.11
1996/12/31 18040.91 18026.23
1997/01/31 18153.82 18160.09
1997/02/28 18213.00 18220.64
1997/03/31 18041.54 18049.03
1997/04/30 18324.06 18336.85
1997/05/31 18504.31 18516.30
1997/06/30 18720.66 18732.29
1997/07/31 19041.59 19085.32
1997/08/31 19020.10 19039.96
1997/09/30 19226.07 19281.44
1997/10/31 19431.18 19495.22
1997/11/30 19495.67 19559.21
1997/12/31 19666.96 19737.44
1998/01/31 19855.41 19933.81
1998/02/28 19881.97 19975.97
1998/03/31 19965.62 20060.55
1998/04/30 20065.57 20174.06
1998/05/31 20200.79 20308.16
1998/06/30 20300.10 20405.00
1998/07/31 20380.58 20508.46
1998/08/31 20555.03 20694.53
1998/09/30 20767.20 20944.35
1998/10/31 20570.75 20917.38
1998/11/30 20724.22 21021.57
1998/12/31 20793.98 21110.81
1999/01/31 20910.12 21261.09
1999/02/28 20851.81 21177.00
1999/03/31 21007.23 21319.22
1999/04/30 21083.57 21417.59
1999/05/31 21006.16 21297.87
1999/06/30 20930.49 21222.92
1999/07/31 20816.14 21078.94
1999/08/31 20804.19 21078.19
1999/09/30 21113.95 21420.32
1999/10/29 21206.44 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093437 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Institutional
Class on October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have grown to $21,206 - a 112.06%
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 $21,544 - a 115.44% 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
YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997
Dividend returns 6.14% 6.13% 4.30%
Capital returns -3.05% -0.27% 2.43%
Total returns 3.09% 5.86% 6.73%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.59(cents) 31.91(cents) 65.62(cents)
Annualized dividend rate 6.33% 6.03% 6.16%
30-day annualized yield 6.53% - -
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 $10.40 over the past one month, $10.50 over the past six months,
and $10.65 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares provided a total return of 3.09%. To get a
sense of how the fund did relative to its competitors, the U.S.
mortgage funds average returned 1.65% for the same 12-month period,
according to Lipper Inc. Additionally, the Lehman Brothers
Mortgage-Backed Securities Index - which tracks the types of
securities in which the fund invests - returned 2.99% for the same
12-month period.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS AND THE
LEHMAN INDEX?
A. The main contributor to the fund's strong performance was its
larger-than-average stake in commercial mortgage-backed securities
(CMBS), which performed relatively well. Commercial mortgage-backed
securities are bonds that are collateralized by mortgage loans on
commercial real estate - such as office buildings, shopping malls,
hotels and apartment buildings. At the beginning of the period, the
CMBS market had been severely punished over concerns about commercial
real-estate overbuilding and a lack of market liquidity. But the
global financial crisis of October 1998 effectively put a stop to the
financing of construction of new properties. By early 1999, liquidity
had returned and the CMBS market snapped back.
Q. PREPAYMENT ACTIVITY WAS A BIG CHALLENGE FOR THE MORTGAGE MARKET
DURING THE PAST YEAR. WHAT CHOICES DID YOU MAKE IN LIGHT OF THAT
CHALLENGE?
A. The biggest investment risk associated with mortgage securities is
a rapid acceleration in prepayment activity. That's what occurred in
1998 and early 1999 when interest rates fell dramatically and huge
waves of homeowners refinanced their mortgages. During the crush of
prepayment activity, I emphasized mortgage securities that had some
measure of prepayment protection, including 15-year Fannie Mae
securities and 30-year Ginnie Mae securities. Since homeowners with
Ginnie Mae loans have less flexibility to refinance, Ginnie Mae
securities are less sensitive to prepayments than their Fannie Mae and
Freddie Mac counterparts. Compared to homeowners with traditional
30-year loans, fewer 15-year mortgage borrowers refinance or pay off
their loans earlier. I also used "seasoned" - meaning older - mortgage
securities, which had, over time, withstood earlier waves of
prepayment. My emphasis on prepayment-resistant mortgage securities
was a plus for performance in the first several months of the period.
But in response to rising interest rates, I switched courses.
Q. TELL US ABOUT THAT SWITCH . . .
A. Higher interest rates dramatically curtailed prepayment activity.
So I sold most of the fund's stake in 15-year Fannie Maes, reduced its
stake in seasoned securities and focused instead on securities that
offered better yields. In particular, I added 30-year 7% Freddie Mac
and Fannie Mae securities.
Q. AND HOW DID THAT STRATEGY WORK OUT?
A. Unusually light demand caused Fannie Mae and Freddie Mac securities
to lag their Ginnie Mae counterparts over the past couple months. But
I continued to hold onto Fannie Mae and Freddie Mac securities because
I believe that they will outperform Ginnie Maes over time.
Furthermore, I wanted to position the fund to benefit from potential
outperformance of Fannie Mae and Freddie Mac securities once demand
returns to more normal levels.
Q. WHAT'S YOUR OUTLOOK?
A. I think that the mortgage securities market offers some very
attractive values at current levels. Even though prepayment activity
has slowed dramatically, many bonds are priced as if prepayments are
still a way of life. In other words, investors are getting compensated
- - in the form of relatively high yields - for taking on a risk that's
declined significantly in the current environment. To get the
prepayment engine going again would, by my calculations, require rates
to dip well below where they were a year ago. Given that outlook, I
believe that the best values to be found are in bonds that offer
relatively high yields, which I plan to continue searching for and
holding.
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, consistent
with prudent investment risk.
In seeking current income,
the fund may also consider
the potential for capital gain.
START DATE: December 31, 1984
SIZE: as of October 31, 1999,
more than $473 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MORTGAGE
PREPAYMENT ACTIVITY:
"Falling interest rates weighed
heavily on mortgage securities
during the past year because, as
rates declined, the rate of
mortgage prepayment
accelerated. But an analysis of
more current data shows
definitive signs that prepayment
activity has slowed in response to
higher interest rates. The MBA
Refinancing Index - one of the
most widely watched barometers
of prepayment activity - rose to a
record high of 4400 in late 1998, 44
times higher than the base
reading of 100 in 1990. During the
past year, the largest one-month
volume of mortgages issued
peaked at $80 billion.
"But rising interest rates have
dramatically curtailed
prepayment activity. At the end of
October, the MBA refinancing
activity dropped to 416, a level 10
times off its peak earlier in the
year. Also, the one-month volume
of mortgages dropped to $25
billion. Given that mortgage rates
hovered around 8% at the end of
the period, volume is likely to
decline further through the winter
months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 3.1
6 - 6.99% 47.0 45.7
7 - 7.99% 36.4 23.3
8 - 8.99% 7.8 8.4
9 - 9.99% 3.8 5.1
10% and over 3.1 3.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 8.0 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 4.7 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 76.9% Mortgage Securities 88.4%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.0% Related Securities 17.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.1% Net Other Assets (6.2%)*
Row: 1, Col: 1, Value: 76.90000000000001 Row: 1, Col: 1, Value: 88.40000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: nil Row: 1, Col: 3, Value: nil
Row: 1, Col: 4, Value: 21.0 Row: 1, Col: 4, Value: 17.8
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: nil
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: nil Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.1 Row: 1, Col: 8, Value: 0.0
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 76.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 51.9%
6% 10/1/28 to 7/1/29 $ 10,562,669 $ 9,855,604
6.5% 9/1/10 to 6/1/29 132,830,766 127,377,345
7% 3/1/19 to 9/1/29 75,047,423 73,758,602
7.5% 3/1/22 to 10/1/28 4,689,610 4,710,832
8% 1/1/07 to 11/1/29 17,960,269 18,296,623
8.25% 1/1/13 76,806 79,103
8.5% 6/1/16 to 11/1/23 3,657,034 3,794,939
8.75% 11/1/08 to 7/1/09 159,649 164,842
9% 1/1/08 to 2/1/13 583,645 605,628
9.5% 5/1/03 to 8/1/22 4,609,873 4,793,726
11% 12/1/02 to 8/1/10 1,270,775 1,375,576
12.25% 5/1/13 to 6/1/15 153,672 172,878
12.5% 11/1/14 to 3/1/16 329,243 371,774
12.75% 2/1/14 to 6/1/15 62,841 70,092
13.5% 9/1/13 to 12/1/14 133,209 153,857
14% 11/1/14 41,740 48,627
245,630,048
FREDDIE MAC - 12.4%
5% 7/1/10 2,374,483 2,199,366
6% 2/1/29 to 7/1/29 4,949,597 4,618,569
6.5% 1/1/24 to 9/1/24 22,191,188 21,477,363
7% 7/1/29 to 9/1/29 12,973,281 12,746,249
7.5% 6/1/26 to 8/1/28 3,111,718 3,125,486
8% 10/1/07 to 4/1/21 661,472 672,159
8.5% 11/1/03 to 1/1/20 1,587,836 1,639,793
9% 9/1/08 to 5/1/21 6,990,523 7,310,029
10% 1/1/09 to 5/1/19 1,177,016 1,246,705
10.5% 8/1/10 to 12/1/20 1,272,823 1,377,494
11.5% 4/1/12 65,071 71,350
12.25% 6/1/14 to 7/1/15 161,355 181,852
12.5% 5/1/12 to 12/1/14 644,783 724,276
12.75% 6/1/05 to 3/1/15 64,868 71,157
13% 1/1/11 to 6/1/15 1,049,360 1,200,158
58,662,006
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 12.6%
6.5% 5/15/28 to 1/15/29 4,296,716 4,106,028
7% 5/15/23 to 6/15/29 18,186,168 17,845,777
7.5% 7/15/05 to 9/15/27 14,743,215 14,867,495
8% 4/15/02 to 12/15/25 9,621,294 9,839,359
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
8.5% 7/15/16 to 6/15/18 $ 1,950,831 $ 2,036,256
9% 9/20/16 to 4/20/18 66,797 70,198
9.5% 6/15/09 to 12/15/24 3,175,696 3,365,633
10% 12/15/17 to 1/15/26 4,876,056 5,332,643
10.5% 8/15/00 to 2/20/18 727,758 783,752
11% 1/15/10 to 9/15/19 1,300,473 1,448,626
11.5% 10/15/10 24,927 27,740
13% 10/15/13 58,637 67,689
13.5% 7/15/11 to 10/15/14 62,056 71,790
59,862,986
TOTAL U.S. GOVERNMENT AGENCY 364,155,040
- - MORTGAGE SECURITIES
(Cost $369,673,468)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.3%
U.S. GOVERNMENT AGENCY - 4.3%
Fannie Mae REMIC Pass Through 10,000,000 9,237,500
Trust Series 1999-51 Class
LK, 6.5% 8/25/29
Fanniemae Whole Loan 6.5% 10,049,260 9,185,652
2/25/29
Freddie Mac planned 1,757,086 1,818,585
amortization class Series 70
Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 20,241,737
OBLIGATIONS
(Cost $20,048,497)
COMMERCIAL MORTGAGE
SECURITIES - 16.7%
ACP Mortgage LP Series 1 2,320,648 2,058,647
Class E, 6.8464% 2/28/28
(a)(b)
Bankers Trust II Series 5,000,000 4,987,500
1999-S1A Class D, 7.5488%
2/28/14 (a)(b)
Bankers Trust REMIC Trust 4,000,000 4,006,250
Series 1998-S1A Class F,
7.38% 11/28/02 (b)
CBM Funding Corp. sequential 2,300,000 2,269,094
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,808,125
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,052,500
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 3,498,052 3,488,761
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, $ 1,600,000 $ 1,366,624
7.1905% 4/13/31 (a)(b)
Series 1999-GSFL II Class F, 4,500,000 4,440,240
7.6634% 11/13/13 (a)(b)
Nomura Asset Securities Corp. 15,000,000 13,139,063
Series 1998-D6 Class A-4,
7.3506% 3/17/28 (b)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.3063% 2/15/34 7,900,000 7,484,016
(a)(b)
Class A-5, 6.6563% 2/15/34 5,278,196 4,944,185
(a)(b)
Structured Asset Securities 3,192,522 2,929,638
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 17,218,656
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 79,193,299
SECURITIES
(Cost $83,897,322)
</TABLE>
CASH EQUIVALENTS - 1.5%
MATURITY AMOUNT
Investments in repurchase $ 6,942,082 6,939,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $6,939,000)
TOTAL INVESTMENT PORTFOLIO - 470,529,076
99.4% (Cost $480,558,287)
NET OTHER ASSETS - 0.6% 2,974,520
NET ASSETS - 100% $ 473,503,596
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 $42,499,868 or 9.0% of net assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $480,637,465. Net unrealized depreciation
aggregated $10,108,389, of which $2,596,741 related to appreciated
investment securities and $12,705,130 related to depreciated
investment securities.
The fund hereby designates approximately $4,617,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $5,050,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 470,529,076
value (including repurchase
agreements of $6,939,000)
(cost $480,558,287) - See
accompanying schedule
Receivable for investments 9,473,896
sold
Receivable for fund shares 160,026
sold
Interest receivable 2,668,553
TOTAL ASSETS 482,831,551
LIABILITIES
Payable to custodian bank $ 30,761
Payable for investments 8,124,926
purchased
Payable for fund shares 422,322
redeemed
Distributions payable 415,052
Accrued management fee 166,857
Distribution fees payable 20,453
Other payables and accrued 147,584
expenses
TOTAL LIABILITIES 9,327,955
NET ASSETS $ 473,503,596
Net Assets consist of:
Paid in capital $ 486,801,066
Undistributed net investment 1,901,973
income
Accumulated undistributed net (5,170,232)
realized gain (loss) on
investments
Net unrealized appreciation (10,029,211)
(depreciation) on investments
NET ASSETS $ 473,503,596
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.48
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,090,255 (divided by)
294,996 shares)
Maximum offering price per $11.00
share (100/95.25 of $10.48)
CLASS T: NET ASSET VALUE and $10.48
redemption price per share
($29,051,750 (divided by)
2,771,642 shares)
Maximum offering price per $10.86
share (100/96.50 of $10.48)
CLASS B: NET ASSET VALUE and $10.48
offering price per share
($19,101,218 (divided by)
1,823,400 shares) A
INITIAL CLASS: NET ASSET $10.49
VALUE, offering price and
redemption price per share
($406,838,729 (divided by)
38,797,891 shares)
INSTITUTIONAL CLASS: NET $10.47
ASSET VALUE, offering price
and redemption price per
share ($15,421,644 (divided
by) 1,473,289 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 34,267,086
Interest
EXPENSES
Management fee $ 2,110,419
Transfer agent fees 937,977
Distribution fees 190,306
Accounting fees and expenses 161,159
Non-interested trustees' 1,708
compensation
Custodian fees and expenses 91,213
Registration fees 91,994
Audit 54,626
Legal 15,537
Miscellaneous 345
Total expenses before 3,655,284
reductions
Expense reductions (27,083) 3,628,201
NET INVESTMENT INCOME 30,638,885
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (6,155,525)
Futures contracts 534,939 (5,620,586)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,123,506)
Futures contracts 115,853
Delayed delivery commitments (183,312) (10,190,965)
NET GAIN (LOSS) (15,811,551)
NET INCREASE (DECREASE) IN $ 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,638,885 $ 32,333,262
income
Net realized gain (loss) (5,620,586) 8,605,529
Change in net unrealized (10,190,965) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,827,334 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (30,183,549) (30,575,427)
From net investment income
From net realized gain (6,924,572) (1,430,037)
TOTAL DISTRIBUTIONS (37,108,121) (32,005,464)
Share transactions - net (14,273,306) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (36,554,093) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 473,503,596 $ 510,057,689
undistributed net investment
income of $1,901,973 and
$1,699,376, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .646 .669 .170 .268
Net realized and unrealized (.336) (.061) .048 .224
gain (loss)
Total from investment .310 .608 .218 .492
operations
Less Distributions
From net investment income (.640) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.790) (.668) (.248) (.272)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .637 .665 .167 .255
Net realized and unrealized (.338) (.063) .048 .233
gain (loss)
Total from investment .299 .602 .215 .488
operations
Less Distributions
From net investment income (.629) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.779) (.662) (.245) (.268)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
</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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .567 .584 .142 .234
Net realized and unrealized (.324) (.064) .065 .214
gain (loss)
Total from investment .243 .520 .207 .448
operations
Less Distributions
From net investment income (.563) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.713) (.590) (.227) (.238)
Net asset value, end of period $ 10.480 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 183% 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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 F 1997 G 1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .674 D .700 D .176 D .678 D .729 .772
Net realized and unrealized (.342) (.056) .047 .391 (.015) .325
gain (loss)
Total from investment .332 .644 .223 1.069 .714 1.097
operations
Less Distributions
From net investment income (.662) (.664) (.173) (.689) (.724) (.737)
From net realized gain (.150) (.030) (.080) (.110) (.100) -
In excess of net realized - - - - - (.050)
gain
Total distributions (.812) (.694) (.253) (.799) (.824) (.787)
Net asset value, end of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
TOTAL RETURN B, C 3.14% 5.99% 2.05% 10.34% 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 406,839 $ 459,212 $ 494,304 $ 506,113 $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .70% .71% .72% A .73% .74% .77%
net assets
Ratio of expenses to average .70% .71% .72% A .73% .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.29% 6.34% 6.36% A 6.26% 6.75% 7.37%
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149% 221% 329%
</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 THREE MONTHS ENDED OCTOBER 31
G YEAR ENDED JULY 31
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 H 1997 G
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 .669 .693 .172 .263
Net realized and unrealized (.343) (.063) .050 .226
gain (loss)
Total from investment .326 .630 .222 .489
operations
Less Distributions
From net investment income (.656) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.806) (.690) (.252) (.279)
Net asset value, end of period $ 10.470 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
G FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 1997
H THREE MONTHS ENDED OCTOBER 31
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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) 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.
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, futures
transactions, 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 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 after the customary settlement period for that security. 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 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.
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 $875,693,626 and $942,195,101, respectively, of which U.S.
government and government agency obligations aggregated $853,484,094
and $932,362,579, respectively.
The market value of futures contracts opened and closed during the
period amounted to $29,995,764 and $39,662,629, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 $ 3,865 $ 146
CLASS T 61,872 4,924
CLASS B 124,569 89,966
$ 190,306 $ 95,036
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 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 is 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 $ 29,751 $ 10,398
CLASS T 74,991 27,421
CLASS B 68,549 68,549*
$ 173,291 $ 106,368
* 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 $ 8,236 .32
CLASS T 72,011 .29
CLASS B 28,891 .21
INITIAL CLASS 785,661 .18
INSTITUTIONAL CLASS 43,178 .24
$ 937,977
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, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) 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% $ 2,125
CLASS T 1.00% 13,483
INSTITUTIONAL CLASS .75% 454
$ 16,062
In addition, through an arrangement with the fund's custodian, 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 $11,021 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 153,223 $ 47,643
Class T 1,450,107 835,552
Class B 724,614 198,305
Initial Class 26,727,640 28,222,031
Institutional Class 1,127,965 1,271,896
Total $ 30,183,549 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,709 41,653
Class B 132,050 4,898
Initial Class 6,182,269 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,572 $ 1,430,037
Total Distributions $ 37,108,121 $ 32,005,464
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 233,326 191,569 $ 2,488,784 $ 2,113,314
Reinvestment of
distributions 11,952 3,475 127,329 38,300
Shares redeemed (120,472) (174,371) (1,280,382) (1,919,263)
Net increase (decrease) 124,806 20,673 $ 1,335,731 $ 232,351
CLASS T Shares sold 2,003,369 1,214,468 $ 21,386,352 $ 13,402,368
Reinvestment of
distributions 148,336 72,903 1,582,559 803,861
Shares redeemed (1,122,570) (874,013) (11,947,707) (9,643,136)
Net increase (decrease) 1,029,135 413,358 $ 11,021,204 $ 4,563,093
CLASS B Shares sold 1,505,268 623,528 $ 16,049,817 $ 6,874,797
Reinvestment of
distributions 63,855 14,736 679,689 162,453
Shares redeemed (461,420) (66,613) (4,891,488) (734,102)
Net increase (decrease) 1,107,703 571,651 $ 11,838,018 $ 6,303,148
INITIAL CLASS Shares sold 3,914,002 5,885,198 $ 41,964,545 $ 64,970,201
Reinvestment of
distributions 2,515,203 2,196,325 26,913,754 24,230,109
Shares redeemed (9,502,966) (11,046,014) (101,601,425) (121,871,170)
Net increase (decrease) (3,073,761) (2,964,491) $ (32,723,126) $ (32,670,860)
INSTITUTIONAL CLASS Shares 667,600 1,131,767 $ 7,141,162 $ 12,463,547
sold
Reinvestment of
distributions 70,535 61,639 754,625 679,028
Shares redeemed (1,277,677) (971,330) (13,640,920) (10,710,195)
Net increase (decrease) (539,542) 222,076 $ (5,745,133) $ 2,432,380
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Mortgage Securities Fund (formerly a fund of Fidelity
Income Fund):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Income Fund) at October 31,
1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Mortgage Securities Fund's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 1999
DISTRIBUTIONS
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88115
1.704047.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
MORTGAGE SECURITIES
FUND - CLASS A, CLASS T AND CLASS B
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 39 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 40
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.93% 45.37% 111.27%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -1.96% 38.46% 101.23%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to 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 one year average represents a peer
group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.93% 7.77% 7.77%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -1.96% 6.73% 7.24%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 9525.00 10000.00
1989/11/30 9616.79 10108.36
1989/12/31 9683.07 10168.18
1990/01/31 9593.86 10097.08
1990/02/28 9657.77 10156.41
1990/03/31 9665.36 10181.42
1990/04/30 9581.76 10089.97
1990/05/31 9860.32 10403.04
1990/06/30 10003.26 10567.54
1990/07/31 10148.64 10750.92
1990/08/31 10121.80 10636.68
1990/09/30 10175.83 10723.95
1990/10/31 10280.07 10845.55
1990/11/30 10505.02 11072.81
1990/12/31 10686.22 11258.40
1991/01/31 10797.11 11429.52
1991/02/28 10866.23 11525.86
1991/03/31 10939.32 11604.31
1991/04/30 11057.74 11711.20
1991/05/31 11115.23 11814.17
1991/06/30 11143.02 11824.71
1991/07/31 11303.08 12024.76
1991/08/31 11519.08 12243.44
1991/09/30 11698.91 12472.91
1991/10/31 11837.19 12679.58
1991/11/30 11909.56 12771.51
1991/12/31 12140.91 13028.19
1992/01/31 12082.51 12877.67
1992/02/29 12202.73 12999.51
1992/03/31 12118.40 12916.65
1992/04/30 12232.01 13043.64
1992/05/31 12433.91 13278.74
1992/06/30 12565.65 13435.40
1992/07/31 12544.08 13552.83
1992/08/31 12625.22 13729.35
1992/09/30 12704.48 13836.23
1992/10/31 12578.15 13714.88
1992/11/30 12638.94 13757.78
1992/12/31 12802.96 13935.52
1993/01/31 12919.77 14118.66
1993/02/28 13030.42 14261.83
1993/03/31 13115.51 14348.37
1993/04/30 13207.07 14422.41
1993/05/31 13246.18 14504.54
1993/06/30 13407.77 14615.59
1993/07/31 13481.47 14673.94
1993/08/31 13506.57 14743.07
1993/09/30 13536.08 14755.82
1993/10/31 13560.16 14798.48
1993/11/30 13531.81 14769.55
1993/12/31 13662.42 14889.19
1994/01/31 13788.24 15036.77
1994/02/28 13715.53 14931.85
1994/03/31 13560.09 14543.03
1994/04/30 13500.69 14435.89
1994/05/31 13615.62 14493.01
1994/06/30 13685.31 14461.63
1994/07/31 13904.08 14751.16
1994/08/31 13966.37 14797.74
1994/09/30 13814.99 14587.15
1994/10/31 13843.04 14578.82
1994/11/30 13829.23 14533.22
1994/12/31 13927.69 14649.18
1995/01/31 14191.01 14962.74
1995/02/28 14508.71 15344.69
1995/03/31 14570.28 15417.01
1995/04/30 14799.99 15636.19
1995/05/31 15265.66 16129.20
1995/06/30 15382.11 16220.89
1995/07/31 15417.05 16248.84
1995/08/31 15607.29 16417.01
1995/09/30 15768.63 16561.41
1995/10/31 15944.04 16708.75
1995/11/30 16120.57 16899.73
1995/12/31 16298.17 17110.81
1996/01/31 16431.60 17239.76
1996/02/29 16326.90 17096.59
1996/03/31 16267.67 17034.81
1996/04/30 16233.76 16986.76
1996/05/31 16170.91 16937.24
1996/06/30 16394.07 17170.38
1996/07/31 16452.62 17233.39
1996/08/31 16448.99 17233.15
1996/09/30 16709.31 17521.70
1996/10/31 17018.49 17865.41
1996/11/30 17281.42 18121.11
1996/12/31 17183.97 18026.23
1997/01/31 17291.51 18160.09
1997/02/28 17347.88 18220.64
1997/03/31 17182.41 18049.03
1997/04/30 17448.67 18336.85
1997/05/31 17618.52 18516.30
1997/06/30 17822.11 18732.29
1997/07/31 18141.63 19085.32
1997/08/31 18102.07 19039.96
1997/09/30 18312.31 19281.44
1997/10/31 18505.08 19495.22
1997/11/30 18564.16 19559.21
1997/12/31 18707.35 19737.44
1998/01/31 18895.85 19933.81
1998/02/28 18916.37 19975.97
1998/03/31 18975.45 20060.55
1998/04/30 19085.31 20174.06
1998/05/31 19211.24 20308.16
1998/06/30 19303.24 20405.00
1998/07/31 19377.16 20508.46
1998/08/31 19540.48 20694.53
1998/09/30 19721.93 20944.35
1998/10/31 19550.47 20917.38
1998/11/30 19695.29 21021.57
1998/12/31 19757.92 21110.81
1999/01/31 19865.39 21261.09
1999/02/28 19807.73 21177.00
1999/03/31 19952.67 21319.22
1999/04/30 20022.58 21417.59
1999/05/31 19946.56 21297.87
1999/06/30 19872.27 21222.92
1999/07/31 19761.29 21078.94
1999/08/31 19747.42 21078.19
1999/09/30 20038.54 21420.32
1999/10/29 20123.28 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093238 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class A on
October 31, 1989, and the current 4.75% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $20,123 - a 101.23% 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
$21,544 - a 115.44% 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
YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS A SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 5.98% 5.92% 4.18%
Capital returns -3.05% -0.27% 2.53%
Total returns 2.93% 5.65% 6.71%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.44(cents) 31.08(cents) 63.99(cents)
Annualized dividend rate 6.15% 5.87% 6.00%
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 $10.41 over the past one month, $10.51 over the past six months,
and $10.66 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all 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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.82% 45.06% 110.82%
SECURITIES - CL T
FIDELITY ADV MORTGAGE -0.78% 39.98% 103.44%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to 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 one year average represents a peer
group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.82% 7.72% 7.74%
SECURITIES - CL T
FIDELITY ADV MORTGAGE -0.78% 6.96% 7.36%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 9650.00 10000.00
1989/11/30 9742.99 10108.36
1989/12/31 9810.15 10168.18
1990/01/31 9719.77 10097.08
1990/02/28 9784.51 10156.41
1990/03/31 9792.20 10181.42
1990/04/30 9707.50 10089.97
1990/05/31 9989.72 10403.04
1990/06/30 10134.54 10567.54
1990/07/31 10281.82 10750.92
1990/08/31 10254.63 10636.68
1990/09/30 10309.37 10723.95
1990/10/31 10414.98 10845.55
1990/11/30 10642.88 11072.81
1990/12/31 10826.46 11258.40
1991/01/31 10938.80 11429.52
1991/02/28 11008.84 11525.86
1991/03/31 11082.88 11604.31
1991/04/30 11202.86 11711.20
1991/05/31 11261.10 11814.17
1991/06/30 11289.26 11824.71
1991/07/31 11451.41 12024.76
1991/08/31 11670.25 12243.44
1991/09/30 11852.44 12472.91
1991/10/31 11992.53 12679.58
1991/11/30 12065.85 12771.51
1991/12/31 12300.24 13028.19
1992/01/31 12241.07 12877.67
1992/02/29 12362.87 12999.51
1992/03/31 12277.44 12916.65
1992/04/30 12392.54 13043.64
1992/05/31 12597.08 13278.74
1992/06/30 12730.55 13435.40
1992/07/31 12708.70 13552.83
1992/08/31 12790.91 13729.35
1992/09/30 12871.21 13836.23
1992/10/31 12743.22 13714.88
1992/11/30 12804.81 13757.78
1992/12/31 12970.98 13935.52
1993/01/31 13089.32 14118.66
1993/02/28 13201.42 14261.83
1993/03/31 13287.63 14348.37
1993/04/30 13380.40 14422.41
1993/05/31 13420.01 14504.54
1993/06/30 13583.73 14615.59
1993/07/31 13658.39 14673.94
1993/08/31 13683.83 14743.07
1993/09/30 13713.72 14755.82
1993/10/31 13738.11 14798.48
1993/11/30 13709.40 14769.55
1993/12/31 13841.71 14889.19
1994/01/31 13969.19 15036.77
1994/02/28 13895.52 14931.85
1994/03/31 13738.05 14543.03
1994/04/30 13677.86 14435.89
1994/05/31 13794.30 14493.01
1994/06/30 13864.91 14461.63
1994/07/31 14086.54 14751.16
1994/08/31 14149.66 14797.74
1994/09/30 13996.29 14587.15
1994/10/31 14024.71 14578.82
1994/11/30 14010.72 14533.22
1994/12/31 14110.47 14649.18
1995/01/31 14377.24 14962.74
1995/02/28 14699.11 15344.69
1995/03/31 14761.49 15417.01
1995/04/30 14994.22 15636.19
1995/05/31 15465.99 16129.20
1995/06/30 15583.98 16220.89
1995/07/31 15619.37 16248.84
1995/08/31 15812.11 16417.01
1995/09/30 15975.56 16561.41
1995/10/31 16153.28 16708.75
1995/11/30 16332.12 16899.73
1995/12/31 16512.05 17110.81
1996/01/31 16647.24 17239.76
1996/02/29 16541.17 17096.59
1996/03/31 16481.16 17034.81
1996/04/30 16446.80 16986.76
1996/05/31 16383.12 16937.24
1996/06/30 16609.22 17170.38
1996/07/31 16668.53 17233.39
1996/08/31 16664.85 17233.15
1996/09/30 16928.60 17521.70
1996/10/31 17241.83 17865.41
1996/11/30 17508.21 18121.11
1996/12/31 17409.48 18026.23
1997/01/31 17518.44 18160.09
1997/02/28 17575.55 18220.64
1997/03/31 17406.59 18049.03
1997/04/30 17674.43 18336.85
1997/05/31 17844.90 18516.30
1997/06/30 18050.00 18732.29
1997/07/31 18372.70 19085.32
1997/08/31 18348.56 19039.96
1997/09/30 18543.17 19281.44
1997/10/31 18736.91 19495.22
1997/11/30 18795.17 19559.21
1997/12/31 18956.05 19737.44
1998/01/31 19133.31 19933.81
1998/02/28 19155.19 19975.97
1998/03/31 19231.65 20060.55
1998/04/30 19323.89 20174.06
1998/05/31 19449.86 20308.16
1998/06/30 19541.41 20405.00
1998/07/31 19614.72 20508.46
1998/08/31 19778.35 20694.53
1998/09/30 19960.37 20944.35
1998/10/31 19785.35 20917.38
1998/11/30 19946.31 21021.57
1998/12/31 20009.73 21110.81
1999/01/31 20117.10 21261.09
1999/02/28 20057.32 21177.00
1999/03/31 20183.61 21319.22
1999/04/30 20271.42 21417.59
1999/05/31 20192.83 21297.87
1999/06/30 20097.18 21222.92
1999/07/31 20002.26 21078.94
1999/08/31 19967.36 21078.19
1999/09/30 20279.28 21420.32
1999/10/29 20343.91 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093443 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class T on
October 31, 1989, and the current 3.50% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $20,344 - a 103.44% 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
$21,544 - a 115.44% 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
YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS T SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 5.87% 5.87% 4.12%
Capital returns -3.05% -0.27% 2.53%
Total returns 2.82% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.35(cents) 30.55(cents) 62.92(cents)
Annualized dividend rate 6.05% 5.77% 5.90%
30-day annualized yield 6.01% - -
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 $10.42 over the past one month, $10.51 over the past six months,
and $10.66 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all 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 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 one year, past five years and past 10 years total
return figures are 5%, 2% and 0%, respectively. If Fidelity had not
reimbursed certain class expenses, the past five year and past 10 year
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.29% 42.61% 107.27%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -2.49% 40.61% 107.27%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to 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 one year average represents a peer
group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.29% 7.36% 7.56%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -2.49% 7.05% 7.56%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 10000.00 10000.00
1989/11/30 10096.36 10108.36
1989/12/31 10165.96 10168.18
1990/01/31 10072.30 10097.08
1990/02/28 10139.39 10156.41
1990/03/31 10147.36 10181.42
1990/04/30 10059.59 10089.97
1990/05/31 10352.04 10403.04
1990/06/30 10502.11 10567.54
1990/07/31 10654.74 10750.92
1990/08/31 10626.56 10636.68
1990/09/30 10683.28 10723.95
1990/10/31 10792.72 10845.55
1990/11/30 11028.89 11072.81
1990/12/31 11219.13 11258.40
1991/01/31 11335.55 11429.52
1991/02/28 11408.12 11525.86
1991/03/31 11484.85 11604.31
1991/04/30 11609.18 11711.20
1991/05/31 11669.53 11814.17
1991/06/30 11698.71 11824.71
1991/07/31 11866.75 12024.76
1991/08/31 12093.52 12243.44
1991/09/30 12282.32 12472.91
1991/10/31 12427.50 12679.58
1991/11/30 12503.47 12771.51
1991/12/31 12746.36 13028.19
1992/01/31 12685.05 12877.67
1992/02/29 12811.27 12999.51
1992/03/31 12722.73 12916.65
1992/04/30 12842.01 13043.64
1992/05/31 13053.97 13278.74
1992/06/30 13192.28 13435.40
1992/07/31 13169.64 13552.83
1992/08/31 13254.83 13729.35
1992/09/30 13338.04 13836.23
1992/10/31 13205.41 13714.88
1992/11/30 13269.23 13757.78
1992/12/31 13441.43 13935.52
1993/01/31 13564.06 14118.66
1993/02/28 13680.23 14261.83
1993/03/31 13769.57 14348.37
1993/04/30 13865.69 14422.41
1993/05/31 13906.75 14504.54
1993/06/30 14076.40 14615.59
1993/07/31 14153.77 14673.94
1993/08/31 14180.13 14743.07
1993/09/30 14211.11 14755.82
1993/10/31 14236.39 14798.48
1993/11/30 14206.63 14769.55
1993/12/31 14343.74 14889.19
1994/01/31 14475.84 15036.77
1994/02/28 14399.51 14931.85
1994/03/31 14236.32 14543.03
1994/04/30 14173.95 14435.89
1994/05/31 14294.61 14493.01
1994/06/30 14367.78 14461.63
1994/07/31 14597.45 14751.16
1994/08/31 14662.86 14797.74
1994/09/30 14503.93 14587.15
1994/10/31 14533.38 14578.82
1994/11/30 14518.88 14533.22
1994/12/31 14622.25 14649.18
1995/01/31 14898.69 14962.74
1995/02/28 15232.24 15344.69
1995/03/31 15296.88 15417.01
1995/04/30 15538.05 15636.19
1995/05/31 16026.94 16129.20
1995/06/30 16149.20 16220.89
1995/07/31 16185.88 16248.84
1995/08/31 16385.60 16417.01
1995/09/30 16554.99 16561.41
1995/10/31 16739.15 16708.75
1995/11/30 16924.48 16899.73
1995/12/31 17110.94 17110.81
1996/01/31 17251.03 17239.76
1996/02/29 17141.11 17096.59
1996/03/31 17078.92 17034.81
1996/04/30 17043.32 16986.76
1996/05/31 16977.33 16937.24
1996/06/30 17211.63 17170.38
1996/07/31 17273.09 17233.39
1996/08/31 17269.28 17233.15
1996/09/30 17542.59 17521.70
1996/10/31 17867.18 17865.41
1996/11/30 18143.22 18121.11
1996/12/31 18040.91 18026.23
1997/01/31 18153.82 18160.09
1997/02/28 18213.00 18220.64
1997/03/31 18028.25 18049.03
1997/04/30 18297.53 18336.85
1997/05/31 18445.70 18516.30
1997/06/30 18664.59 18732.29
1997/07/31 18970.20 19085.32
1997/08/31 18933.92 19039.96
1997/09/30 19124.74 19281.44
1997/10/31 19331.56 19495.22
1997/11/30 19363.81 19559.21
1997/12/31 19519.06 19737.44
1998/01/31 19708.81 19933.81
1998/02/28 19721.58 19975.97
1998/03/31 19771.38 20060.55
1998/04/30 19873.33 20174.06
1998/05/31 19991.92 20308.16
1998/06/30 20057.15 20405.00
1998/07/31 20139.27 20508.46
1998/08/31 20296.02 20694.53
1998/09/30 20471.86 20944.35
1998/10/31 20262.46 20917.38
1998/11/30 20418.09 21021.57
1998/12/31 20471.29 21110.81
1999/01/31 20569.88 21261.09
1999/02/28 20497.38 21177.00
1999/03/31 20616.15 21319.22
1999/04/30 20695.52 21417.59
1999/05/31 20604.65 21297.87
1999/06/30 20496.69 21222.92
1999/07/31 20389.61 21078.94
1999/08/31 20363.43 21078.19
1999/09/30 20651.20 21420.32
1999/10/29 20726.64 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093250 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class B on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $20,727 - a 107.27% 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 $21,544 a 115.44% 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
YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
1999 1998 1997
Dividend returns 5.25% 5.19% 3.66%
Capital returns -2.96% -0.37% 2.52%
Total returns 2.29% 4.82% 6.18%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.83(cents) 27.37(cents) 56.34(cents)
Annualized dividend rate 5.46% 5.17% 5.29%
30-day annualized yield 5.66% - -
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 $10.41 over the past one month, $10.51 over the past six months,
and $10.65 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Class A, Class T and Class B shares provided total returns of 2.93%,
2.82% and 2.29%, respectively. To get a sense of how the fund did
relative to its competitors, the U.S. mortgage funds average returned
1.65% for the same 12-month period, according to Lipper Inc.
Additionally, the Lehman Brothers Mortgage-Backed Securities Index -
which tracks the types of securities in which the fund invests -
returned 2.99% for the same 12-month period.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS AND THE
LEHMAN INDEX?
A. The main contributor to the fund's strong performance was its
larger-than-average stake in commercial mortgage-backed securities
(CMBS), which performed relatively well. Commercial mortgage-backed
securities are bonds that are collateralized by mortgage loans on
commercial real estate - such as office buildings, shopping malls,
hotels and apartment buildings. At the beginning of the period, the
CMBS market had been severely punished over concerns about commercial
real-estate overbuilding and a lack of market liquidity. But the
global financial crisis of October 1998 effectively put a stop to the
financing of construction of new properties. By early 1999, liquidity
had returned and the CMBS market snapped back.
Q. PREPAYMENT ACTIVITY WAS A BIG CHALLENGE FOR THE MORTGAGE MARKET
DURING THE PAST YEAR. WHAT CHOICES DID YOU MAKE IN LIGHT OF THAT
CHALLENGE?
A. The biggest investment risk associated with mortgage securities is
a rapid acceleration in prepayment activity. That's what occurred in
1998 and early 1999 when interest rates fell dramatically and huge
waves of homeowners refinanced their mortgages. During the crush of
prepayment activity, I emphasized mortgage securities that had some
measure of prepayment protection, including 15-year Fannie Mae
securities and 30-year Ginnie Mae securities. Since homeowners with
Ginnie Mae loans have less flexibility to refinance, Ginnie Mae
securities are less sensitive to prepayments than their Fannie Mae and
Freddie Mac counterparts. Compared to homeowners with traditional
30-year loans, fewer 15-year mortgage borrowers refinance or pay off
their loans earlier. I also used "seasoned" - meaning older - mortgage
securities, which had, over time, withstood earlier waves of
prepayment. My emphasis on prepayment-resistant mortgage securities
was a plus for performance in the first several months of the period.
But in response to rising interest rates, I switched courses.
Q. TELL US ABOUT THAT SWITCH . . .
A. Higher interest rates dramatically curtailed prepayment activity.
So I sold most of the fund's stake in 15-year Fannie Maes, reduced its
stake in seasoned securities and focused instead on securities that
offered better yields. In particular, I added 30-year 7% Freddie Mac
and Fannie Mae securities.
Q. AND HOW DID THAT STRATEGY WORK OUT?
A. Unusually light demand caused Fannie Mae and Freddie Mac securities
to lag their Ginnie Mae counterparts over the past couple months. But
I continued to hold onto Fannie Mae and Freddie Mac securities because
I believe that they will outperform Ginnie Maes over time.
Furthermore, I wanted to position the fund to benefit from potential
outperformance of Fannie Mae and Freddie Mac securities once demand
returns to more normal levels.
Q. WHAT'S YOUR OUTLOOK?
A. I think that the mortgage securities market offers some very
attractive values at current levels. Even though prepayment activity
has slowed dramatically, many bonds are priced as if prepayments are
still a way of life. In other words, investors are getting compensated
- - in the form of relatively high yields - for taking on a risk that's
declined significantly in the current environment. To get the
prepayment engine going again would, by my calculations, require rates
to dip well below where they were a year ago. Given that outlook, I
believe that the best values to be found are in bonds that offer
relatively high yields, which I plan to continue searching for and
holding.
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, consistent
with prudent investment risk.
In seeking current income,
the fund may also consider
the potential for capital gain.
START DATE: December 31, 1984
SIZE: as of October 31, 1999,
more than $473 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MORTGAGE
PREPAYMENT ACTIVITY:
"Falling interest rates weighed
heavily on mortgage securities
during the past year because, as
rates declined, the rate of
mortgage prepayment
accelerated. But an analysis of
more current data shows
definitive signs that prepayment
activity has slowed in response to
higher interest rates. The MBA
Refinancing Index - one of the
most widely watched barometers
of prepayment activity - rose to a
record high of 4400 in late 1998, 44
times higher than the base
reading of 100 in 1990. During the
past year, the largest one-month
volume of mortgages issued
peaked at $80 billion.
"But rising interest rates have
dramatically curtailed
prepayment activity. At the end of
October, the MBA refinancing
activity dropped to 416, a level 10
times off its peak earlier in the
year. Also, the one-month volume
of mortgages dropped to $25
billion. Given that mortgage rates
hovered around 8% at the end of
the period, volume is likely to
decline further through the winter
months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 3.1
6 - 6.99% 47.0 45.7
7 - 7.99% 36.4 23.3
8 - 8.99% 7.8 8.4
9 - 9.99% 3.8 5.1
10% and over 3.1 3.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 8.0 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 4.7 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 76.9% Mortgage Securities 88.4%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.0% Related Securities 17.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.1% Net Other Assets (6.2%)*
Row: 1, Col: 1, Value: 76.90000000000001 Row: 1, Col: 1, Value: 88.40000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: nil Row: 1, Col: 3, Value: nil
Row: 1, Col: 4, Value: 21.0 Row: 1, Col: 4, Value: 17.8
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: nil
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: nil Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.1 Row: 1, Col: 8, Value: 0.0
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 76.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 51.9%
6% 10/1/28 to 7/1/29 $ 10,562,669 $ 9,855,604
6.5% 9/1/10 to 6/1/29 132,830,766 127,377,345
7% 3/1/19 to 9/1/29 75,047,423 73,758,602
7.5% 3/1/22 to 10/1/28 4,689,610 4,710,832
8% 1/1/07 to 11/1/29 17,960,269 18,296,623
8.25% 1/1/13 76,806 79,103
8.5% 6/1/16 to 11/1/23 3,657,034 3,794,939
8.75% 11/1/08 to 7/1/09 159,649 164,842
9% 1/1/08 to 2/1/13 583,645 605,628
9.5% 5/1/03 to 8/1/22 4,609,873 4,793,726
11% 12/1/02 to 8/1/10 1,270,775 1,375,576
12.25% 5/1/13 to 6/1/15 153,672 172,878
12.5% 11/1/14 to 3/1/16 329,243 371,774
12.75% 2/1/14 to 6/1/15 62,841 70,092
13.5% 9/1/13 to 12/1/14 133,209 153,857
14% 11/1/14 41,740 48,627
245,630,048
FREDDIE MAC - 12.4%
5% 7/1/10 2,374,483 2,199,366
6% 2/1/29 to 7/1/29 4,949,597 4,618,569
6.5% 1/1/24 to 9/1/24 22,191,188 21,477,363
7% 7/1/29 to 9/1/29 12,973,281 12,746,249
7.5% 6/1/26 to 8/1/28 3,111,718 3,125,486
8% 10/1/07 to 4/1/21 661,472 672,159
8.5% 11/1/03 to 1/1/20 1,587,836 1,639,793
9% 9/1/08 to 5/1/21 6,990,523 7,310,029
10% 1/1/09 to 5/1/19 1,177,016 1,246,705
10.5% 8/1/10 to 12/1/20 1,272,823 1,377,494
11.5% 4/1/12 65,071 71,350
12.25% 6/1/14 to 7/1/15 161,355 181,852
12.5% 5/1/12 to 12/1/14 644,783 724,276
12.75% 6/1/05 to 3/1/15 64,868 71,157
13% 1/1/11 to 6/1/15 1,049,360 1,200,158
58,662,006
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 12.6%
6.5% 5/15/28 to 1/15/29 4,296,716 4,106,028
7% 5/15/23 to 6/15/29 18,186,168 17,845,777
7.5% 7/15/05 to 9/15/27 14,743,215 14,867,495
8% 4/15/02 to 12/15/25 9,621,294 9,839,359
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
8.5% 7/15/16 to 6/15/18 $ 1,950,831 $ 2,036,256
9% 9/20/16 to 4/20/18 66,797 70,198
9.5% 6/15/09 to 12/15/24 3,175,696 3,365,633
10% 12/15/17 to 1/15/26 4,876,056 5,332,643
10.5% 8/15/00 to 2/20/18 727,758 783,752
11% 1/15/10 to 9/15/19 1,300,473 1,448,626
11.5% 10/15/10 24,927 27,740
13% 10/15/13 58,637 67,689
13.5% 7/15/11 to 10/15/14 62,056 71,790
59,862,986
TOTAL U.S. GOVERNMENT AGENCY 364,155,040
- - MORTGAGE SECURITIES
(Cost $369,673,468)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.3%
U.S. GOVERNMENT AGENCY - 4.3%
Fannie Mae REMIC Pass Through 10,000,000 9,237,500
Trust Series 1999-51 Class
LK, 6.5% 8/25/29
Fanniemae Whole Loan 6.5% 10,049,260 9,185,652
2/25/29
Freddie Mac planned 1,757,086 1,818,585
amortization class Series 70
Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 20,241,737
OBLIGATIONS
(Cost $20,048,497)
COMMERCIAL MORTGAGE
SECURITIES - 16.7%
ACP Mortgage LP Series 1 2,320,648 2,058,647
Class E, 6.8464% 2/28/28
(a)(b)
Bankers Trust II Series 5,000,000 4,987,500
1999-S1A Class D, 7.5488%
2/28/14 (a)(b)
Bankers Trust REMIC Trust 4,000,000 4,006,250
Series 1998-S1A Class F,
7.38% 11/28/02 (b)
CBM Funding Corp. sequential 2,300,000 2,269,094
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,808,125
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,052,500
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 3,498,052 3,488,761
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, $ 1,600,000 $ 1,366,624
7.1905% 4/13/31 (a)(b)
Series 1999-GSFL II Class F, 4,500,000 4,440,240
7.6634% 11/13/13 (a)(b)
Nomura Asset Securities Corp. 15,000,000 13,139,063
Series 1998-D6 Class A-4,
7.3506% 3/17/28 (b)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.3063% 2/15/34 7,900,000 7,484,016
(a)(b)
Class A-5, 6.6563% 2/15/34 5,278,196 4,944,185
(a)(b)
Structured Asset Securities 3,192,522 2,929,638
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 17,218,656
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 79,193,299
SECURITIES
(Cost $83,897,322)
</TABLE>
CASH EQUIVALENTS - 1.5%
MATURITY AMOUNT
Investments in repurchase $ 6,942,082 6,939,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $6,939,000)
TOTAL INVESTMENT PORTFOLIO - 470,529,076
99.4% (Cost $480,558,287)
NET OTHER ASSETS - 0.6% 2,974,520
NET ASSETS - 100% $ 473,503,596
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 $42,499,868 or 9.0% of net assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $480,637,465. Net unrealized depreciation
aggregated $10,108,389, of which $2,596,741 related to appreciated
investment securities and $12,705,130 related to depreciated
investment securities.
The fund hereby designates approximately $4,617,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $5,050,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 470,529,076
value (including repurchase
agreements of $6,939,000)
(cost $480,558,287) - See
accompanying schedule
Receivable for investments 9,473,896
sold
Receivable for fund shares 160,026
sold
Interest receivable 2,668,553
TOTAL ASSETS 482,831,551
LIABILITIES
Payable to custodian bank $ 30,761
Payable for investments 8,124,926
purchased
Payable for fund shares 422,322
redeemed
Distributions payable 415,052
Accrued management fee 166,857
Distribution fees payable 20,453
Other payables and accrued 147,584
expenses
TOTAL LIABILITIES 9,327,955
NET ASSETS $ 473,503,596
Net Assets consist of:
Paid in capital $ 486,801,066
Undistributed net investment 1,901,973
income
Accumulated undistributed net (5,170,232)
realized gain (loss) on
investments
Net unrealized appreciation (10,029,211)
(depreciation) on investments
NET ASSETS $ 473,503,596
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.48
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,090,255 (divided by)
294,996 shares)
Maximum offering price per $11.00
share (100/95.25 of $10.48)
CLASS T: NET ASSET VALUE and $10.48
redemption price per share
($29,051,750 (divided by)
2,771,642 shares)
Maximum offering price per $10.86
share (100/96.50 of $10.48)
CLASS B: NET ASSET VALUE and $10.48
offering price per share
($19,101,218 (divided by)
1,823,400 shares) A
INITIAL CLASS: NET ASSET $10.49
VALUE, offering price and
redemption price per share
($406,838,729 (divided by)
38,797,891 shares)
INSTITUTIONAL CLASS: NET $10.47
ASSET VALUE, offering price
and redemption price per
share ($15,421,644 (divided
by) 1,473,289 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 34,267,086
Interest
EXPENSES
Management fee $ 2,110,419
Transfer agent fees 937,977
Distribution fees 190,306
Accounting fees and expenses 161,159
Non-interested trustees' 1,708
compensation
Custodian fees and expenses 91,213
Registration fees 91,994
Audit 54,626
Legal 15,537
Miscellaneous 345
Total expenses before 3,655,284
reductions
Expense reductions (27,083) 3,628,201
NET INVESTMENT INCOME 30,638,885
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (6,155,525)
Futures contracts 534,939 (5,620,586)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,123,506)
Futures contracts 115,853
Delayed delivery commitments (183,312) (10,190,965)
NET GAIN (LOSS) (15,811,551)
NET INCREASE (DECREASE) IN $ 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,638,885 $ 32,333,262
income
Net realized gain (loss) (5,620,586) 8,605,529
Change in net unrealized (10,190,965) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,827,334 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (30,183,549) (30,575,427)
From net investment income
From net realized gain (6,924,572) (1,430,037)
TOTAL DISTRIBUTIONS (37,108,121) (32,005,464)
Share transactions - net (14,273,306) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (36,554,093) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 473,503,596 $ 510,057,689
undistributed net investment
income of $1,901,973 and
$1,699,376, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .646 .669 .170 .268
Net realized and unrealized (.336) (.061) .048 .224
gain (loss)
Total from investment .310 .608 .218 .492
operations
Less Distributions
From net investment income (.640) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.790) (.668) (.248) (.272)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .637 .665 .167 .255
Net realized and unrealized (.338) (.063) .048 .233
gain (loss)
Total from investment .299 .602 .215 .488
operations
Less Distributions
From net investment income (.629) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.779) (.662) (.245) (.268)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
</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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .567 .584 .142 .234
Net realized and unrealized (.324) (.064) .065 .214
gain (loss)
Total from investment .243 .520 .207 .448
operations
Less Distributions
From net investment income (.563) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.713) (.590) (.227) (.238)
Net asset value, end of period $ 10.480 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 183% 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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 F 1997 G 1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .674 D .700 D .176 D .678 D .729 .772
Net realized and unrealized (.342) (.056) .047 .391 (.015) .325
gain (loss)
Total from investment .332 .644 .223 1.069 .714 1.097
operations
Less Distributions
From net investment income (.662) (.664) (.173) (.689) (.724) (.737)
From net realized gain (.150) (.030) (.080) (.110) (.100) -
In excess of net realized - - - - - (.050)
gain
Total distributions (.812) (.694) (.253) (.799) (.824) (.787)
Net asset value, end of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
TOTAL RETURN B, C 3.14% 5.99% 2.05% 10.34% 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 406,839 $ 459,212 $ 494,304 $ 506,113 $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .70% .71% .72% A .73% .74% .77%
net assets
Ratio of expenses to average .70% .71% .72% A .73% .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.29% 6.34% 6.36% A 6.26% 6.75% 7.37%
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149% 221% 329%
</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 THREE MONTHS ENDED OCTOBER 31
G YEAR ENDED JULY 31
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 H 1997 G
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 .669 .693 .172 .263
Net realized and unrealized (.343) (.063) .050 .226
gain (loss)
Total from investment .326 .630 .222 .489
operations
Less Distributions
From net investment income (.656) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.806) (.690) (.252) (.279)
Net asset value, end of period $ 10.470 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
G FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 1997
H THREE MONTHS ENDED OCTOBER 31
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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) 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.
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, futures
transactions, 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 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 after the customary settlement period for that security. 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 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.
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 $875,693,626 and $942,195,101, respectively, of which U.S.
government and government agency obligations aggregated $853,484,094
and $932,362,579, respectively.
The market value of futures contracts opened and closed during the
period amounted to $29,995,764 and $39,662,629, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 $ 3,865 $ 146
CLASS T 61,872 4,924
CLASS B 124,569 89,966
$ 190,306 $ 95,036
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 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 is 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 $ 29,751 $ 10,398
CLASS T 74,991 27,421
CLASS B 68,549 68,549*
$ 173,291 $ 106,368
* 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 $ 8,236 .32
CLASS T 72,011 .29
CLASS B 28,891 .21
INITIAL CLASS 785,661 .18
INSTITUTIONAL CLASS 43,178 .24
$ 937,977
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, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) 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% $ 2,125
CLASS T 1.00% 13,483
INSTITUTIONAL CLASS .75% 454
$ 16,062
In addition, through an arrangement with the fund's custodian, 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 $11,021 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 153,223 $ 47,643
Class T 1,450,107 835,552
Class B 724,614 198,305
Initial Class 26,727,640 28,222,031
Institutional Class 1,127,965 1,271,896
Total $ 30,183,549 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,709 41,653
Class B 132,050 4,898
Initial Class 6,182,269 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,572 $ 1,430,037
Total Distributions $ 37,108,121 $ 32,005,464
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 233,326 191,569 $ 2,488,784 $ 2,113,314
Reinvestment of
distributions 11,952 3,475 127,329 38,300
Shares redeemed (120,472) (174,371) (1,280,382) (1,919,263)
Net increase (decrease) 124,806 20,673 $ 1,335,731 $ 232,351
CLASS T Shares sold 2,003,369 1,214,468 $ 21,386,352 $ 13,402,368
Reinvestment of
distributions 148,336 72,903 1,582,559 803,861
Shares redeemed (1,122,570) (874,013) (11,947,707) (9,643,136)
Net increase (decrease) 1,029,135 413,358 $ 11,021,204 $ 4,563,093
CLASS B Shares sold 1,505,268 623,528 $ 16,049,817 $ 6,874,797
Reinvestment of
distributions 63,855 14,736 679,689 162,453
Shares redeemed (461,420) (66,613) (4,891,488) (734,102)
Net increase (decrease) 1,107,703 571,651 $ 11,838,018 $ 6,303,148
INITIAL CLASS Shares sold 3,914,002 5,885,198 $ 41,964,545 $ 64,970,201
Reinvestment of
distributions 2,515,203 2,196,325 26,913,754 24,230,109
Shares redeemed (9,502,966) (11,046,014) (101,601,425) (121,871,170)
Net increase (decrease) (3,073,761) (2,964,491) $ (32,723,126) $ (32,670,860)
INSTITUTIONAL CLASS Shares 667,600 1,131,767 $ 7,141,162 $ 12,463,547
sold
Reinvestment of
distributions 70,535 61,639 754,625 679,028
Shares redeemed (1,277,677) (971,330) (13,640,920) (10,710,195)
Net increase (decrease) (539,542) 222,076 $ (5,745,133) $ 2,432,380
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Mortgage Securities Fund (formerly a fund of Fidelity
Income Fund):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Income Fund) at October 31,
1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Mortgage Securities Fund's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 1999
DISTRIBUTIONS
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88208
1.538412.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
MUNICIPAL INCOME FUND -
CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 53 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 54
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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
five years and past ten years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.36% 35.23% 100.50%
- - CL A
FIDELITY ADV MUNICIPAL INCOME -6.99% 28.81% 90.98%
- - CL A (INCL. 4.75% SALES
CHARGE)
LB Municipal Bond -1.77% 39.75% 99.11%
General Municipal Debt Funds -4.18% 33.04% 86.71%
Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the Lehman
Brothers 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 one year average represents a peer
group of 263 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.36% 6.22% 7.20%
- - CL A
FIDELITY ADV MUNICIPAL INCOME -6.99% 5.19% 6.68%
- - CL A (INCL. 4.75% SALES
CHARGE)
LB Municipal Bond -1.77% 6.92% 7.13%
General Municipal Debt Funds -4.18% 5.87% 6.43%
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
1989/10/31 9525.00 10000.00
1989/11/30 9642.26 10175.00
1989/12/31 9733.93 10258.23
1990/01/31 9749.29 10209.71
1990/02/28 9819.16 10300.58
1990/03/31 9880.76 10303.67
1990/04/30 9790.39 10229.07
1990/05/31 9991.02 10452.37
1990/06/30 10108.74 10544.24
1990/07/31 10264.65 10699.25
1990/08/31 10195.39 10543.89
1990/09/30 10267.89 10549.90
1990/10/31 10408.86 10741.28
1990/11/30 10667.13 10957.28
1990/12/31 10735.18 11004.95
1991/01/31 10860.12 11152.64
1991/02/28 10943.62 11249.66
1991/03/31 11007.96 11253.71
1991/04/30 11187.20 11403.39
1991/05/31 11325.48 11504.76
1991/06/30 11351.84 11493.37
1991/07/31 11498.63 11633.36
1991/08/31 11602.47 11786.57
1991/09/30 11738.56 11940.04
1991/10/31 11868.63 12047.50
1991/11/30 11913.28 12081.11
1991/12/31 12042.85 12340.37
1992/01/31 12176.34 12368.51
1992/02/29 12242.49 12372.46
1992/03/31 12303.91 12377.04
1992/04/30 12414.96 12487.20
1992/05/31 12526.33 12634.17
1992/06/30 12698.09 12846.17
1992/07/31 13140.25 13231.30
1992/08/31 13038.49 13102.30
1992/09/30 13119.86 13187.98
1992/10/31 12961.53 13058.35
1992/11/30 13221.30 13292.22
1992/12/31 13380.71 13427.94
1993/01/31 13607.04 13584.10
1993/02/28 14087.51 14075.44
1993/03/31 13940.58 13926.66
1993/04/30 14088.41 14067.18
1993/05/31 14205.08 14146.24
1993/06/30 14432.83 14382.34
1993/07/31 14443.55 14401.18
1993/08/31 14815.55 14701.01
1993/09/30 15020.71 14868.46
1993/10/31 15028.77 14897.15
1993/11/30 14881.89 14765.91
1993/12/31 15225.54 15077.62
1994/01/31 15402.83 15249.80
1994/02/28 14995.73 14854.83
1994/03/31 14196.41 14249.95
1994/04/30 14290.61 14370.79
1994/05/31 14375.12 14495.38
1994/06/30 14322.20 14406.81
1994/07/31 14580.55 14670.89
1994/08/31 14603.45 14721.65
1994/09/30 14374.69 14505.54
1994/10/31 14122.70 14247.92
1994/11/30 13668.66 13990.32
1994/12/31 13999.94 14298.24
1995/01/31 14472.89 14706.89
1995/02/28 14862.84 15134.56
1995/03/31 14940.99 15308.46
1995/04/30 14990.10 15326.52
1995/05/31 15469.80 15815.59
1995/06/30 15348.45 15678.00
1995/07/31 15398.45 15826.63
1995/08/31 15554.23 16027.31
1995/09/30 15679.66 16128.76
1995/10/31 15888.38 16363.27
1995/11/30 16188.26 16634.74
1995/12/31 16331.19 16794.60
1996/01/31 16420.27 16921.40
1996/02/29 16394.84 16807.18
1996/03/31 16048.42 16592.38
1996/04/30 15984.31 16545.43
1996/05/31 15965.46 16538.81
1996/06/30 16151.45 16718.92
1996/07/31 16257.01 16871.06
1996/08/31 16292.40 16867.01
1996/09/30 16437.73 17103.15
1996/10/31 16599.97 17296.58
1996/11/30 16890.01 17613.11
1996/12/31 16827.29 17539.14
1997/01/31 16903.32 17572.28
1997/02/28 17054.66 17733.60
1997/03/31 16866.51 17497.21
1997/04/30 17008.53 17643.66
1997/05/31 17211.58 17909.02
1997/06/30 17427.39 18099.75
1997/07/31 17924.95 18601.12
1997/08/31 17761.26 18426.82
1997/09/30 17994.87 18645.55
1997/10/31 18097.79 18765.44
1997/11/30 18214.66 18875.78
1997/12/31 18508.35 19151.18
1998/01/31 18686.48 19348.82
1998/02/28 18692.48 19354.62
1998/03/31 18751.95 19371.66
1998/04/30 18655.47 19284.29
1998/05/31 18940.70 19589.56
1998/06/30 19009.91 19666.74
1998/07/31 19051.06 19716.11
1998/08/31 19338.44 20020.72
1998/09/30 19563.06 20270.18
1998/10/31 19558.88 20269.77
1998/11/30 19631.21 20340.92
1998/12/31 19658.83 20392.18
1999/01/31 19875.77 20634.64
1999/02/28 19754.51 20544.47
1999/03/31 19753.05 20573.03
1999/04/30 19795.75 20624.25
1999/05/31 19666.19 20504.84
1999/06/30 19357.01 20209.57
1999/07/31 19418.29 20283.13
1999/08/31 19269.45 20120.87
1999/09/30 19295.71 20129.12
1999/10/29 19098.05 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 094513 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class A on
October 31, 1989, and the current 4.75% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $19,098 - a 90.98% 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 $19,911 - a 99.11% 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 4.42% 4.86% 5.51% 0.89%
Capital returns -6.78% 3.21% 3.51% 0.95%
Total returns -2.36% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.85(cents) 28.63(cents) 56.75(cents)
Annualized dividend rate 4.87% 4.73% 4.64%
30-day annualized yield 4.57% - -
30-day annualized 7.14% - -
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 $11.73 over the past one
month, $12.00 over the past six months and $12.24 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 would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.53% 35.18% 100.43%
- - CL T
FIDELITY ADV MUNICIPAL INCOME -5.95% 30.45% 93.42%
- - CL T (INCL. 3.50% SALES
CHARGE)
LB Municipal Bond -1.77% 39.75% 99.11%
General Municipal Debt Funds -4.18% 33.04% 86.71%
Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the Lehman
Brothers 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 one year average represents a peer
group of 263 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.53% 6.21% 7.20%
- - CL T
FIDELITY ADV MUNICIPAL INCOME -5.95% 5.46% 6.82%
- - CL T (INCL. 3.50% SALES
CHARGE)
LB Municipal Bond -1.77% 6.92% 7.13%
General Municipal Debt Funds -4.18% 5.87% 6.43%
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
1989/10/31 9650.00 10000.00
1989/11/30 9768.80 10175.00
1989/12/31 9861.67 10258.23
1990/01/31 9877.23 10209.71
1990/02/28 9948.02 10300.58
1990/03/31 10010.43 10303.67
1990/04/30 9918.87 10229.07
1990/05/31 10122.14 10452.37
1990/06/30 10241.40 10544.24
1990/07/31 10399.36 10699.25
1990/08/31 10329.19 10543.89
1990/09/30 10402.64 10549.90
1990/10/31 10545.46 10741.28
1990/11/30 10807.12 10957.28
1990/12/31 10876.06 11004.95
1991/01/31 11002.64 11152.64
1991/02/28 11087.24 11249.66
1991/03/31 11152.42 11253.71
1991/04/30 11334.01 11403.39
1991/05/31 11474.11 11504.76
1991/06/30 11500.82 11493.37
1991/07/31 11649.53 11633.36
1991/08/31 11754.73 11786.57
1991/09/30 11892.61 11940.04
1991/10/31 12024.39 12047.50
1991/11/30 12069.62 12081.11
1991/12/31 12200.89 12340.37
1992/01/31 12336.14 12368.51
1992/02/29 12403.16 12372.46
1992/03/31 12465.38 12377.04
1992/04/30 12577.88 12487.20
1992/05/31 12690.72 12634.17
1992/06/30 12864.73 12846.17
1992/07/31 13312.69 13231.30
1992/08/31 13209.60 13102.30
1992/09/30 13292.04 13187.98
1992/10/31 13131.63 13058.35
1992/11/30 13394.81 13292.22
1992/12/31 13556.31 13427.94
1993/01/31 13785.61 13584.10
1993/02/28 14272.39 14075.44
1993/03/31 14123.53 13926.66
1993/04/30 14273.30 14067.18
1993/05/31 14391.50 14146.24
1993/06/30 14622.24 14382.34
1993/07/31 14633.10 14401.18
1993/08/31 15009.98 14701.01
1993/09/30 15217.84 14868.46
1993/10/31 15226.00 14897.15
1993/11/30 15077.19 14765.91
1993/12/31 15425.35 15077.62
1994/01/31 15604.97 15249.80
1994/02/28 15192.53 14854.83
1994/03/31 14382.72 14249.95
1994/04/30 14478.15 14370.79
1994/05/31 14563.77 14495.38
1994/06/30 14510.15 14406.81
1994/07/31 14771.89 14670.89
1994/08/31 14795.10 14721.65
1994/09/30 14563.33 14505.54
1994/10/31 14308.04 14247.92
1994/11/30 13848.04 13990.32
1994/12/31 14183.66 14298.24
1995/01/31 14662.82 14706.89
1995/02/28 15057.90 15134.56
1995/03/31 15137.07 15308.46
1995/04/30 15186.82 15326.52
1995/05/31 15672.82 15815.59
1995/06/30 15549.87 15678.00
1995/07/31 15600.53 15826.63
1995/08/31 15758.35 16027.31
1995/09/30 15885.43 16128.76
1995/10/31 16096.89 16363.27
1995/11/30 16400.70 16634.74
1995/12/31 16545.51 16794.60
1996/01/31 16635.76 16921.40
1996/02/29 16610.00 16807.18
1996/03/31 16259.03 16592.38
1996/04/30 16194.08 16545.43
1996/05/31 16174.98 16538.81
1996/06/30 16363.41 16718.92
1996/07/31 16470.36 16871.06
1996/08/31 16506.21 16867.01
1996/09/30 16654.34 17103.15
1996/10/31 16850.26 17296.58
1996/11/30 17099.26 17613.11
1996/12/31 17033.52 17539.14
1997/01/31 17109.98 17572.28
1997/02/28 17277.37 17733.60
1997/03/31 17087.14 17497.21
1997/04/30 17230.58 17643.66
1997/05/31 17436.13 17909.02
1997/06/30 17654.41 18099.75
1997/07/31 18158.02 18601.12
1997/08/31 18007.37 18426.82
1997/09/30 18229.05 18645.55
1997/10/31 18348.67 18765.44
1997/11/30 18449.05 18875.78
1997/12/31 18759.65 19151.18
1998/01/31 18940.44 19348.82
1998/02/28 18961.30 19354.62
1998/03/31 19007.24 19371.66
1998/04/30 18910.32 19284.29
1998/05/31 19200.14 19589.56
1998/06/30 19270.68 19666.74
1998/07/31 19313.18 19716.11
1998/08/31 19605.05 20020.72
1998/09/30 19832.99 20270.18
1998/10/31 19844.33 20269.77
1998/11/30 19900.07 20340.92
1998/12/31 19926.10 20392.18
1999/01/31 20143.76 20634.64
1999/02/28 20019.22 20544.47
1999/03/31 20016.13 20573.03
1999/04/30 20057.74 20624.25
1999/05/31 19924.84 20504.84
1999/06/30 19610.01 20209.57
1999/07/31 19686.66 20283.13
1999/08/31 19534.44 20120.87
1999/09/30 19543.06 20129.12
1999/10/29 19341.54 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 094545 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class T on
October 31, 1989, and the current 3.50% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $19,342 - a 93.42% 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 $19,911 - a 99.11% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.32% 4.86% 5.47% 5.69% 6.62%
Capital returns -6.85% 3.29% 3.42% -1.01% 5.88%
Total returns -2.53% 8.15% 8.89% 4.68% 12.50%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.76(cents) 28.03(cents) 55.47(cents)
Annualized dividend rate 4.77% 4.63% 4.52%
30-day annualized yield 4.55% - -
30-day annualized 7.11% - -
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 $11.74 over the past one
month, $12.01 over the past six months and $12.26 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 one year, past
five years and past 10 years total return figures are 5%, 2% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five years and past 10 years total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -3.16% 30.58% 92.69%
- - CL B
FIDELITY ADV MUNICIPAL INCOME -7.82% 28.58% 92.69%
- - CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond -1.77% 39.75% 99.11%
General Municipal Debt Funds -4.18% 33.04% 86.71%
Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the Lehman
Brothers 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 one year average represents a peer
group of 263 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -3.16% 5.48% 6.78%
- - CL B
FIDELITY ADV MUNICIPAL INCOME -7.82% 5.16% 6.78%
- - CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond -1.77% 6.92% 7.13%
General Municipal Debt Funds -4.18% 5.87% 6.43%
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
1989/10/31 10000.00 10000.00
1989/11/30 10123.11 10175.00
1989/12/31 10219.35 10258.23
1990/01/31 10235.47 10209.71
1990/02/28 10308.83 10300.58
1990/03/31 10373.50 10303.67
1990/04/30 10278.62 10229.07
1990/05/31 10489.26 10452.37
1990/06/30 10612.85 10544.24
1990/07/31 10776.54 10699.25
1990/08/31 10703.82 10543.89
1990/09/30 10779.93 10549.90
1990/10/31 10927.93 10741.28
1990/11/30 11199.08 10957.28
1990/12/31 11270.53 11004.95
1991/01/31 11401.70 11152.64
1991/02/28 11489.36 11249.66
1991/03/31 11556.91 11253.71
1991/04/30 11745.09 11403.39
1991/05/31 11890.27 11504.76
1991/06/30 11917.94 11493.37
1991/07/31 12072.05 11633.36
1991/08/31 12181.07 11786.57
1991/09/30 12323.95 11940.04
1991/10/31 12460.51 12047.50
1991/11/30 12507.38 12081.11
1991/12/31 12643.41 12340.37
1992/01/31 12783.56 12368.51
1992/02/29 12853.01 12372.46
1992/03/31 12917.49 12377.04
1992/04/30 13034.08 12487.20
1992/05/31 13151.00 12634.17
1992/06/30 13331.33 12846.17
1992/07/31 13795.53 13231.30
1992/08/31 13688.71 13102.30
1992/09/30 13774.13 13187.98
1992/10/31 13607.90 13058.35
1992/11/30 13880.63 13292.22
1992/12/31 14047.99 13427.94
1993/01/31 14285.60 13584.10
1993/02/28 14790.04 14075.44
1993/03/31 14635.78 13926.66
1993/04/30 14790.98 14067.18
1993/05/31 14913.47 14146.24
1993/06/30 15152.58 14382.34
1993/07/31 15163.83 14401.18
1993/08/31 15554.38 14701.01
1993/09/30 15769.78 14868.46
1993/10/31 15778.24 14897.15
1993/11/30 15624.03 14765.91
1993/12/31 15984.82 15077.62
1994/01/31 16170.95 15249.80
1994/02/28 15743.55 14854.83
1994/03/31 14904.37 14249.95
1994/04/30 15003.27 14370.79
1994/05/31 15091.99 14495.38
1994/06/30 15036.43 14406.81
1994/07/31 15288.20 14670.89
1994/08/31 15312.55 14721.65
1994/09/30 15058.64 14505.54
1994/10/31 14756.76 14247.92
1994/11/30 14272.68 13990.32
1994/12/31 14622.83 14298.24
1995/01/31 15094.05 14706.89
1995/02/28 15491.15 15134.56
1995/03/31 15562.65 15308.46
1995/04/30 15590.25 15326.52
1995/05/31 16079.86 15815.59
1995/06/30 15943.22 15678.00
1995/07/31 15984.94 15826.63
1995/08/31 16136.65 16027.31
1995/09/30 16257.20 16128.76
1995/10/31 16464.28 16363.27
1995/11/30 16765.80 16634.74
1995/12/31 16903.86 16794.60
1996/01/31 16987.41 16921.40
1996/02/29 16952.21 16807.18
1996/03/31 16584.07 16592.38
1996/04/30 16507.54 16545.43
1996/05/31 16477.26 16538.81
1996/06/30 16659.38 16718.92
1996/07/31 16759.01 16871.06
1996/08/31 16786.68 16867.01
1996/09/30 16928.31 17103.15
1996/10/31 17118.79 17296.58
1996/11/30 17364.34 17613.11
1996/12/31 17289.09 17539.14
1997/01/31 17343.66 17572.28
1997/02/28 17519.57 17733.60
1997/03/31 17317.42 17497.21
1997/04/30 17439.37 17643.66
1997/05/31 17654.06 17909.02
1997/06/30 17851.47 18099.75
1997/07/31 18351.93 18601.12
1997/08/31 18188.33 18426.82
1997/09/30 18403.16 18645.55
1997/10/31 18514.58 18765.44
1997/11/30 18621.70 18875.78
1997/12/31 18910.33 19151.18
1998/01/31 19097.25 19348.82
1998/02/28 19092.60 19354.62
1998/03/31 19128.41 19371.66
1998/04/30 19020.07 19284.29
1998/05/31 19302.13 19589.56
1998/06/30 19362.87 19666.74
1998/07/31 19395.31 19716.11
1998/08/31 19678.75 20020.72
1998/09/30 19897.64 20270.18
1998/10/31 19898.49 20269.77
1998/11/30 19943.98 20340.92
1998/12/31 19959.54 20392.18
1999/01/31 20167.53 20634.64
1999/02/28 20031.83 20544.47
1999/03/31 20018.03 20573.03
1999/04/30 20049.00 20624.25
1999/05/31 19905.14 20504.84
1999/06/30 19579.32 20209.57
1999/07/31 19629.21 20283.13
1999/08/31 19466.50 20120.87
1999/09/30 19481.10 20129.12
1999/10/29 19269.32 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 094519 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class B on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $19,269 - a 92.69% 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 $19,911 - a 99.11%
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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 3.69% 4.17% 4.81% 4.99% 5.77%
Capital returns -6.85% 3.30% 3.34% -1.01% 5.80%
Total returns -3.16% 7.47% 8.15% 3.98% 11.57%
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
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.13(cents) 24.17(cents) 47.62(cents)
Annualized dividend rate 4.15% 4.00% 3.89%
30-day annualized yield 4.08% - -
30-day annualized 6.38% - -
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 $11.71 over the past one
month, $11.98 over the past six months, and $12.23 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 one year, past five year and past 10 year
total return figures are 1%, 0%, and 0%, respectively. If Fidelity had
not reimbursed certain class expenses, the past five years and past 10
years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -3.24% 30.12% 92.01%
- - CL C
FIDELITY ADV MUNICIPAL INCOME -4.17% 30.12% 92.01%
- - CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond -1.77% 39.75% 99.11%
General Municipal Debt Funds -4.18% 33.04% 86.71%
Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to those of the Lehman
Brothers 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 one year average represents a peer
group of 263 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -3.24% 5.41% 6.74%
- - CL C
FIDELITY ADV MUNICIPAL INCOME -4.17% 5.41% 6.74%
- - CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Municipal Bond -1.77% 6.92% 7.13%
General Municipal Debt Funds -4.18% 5.87% 6.43%
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
1989/10/31 10000.00 10000.00
1989/11/30 10123.11 10175.00
1989/12/31 10219.35 10258.23
1990/01/31 10235.47 10209.71
1990/02/28 10308.83 10300.58
1990/03/31 10373.50 10303.67
1990/04/30 10278.62 10229.07
1990/05/31 10489.26 10452.37
1990/06/30 10612.85 10544.24
1990/07/31 10776.54 10699.25
1990/08/31 10703.82 10543.89
1990/09/30 10779.93 10549.90
1990/10/31 10927.93 10741.28
1990/11/30 11199.08 10957.28
1990/12/31 11270.53 11004.95
1991/01/31 11401.70 11152.64
1991/02/28 11489.36 11249.66
1991/03/31 11556.91 11253.71
1991/04/30 11745.09 11403.39
1991/05/31 11890.27 11504.76
1991/06/30 11917.94 11493.37
1991/07/31 12072.05 11633.36
1991/08/31 12181.07 11786.57
1991/09/30 12323.95 11940.04
1991/10/31 12460.51 12047.50
1991/11/30 12507.38 12081.11
1991/12/31 12643.41 12340.37
1992/01/31 12783.56 12368.51
1992/02/29 12853.01 12372.46
1992/03/31 12917.49 12377.04
1992/04/30 13034.08 12487.20
1992/05/31 13151.00 12634.17
1992/06/30 13331.33 12846.17
1992/07/31 13795.53 13231.30
1992/08/31 13688.71 13102.30
1992/09/30 13774.13 13187.98
1992/10/31 13607.90 13058.35
1992/11/30 13880.63 13292.22
1992/12/31 14047.99 13427.94
1993/01/31 14285.60 13584.10
1993/02/28 14790.04 14075.44
1993/03/31 14635.78 13926.66
1993/04/30 14790.98 14067.18
1993/05/31 14913.47 14146.24
1993/06/30 15152.58 14382.34
1993/07/31 15163.83 14401.18
1993/08/31 15554.38 14701.01
1993/09/30 15769.78 14868.46
1993/10/31 15778.24 14897.15
1993/11/30 15624.03 14765.91
1993/12/31 15984.82 15077.62
1994/01/31 16170.95 15249.80
1994/02/28 15743.55 14854.83
1994/03/31 14904.37 14249.95
1994/04/30 15003.27 14370.79
1994/05/31 15091.99 14495.38
1994/06/30 15036.43 14406.81
1994/07/31 15288.20 14670.89
1994/08/31 15312.55 14721.65
1994/09/30 15058.64 14505.54
1994/10/31 14756.76 14247.92
1994/11/30 14272.68 13990.32
1994/12/31 14622.83 14298.24
1995/01/31 15094.05 14706.89
1995/02/28 15491.15 15134.56
1995/03/31 15562.65 15308.46
1995/04/30 15590.25 15326.52
1995/05/31 16079.86 15815.59
1995/06/30 15943.22 15678.00
1995/07/31 15984.94 15826.63
1995/08/31 16136.65 16027.31
1995/09/30 16257.20 16128.76
1995/10/31 16464.28 16363.27
1995/11/30 16765.80 16634.74
1995/12/31 16903.86 16794.60
1996/01/31 16987.41 16921.40
1996/02/29 16952.21 16807.18
1996/03/31 16584.07 16592.38
1996/04/30 16507.54 16545.43
1996/05/31 16477.26 16538.81
1996/06/30 16659.38 16718.92
1996/07/31 16759.01 16871.06
1996/08/31 16786.68 16867.01
1996/09/30 16928.31 17103.15
1996/10/31 17118.79 17296.58
1996/11/30 17364.34 17613.11
1996/12/31 17289.09 17539.14
1997/01/31 17343.66 17572.28
1997/02/28 17519.57 17733.60
1997/03/31 17317.42 17497.21
1997/04/30 17439.37 17643.66
1997/05/31 17654.06 17909.02
1997/06/30 17851.47 18099.75
1997/07/31 18351.93 18601.12
1997/08/31 18188.33 18426.82
1997/09/30 18403.16 18645.55
1997/10/31 18514.58 18765.44
1997/11/30 18603.32 18875.78
1997/12/31 18900.90 19151.18
1998/01/31 19068.36 19348.82
1998/02/28 19076.88 19354.62
1998/03/31 19107.24 19371.66
1998/04/30 18995.56 19284.29
1998/05/31 19271.89 19589.56
1998/06/30 19328.46 19666.74
1998/07/31 19356.32 19716.11
1998/08/31 19634.21 20020.72
1998/09/30 19864.11 20270.18
1998/10/31 19844.45 20269.77
1998/11/30 19888.51 20340.92
1998/12/31 19902.95 20392.18
1999/01/31 20108.86 20634.64
1999/02/28 19972.43 20544.47
1999/03/31 19957.13 20573.03
1999/04/30 19986.23 20624.25
1999/05/31 19841.48 20504.84
1999/06/30 19532.11 20209.57
1999/07/31 19580.12 20283.13
1999/08/31 19416.66 20120.87
1999/09/30 19413.21 20129.12
1999/10/29 19201.07 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 094525 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class C on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $19,201 - a 92.01% 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 $19,911 - a 99.11%
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
YEAR ENDED OCTOBER 31 NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31
1999 1998
Dividend returns 3.61% 3.87%
Capital returns -6.85% 3.54%
Total returns -3.24% 7.41%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.03(cents) 23.57(cents) 46.52(cents)
Annualized dividend rate 4.04% 3.89% 3.79%
30-day annualized yield 3.97% - -
30-day annualized 6.20% - -
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 $11.74 over the past one
month, $12.01 over the past six months, and $12.26 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
Despite a municipal bond market
rally late in the period spurred by
attractively priced issues and yields
higher than they've been since
1997, munis produced lackluster
results during the 12-month period
ending October 31, 1999.
Following the global financial crisis
in the fall of 1998 and interest rate
jitters through most of 1999, the
Lehman Brothers Municipal Bond
Index - an index of approximately
50,000 investment-grade, fixed-rate,
tax-
exempt bonds - declined 1.77%
during the period. In comparison,
the Lehman Brothers Aggregate
Bond Index - a broad measure of
the taxable bond market - posted a
marginally positive return of
0.53%. In general, the negative
environment of increasing interest
rates and investors' persistent
concerns about inflation hit the
Lehman Brothers Long-Term
Government Bond Index the hardest,
as it fell 6.10% during the period.
While the supply of municipals was
relatively light during the period -
particularly compared to 1998's
near-record levels of issuance -
demand was similarly muted,
especially among institutional
investors. Muni bonds came under
further downward pressure in the
second half of the period following
two interest-rate hikes by the
Federal Reserve Board and
widespread belief among investors
that there would be a third hike in
November.
(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 12-month period that ended October 31, 1999, the fund's
Class A, Class T, Class B and Class C shares had total returns
of-2.36%, -2.53%, -3.16% and -3.24%, respectively. To get a sense of
how the fund did relative to its competitors, the general municipal
debt funds average returned -4.18% for the same 12-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 -1.77% for the same 12-month period.
Q. RISING INTEREST RATES MADE IT A FAIRLY DIFFICULT AND VOLATILE YEAR
FOR MUNICIPAL BONDS. WHY DID THE FUND OUTPERFORM ITS PEERS?
A. The fund's outperformance of its peers was in part due to duration
management. In keeping with Fidelity's investment approach, I managed
the fund's duration - a measure of its interest-rate sensitivity - to
be in line with the municipal market as a whole, as reflected by the
Lehman Brothers Municipal Bond Index. As a result, I don't lengthen or
shorten duration based on where I think interest rates will be at some
point down the road, because I don't believe that anyone can do so
with any accuracy over time. But other funds in the peer group do
actively manage duration and some increased their interest-rate
sensitivity, which likely caused their returns to suffer when interest
rates rose.
Q. WHICH BOND MATURITIES DID YOU FAVOR?
A. I emphasized intermediate-maturity bonds - those set to mature
within five to 15 years - which also was a plus for the fund's
performance. Although they were a disappointment early on, they
bounced back more recently. Initially, intermediates suffered
primarily from reduced demand and increased supply at the hands of
relatively heavy selling from some specific types of institutional
investors. In contrast, relatively strong demand from individual
investors helped to support the performance of shorter- and
longer-term bonds. Based on Fidelity's quantitative models,
intermediates offered the most attractive value for their given
interest-rate sensitivity and their total return potential. The fund's
focus on this maturity range worked in its favor during the past
several months because institutional investors came back into the
market with purchases of intermediate securities.
Q. THE FUND ALSO HAD A RELATIVELY LARGE EXPOSURE TO "PREMIUM" BONDS.
WHAT ARE PREMIUMS AND WHY WERE THEY ATTRACTIVE?
A. Premium coupon bonds pay interest rates above prevailing market
rates and trade at prices above face - or par - value. One appealing
aspect of premiums was that they were insulated from unfavorable tax
treatment that negatively affected the prices of lower coupon bonds as
interest rates rose.
Q. WHERE DID YOU FIND ATTRACTIVE OPPORTUNITIES?
A. I found some attractive opportunities in the education sector and
bought bonds backed by colleges and universities. Education bonds
offer diversification from the economically sensitive areas of the
market - such as general obligation bonds. In addition, demographic
trends support a growing number of students seeking to obtain advanced
degrees over the next several years. I also found opportunities in the
health care and utilities sectors, both of which are undergoing a wave
of consolidation. I looked for bonds I felt could benefit from
consolidation, either by being acquired or affiliating with a stronger
entity, through the restructuring of debt.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET AND THE FUND?
A. At the end of the period, municipals were priced attractively
compared to their Treasury counterparts. To the extent that investors
realize and act on that relative cheapness, municipals could gain
ground on Treasuries. Of course, the major determinant of the bond
market's performance will be the direction of interest rates, which I
don't spend time trying to forecast. Rather, I look for attractively
priced bonds that I believe will outperform, no matter where interest
rates end up.
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 October 31,
1999, more than $420
million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON
MUNICIPAL BOND DEMAND:
"The demand for municipals can vary
a great deal in response to the
behavior of various market
participants. Corporations, individual
investors and trust accounts tend to
favor short-term securities, which are
less interest-rate sensitive and,
therefore, less volatile. Individual
investors, along with mutual funds
and insurance companies - which
invest the insurance premiums they
collect in bonds - are the primary
purchasers of intermediate-maturity
bonds. Longer-term securities, which
are the most volatile, generally are
the domain of long-term mutual funds,
hedge funds and other investors
known as `arbitrageurs,' who seek to
exploit small differences between
various fixed-income investments. At
various points in time, a given
municipal bond maturity may look
cheap or expensive as different
categories of investors embrace them
or step away from them. With the help
of Fidelity's research team, I try to
take advantage of the anomalies that
can occur by investing in the bond
maturities that look cheap and selling
those that have performed well in
response to strong demand."
NOTE TO SHAREHOLDERS: The fund is
managed to have similar overall
interest-rate risk to a benchmark
index that serves as a proxy for the
market in which the fund invests.
Through the current fiscal year, the
fund used the Lehman Brothers
Municipal Bond Index for this purpose.
Going forward the fund will use a new
benchmark, the Lehman Brothers
3+ Year Municipal Bond Index. The
new benchmark excludes securities
with maturities of less than three
years, and is more representative of
the fund's investment universe.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF OCTOBER
31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
New York 18.0 19.0
Texas 8.4 3.6
Massachusetts 6.5 6.8
Colorado 5.3 5.2
Washington 5.1 4.9
TOP FIVE SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Obligations 19.3 20.7
Electric Utilities 15.9 17.6
Transportation 14.4 12.6
Health Care 13.4 14.0
Education 8.0 5.5
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 12.9 12.9
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 6.7 6.4
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF OCTOBER 31, 1999
Aaa 46.7%
Aa, A 24.3%
Baa 22.4%
Not Rated 4.7%
Short-term
Investments 1.9%
Row: 1, Col: 1, Value: 46.7
Row: 1, Col: 2, Value: 24.3
Row: 1, Col: 3, Value: 22.4
Row: 1, Col: 4, Value: 4.7
Row: 1, Col: 5, Value: 1.9
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
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.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
ALABAMA - 1.0%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,266,000
Series A, 7.7% 8/1/17
ALASKA - 2.0%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,307,732
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 1,505,520
(e)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,505,460
(e)
8,318,712
ARIZONA - 1.3%
Arizona Student Ln. Aquistion Aaa 1,300,000 1,274,676
Auth. Rev. Series A1, 5.875%
5/1/18 (e)
Maricopa County Ind. Dev. Baa1 4,495,000 4,262,923
Auth. Health Facilities Rev.
Rfdg. (Catholic Healthcare
West Proj.) Series A, 4.1%
7/1/03
5,537,599
ARKANSAS - 0.2%
Little Rock Arpt. Passenger Aaa 680,000 674,825
Facilities Charge Rev. 5.65%
5/1/16 (AMBAC Insured) (e)
CALIFORNIA - 3.8%
California Dept. of Wtr. Aa2 2,190,000 2,244,005
Resources Wtr. Sys. Rev.
(Central Valley Proj.)
Series J 2, 6.125% 12/1/13
California Hsg. Fin. Agcy.
Rev. (Home Mtg.):
Series B, 5.2% 8/1/26 (MBIA Aaa 850,000 852,491
Insured) (e)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,497,165
Insured) (e)
California Pub. Works Board A1 2,000,000 1,989,700
Lease Rev. Rfdg. (California
Univ. Proj.) Series A, 5.5%
10/1/13
Central Valley Fing. Auth. BBB- 4,500,000 4,589,010
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Foothill/Eastern Trans. Aaa 2,000,000 891,200
Corridor Agcy. Toll Road
Rev. (Cap. Appreciation) Sr.
Lien Series A, 0% 1/1/14
Northern California Pwr. Aaa 750,000 804,053
Agcy. Pub. Pwr. Rev. (Proj.
No. 3) 5.85% 7/1/10 (AMBAC
Insured) (Escrowed to
Maturity) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
CALIFORNIA - CONTINUED
Sacramento City Fing. Auth. Aaa $ 1,225,000 $ 642,721
Rev. (Cap. Appreciation)
Series B, 0% 11/1/11 (MBIA
Insured)
Sacramento City Fing. Auth. Aaa 2,000,000 1,908,100
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento Cogeneration Auth. BBB- 500,000 522,885
Cogeneration Proj. Rev.
(Procter & Gamble Proj.)
6.375% 7/1/10
15,941,330
COLORADO - 5.3%
Arapaho County Cap. Impt. Aaa 14,000,000 2,175,460
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa2 1,360,000 1,341,518
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist):
6.625% 2/1/13 Baa2 6,900,000 6,476,616
6.625% 2/1/22 Baa2 4,000,000 3,648,840
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,034,656
0% 1/1/08 (MBIA Insured) Aaa 870,000 568,867
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,841,911
Insured) (e)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,328,941
Insured) (e)
Series A:
7.5% 11/15/23 (e) Baa1 2,070,000 2,240,672
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 487,719
to 11/15/04 @ 102) (e)(f)
Series C, 6.55% 11/15/02 (e) Baa1 1,000,000 1,036,560
22,181,760
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
CONNECTICUT - 1.2%
Connecticut Health & Edl. AAA $ 2,170,000 $ 2,321,683
Facilities Auth. Rev. (New
Britain Memorial Hosp.)
Series A, 7.5% 7/1/06
(Pre-Refunded to 7/1/02 @
102) (f)
Eastern Connecticut Resources BBB 3,350,000 2,923,612
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(e)
5,245,295
DISTRICT OF COLUMBIA - 3.1%
District of Columbia Gen.
Oblig. Rfdg.:
Series A:
6% 6/1/07 (MBIA Insured) Aaa 1,850,000 1,944,054
6% 6/1/07 (MBIA Insured) Aaa 150,000 159,164
(Escrowed to Maturity) (f)
Series B, 5% 6/1/05 (MBIA Aaa 3,635,000 3,644,342
Insured)
District of Columbia Hosp. - 940,000 980,495
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 1,700,000
5.625% 11/1/10 Baa 485,000 490,616
District of Columbia Rev.:
(Nat'l. Academy of Science Aaa 2,500,000 2,170,575
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ.) Aaa 2,000,000 2,026,820
Series A, 5.95% 4/1/14 (MBIA
Insured)
13,116,066
FLORIDA - 2.5%
Broward County Resource A3 545,000 562,533
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,137,350
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (e)
Florida Board of Ed. Cap. Aa2 2,100,000 2,007,789
Outlay Rfdg. (Pub. Ed.
Proj.) Series D, 5.75%
6/1/22 (b)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,690,200
Rev. Series A, 7.5% 10/1/17
10,397,872
GEORGIA - 0.2%
Atlanta Wtr. & Wastewtr. Rev. Aaa 700,000 707,182
Rfdg. Series A, 5.5% 11/1/10
(FGIC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
HAWAII - 1.7%
Honolulu City & County Gen.
Oblig. Rfdg. Series C:
5% 7/1/07 (FGIC Insured) Aaa $ 3,500,000 $ 3,490,970
5.125% 7/1/12 (FGIC Insured) Aaa 4,000,000 3,841,560
7,332,530
ILLINOIS - 4.8%
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,377,930
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev.:
(Passenger Facility Charge) Aaa 2,500,000 2,526,025
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 3,917,227
(e)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,453,046
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,121,660
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Chicago School Reform Board Aaa 5,000,000 4,721,250
of Ed. (Chicago School
Reform) 5.75% 12/1/27 (AMBAC
Insured)
Du Page County Cmnty. High Aaa 1,640,000 1,726,641
School District #99 (Downers
Grove) Series A, 6% 2/1/06
(AMBAC Insured)
Illinois Edl. Facilities Aaa 1,200,000 1,271,784
Auth. Rev. Rfdg. (DePaul
Univ.) 6% 10/1/05 (AMBAC
Insured)
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.
Proj.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,079,920
to 5/1/02 @ 102) (f)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,082,840
5/1/02 @ 102) (f)
20,278,323
INDIANA - 0.2%
Indianapolis Econ. Dev. Rev. Baa2 1,000,000 1,056,830
Rfdg. (Nat'l. Benevolent
Assoc.) 7.625% 10/1/22
IOWA - 0.8%
Iowa Student Ln. Liquidity Aaa 3,500,000 3,567,900
Corp. Student Ln. Rev. Rfdg.
Series B, 5.75% 12/1/07 (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
KANSAS - 0.6%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth):
5% 12/1/13 (MBIA Insured) Aaa $ 2,390,000 $ 2,215,506
5% 12/1/14 (MBIA Insured) Aaa 500,000 455,285
2,670,791
KENTUCKY - 1.9%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 5,836,190
Int'l.) Series A, 6% 3/1/05
(MBIA Insured) (e)
(Spl. Facilities Delta Baa3 2,000,000 2,105,940
Airlines, Inc. Proj.)
Series A, 7.5% 2/1/20 (e)
7,942,130
MARYLAND - 1.2%
Maryland Health & Higher Edl.
Facilities Auth. Rev.:
(Good Samaritan Hosp.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,023,983
(Escrowed to Maturity) (f)
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,694,371
Maturity) (f)
Rfdg. (John Hopkins Univ.) 6% Aa2 2,000,000 2,143,960
7/1/10
4,862,314
MASSACHUSETTS - 6.5%
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College) Series J, Aaa 1,265,000 1,120,398
5% 7/1/17 (MBIA Insured)
(Fairview Extended Care) Aaa 5,000,000 5,483,500
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @
103) (f)
(Hebrew Rehab. Ctr. for Aged) A 2,000,000 1,807,060
Series C, 5.25% 7/1/17
(New England Med. Ctr. Hosp.) Aaa 500,000 453,405
Series G, 5.375% 7/1/24
(MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 968,590
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
Massachusetts Ind. Fin. Agcy.
Rev.:
(Atlanticare Med. Ctr.) - 600,000 612,000
Series B, 10.125% 11/1/14
(Pre-Refunded to 11/1/99 @
102) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy.
Rev.: - continued
(Cap. Appreciation)
(Massachusetts Biomedical)
Series A 2:
0% 8/1/08 A+ $ 800,000 $ 503,608
0% 8/1/10 - 4,500,000 2,464,785
Massachusetts Muni. Wholesale Baa2 1,000,000 1,052,260
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Tpk. Auth. Aaa 5,000,000 4,370,450
Metro. Hwy. Sys. Rev. Series
A, 5.125% 1/1/23 (MBIA
Insured)
Massachusetts Wtr. Poll.
Abatement Trust Rev. (MWRA
Ln. Prog.) Series A:
5.25% 8/1/13 Aa1 100,000 96,728
5.25% 8/1/14 Aa1 300,000 285,105
New England Ed. Ln. Marketing A3 3,880,000 3,971,335
Corp. Massachusetts Rfdg.
(Student Ln. Proj.) Series
F, 5.625% 7/1/04 (e)
New England Ed. Ln. Marketing Aaa 4,005,000 4,103,443
Corp. Massachusetts Student
Ln. Rev. Issue A, 5.8% 3/1/02
27,292,667
MICHIGAN - 2.3%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Hosp.) Series Baa2 4,250,000 4,056,923
A, 5.5% 10/1/18 (Escrowed to
Maturity) (f)
(Pontiac Osteopathic Hosp.) Baa2 2,000,000 1,756,600
Series A, 6% 2/1/24
Michigan Strategic Fund Rev. Aaa 1,500,000 1,366,170
Rfdg. (Detroit Edison Co.
Proj.) Series A, 5.55%
9/1/29 (MBIA Insured) (e)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,435,387
Rev. Rfdg. (William
Beaumont Hosp.) 6.25% 1/1/09
9,615,080
MINNESOTA - 1.3%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,519,110
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
MINNESOTA - CONTINUED
Minnesota Hsg. Fin. Agcy. Aa2 $ 2,000,000 $ 2,039,640
Single Family Mtg. (Single
Family Mtg.) Series D, 6.4%
7/1/15 (e)
Rochester Health Care AA+ 2,000,000 1,860,000
Facilities Rev. (Mayo
Foundation) Series A, 5.5%
11/15/27
5,418,750
MISSISSIPPI - 1.0%
Mississippi Gen. Oblig. 6.2% Aaa 3,720,000 3,987,617
2/1/08 (Escrowed to
Maturity) (f)
Mississippi Home Corp. Single Aaa 164,000 170,780
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
4,158,397
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,478,355
6.1% 6/15/14 BBB+ 1,000,000 999,740
2,478,095
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 480,000 502,354
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc.) Series A, 9.5% 5/1/20
(Pre-Refunded to 5/1/00 @
102) (f)
NEW JERSEY - 2.1%
New Jersey Edl. Facilities
Auth. Rev. Rfdg. (Seton
Hall Univ. Proj.):
5% 7/1/18 (AMBAC Insured) Aaa 1,000,000 886,280
5.25% 7/1/07 (AMBAC Insured) Aaa 1,610,000 1,634,263
New Jersey Trans. Trust Fund Aaa 4,000,000 4,066,920
Auth. Rfdg. (Trans. Sys.)
Series A, 5.5% 6/15/11 (MBIA
Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,253,475
Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
8,840,938
NEW MEXICO - 1.8%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,213,996
(e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NEW MEXICO - CONTINUED
Albuquerque Arpt. Rev. Rfdg.:
- - continued
6.75% 7/1/11 (AMBAC Insured) Aaa $ 1,805,000 $ 2,006,420
(e)
New Mexico Edl. Assistance Aaa 1,350,000 1,353,267
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (e)
7,573,683
NEW YORK - 18.0%
Long Island Pwr. Auth. New Aaa 9,390,000 8,209,959
York Elec. Sys. Rev. Series
A, 5.125% 12/1/22 (FSA
Insured)
Metro. Trans. Auth. Dedicated Aaa 1,000,000 889,050
Tax Fund Series A, 5.25%
4/1/26 (MBIA Insured)
Metro. Trans. Auth. New York
Commuter Facilities Rev.:
Rfdg. (Svc. Contract) Series R:
5% 7/1/02 Baa1 2,370,000 2,394,530
5% 7/1/03 Baa1 2,490,000 2,512,211
Series A:
5.625% 7/1/27 (MBIA Insured) Aaa 200,000 188,896
6.125% 7/1/29 Baa1 6,750,000 6,672,578
Metro. Trans. Auth. New York Baa1 1,010,000 988,245
Svc. Contract Rev. Series P,
5.75% 7/1/15
Metro. Trans. Auth. New York
Trans. Facilities Rev. Rfdg.
(Svc. Contract Proj.) Series
8:
5.25% 7/1/17 Baa1 500,000 448,780
5.375% 7/1/21 (FSA Insured) Aaa 700,000 640,073
New York City:
Rfdg.:
Series A, 7% 8/1/03 A3 2,000,000 2,148,960
Series B:
5.7% 8/15/02 A3 1,130,000 1,163,233
5.7% 8/15/02 (Escrowed to A3 35,000 36,159
Maturity) (f)
6.75% 8/15/03 A3 2,000,000 2,134,700
Series E, 6.5% 2/15/04 (FGIC Aaa 1,000,000 1,064,970
Insured)
Series D, 5.5% 2/15/04 A3 2,000,000 2,050,180
Series H:
6.875% 2/1/02 A3 160,000 167,629
6.875% 2/1/02 (Escrowed to Aaa 80,000 84,233
Maturity) (f)
New York City Ind. Dev. Agcy. Aaa 1,000,000 1,045,910
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15
(FSA Insured) (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NEW YORK - CONTINUED
New York City Ind. Dev. Agcy. A3 $ 8,680,000 $ 8,957,586
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (e)
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa 3,500,000 3,247,370
5.75% 6/15/26 A1 5,000,000 4,745,550
5.75% 6/15/29 A1 4,000,000 3,777,800
New York State Dorm. Auth.
Rev.:
(City Univ. Sys. Baa1 3,000,000 3,108,930
Consolidated) Series A, 5.7%
7/1/05
Rfdg. (Jamaica Hosp.) Series Aaa 6,150,000 5,763,965
F, 5.2% 2/15/14 (MBIA
Insured)
New York State Envir.
Facilities Corp.:
Clean Wtr. & Drinking Rev.
(Revolving Funds) Series F:
4.875% 6/15/18 Aa1 1,000,000 860,480
4.875% 6/15/20 Aa1 1,300,000 1,102,049
5% 6/15/15 Aa1 700,000 627,445
New York State Envir. Aa1 1,000,000 883,850
Facilities Corp. Poll. Cont.
Rev. 5.125% 6/15/19
New York State Local Govt. A3 7,500,000 7,200,000
Assistance Corp. Rfdg.
Series C, 5.5% 4/1/17
New York State Thruway Auth. Baa1 2,000,000 2,090,100
Svc. Contract Rev. (Local
Hwy. & Bridges) 5.9% 4/1/07
Triborough Bridge & Tunnel Aaa 500,000 492,700
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11 (FGIC
Insured)
75,698,121
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 4,112,160
Insured)
Series B:
6% 1/1/06 Baa3 4,175,000 4,218,587
7.25% 1/1/07 Baa3 1,000,000 1,078,380
Series C:
5.125% 1/1/03 Baa1 2,700,000 2,667,708
5.25% 1/1/04 Baa1 1,365,000 1,347,159
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,044,840
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NORTH CAROLINA - CONTINUED
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 Baa1 $ 1,750,000 $ 1,763,615
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,187,801
18,420,250
OHIO - 4.5%
Cincinnati Student Ln. Fdg. - 1,215,000 1,241,208
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (e)
Franklin County Hosp. Rev. Baa3 5,000,000 4,791,300
(Doctor's Ohio Health Corp.)
Series A 4.75% 12/1/03
Gateway Economic Dev. Corp. - 3,000,000 3,003,780
Greater Cleveland Stadium
Rev. 6.5% 9/15/14 (e)
Marion County Hosp. Impt. BBB+ 1,000,000 1,001,720
Rev. Rfdg. (Comnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Tpk. Commission Rfdg. Aaa 5,000,000 4,749,250
Series A, 5.5% 2/15/24 (FGIC
Insured)
Ohio Wtr. Dev. Auth. Poll.
Cont. Rev. (Wtr. Cont. Ln.
Fund):
State Match Series, 6.5% Aaa 1,835,000 1,988,039
12/1/04 (MBIA Insured)
Wtr. Quality Series, 5.625% Aaa 2,000,000 2,087,260
6/1/06 (MBIA Insured)
18,862,557
OKLAHOMA - 1.2%
Sapulpa Muni. Auth. Util. Aaa 1,000,000 972,360
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,261,480
(American Airlines Corp.
Proj.) 7.35% 12/1/11
5,233,840
PENNSYLVANIA - 3.8%
Allegheny County Arpt. Rev. Aaa 1,000,000 1,030,000
Rfdg. (Pittsburgh Int'l
Arpt. Proj.) Series A, 5.75%
1/1/07 (MBIA Insured) (e)
Allegheny County Ind. Dev. - 325,000 339,573
Auth. Rev. (YMCA Pittsburgh
Proj.) Series A, 8.75% 3/1/10
Butler County Ind. Dev. Auth. A 3,000,000 2,904,960
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 Baa3 3,250,000 3,283,345
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
PENNSYLVANIA - CONTINUED
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health): - continued
6.8% 11/15/23 Baa3 $ 1,000,000 $ 1,004,670
Delaware County Auth. Rev.
(1st. Mtg. Riddle Village
Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,604,870
Maturity) (f)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,220,743
6/1/02 @ 102) (f)
Pennsylvania Ind. Dev. Auth. Aaa 1,345,000 1,396,635
Rev. (Econ. Dev.) 5.8%
7/1/09 (AMBAC Insured)
15,784,796
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Aaa 4,000,000 4,506,640
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (e)
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,822,805
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
TENNESSEE - 0.3%
Metro. Govt. Nashville & Aaa 1,000,000 720,210
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
Tennessee Gen. Oblig. Rfdg. Aaa 400,000 426,564
Series A, 6% 5/1/07
1,146,774
TEXAS - 8.4%
Conroe Independent School Aaa 750,000 457,643
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
Dallas-Fort Worth Int'l. Baa1 6,000,000 6,247,260
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc.) 7.5% 11/1/25 (e)
Fort Bend Independent School AAA 2,500,000 2,496,675
District Rfdg. 5.25% 2/15/10
Midlothian Independent School Aaa 1,845,000 1,500,317
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev. Aa1 75,000 77,913
Rfdg. 5.5% 2/1/20
(Pre-Refunded to 2/1/07 @
101) (f)
San Antonio Gen. Oblig. Aa2 1,390,000 1,323,711
Series 2000, 5% 2/1/11 (b)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
TEXAS - CONTINUED
San Antonio Independent Aaa $ 3,650,000 $ 3,808,921
School District 5.75% 8/15/10
Texas Gen. Oblig. (Texas Pub. Aa1 5,000,000 4,602,550
Fing. Auth. Proj.) Series A,
5% 10/1/14
Texas Muni. Pwr. Agcy. Rev. Aaa 3,930,000 2,040,063
Rfdg. (Cap. Appreciation)
0% 9/1/11 (AMBAC Insured)
Travis County Health Aaa 4,000,000 4,058,600
Facilities Dev. Corp. Rev.
(Ascension Health Cr. Prog.)
Series A, 6.25% 11/15/19
(MBIA Insured)
Univ. of Texas Univ. Revs Aa1 6,275,000 6,339,507
Rfdg. (Fing. Sys. Proj.)
Series B, 5.625% 8/15/12
Yselta Independent School Aaa 4,065,000 2,415,423
District Rfdg. (Cap.
Appreciation) 0% 8/15/09
35,368,583
UTAH - 2.6%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa 1,000,000 1,092,440
Insured)
Series B, 5.75% 7/1/16 (MBIA Aaa 2,500,000 2,465,025
Insured)
Rfdg. Spl. Oblig. 6th Series Aaa 7,000,000 7,061,180
B, 6% 7/1/16 (MBIA Insured)
South Salt Lake City Ind. - 250,000 264,948
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
10,883,593
VIRGINIA - 0.3%
Loudoun County Ind. Dev. - 1,000,000 1,127,590
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (f)
WASHINGTON - 5.1%
King County Gen. Oblig. Aa1 3,990,000 4,111,057
Series D, 5.75% 12/1/11
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A:
5% 7/1/05 Aa1 $ 3,050,000 $ 3,045,974
5.9% 7/1/04 Aa1 1,000,000 1,041,160
5.4% 7/1/12 Aa1 14,000,000 13,351,091
21,549,282
TOTAL MUNICIPAL BONDS 410,382,254
(Cost $415,389,508)
</TABLE>
CASH EQUIVALENTS - 1.9%
SHARES
Municipal Central Cash Fund, 8,130,356 8,130,356
3.56% (c)(d) (Cost
$8,130,356)
TOTAL INVESTMENT PORTFOLIO - 418,512,610
99.5%
(Cost $423,519,864)
NET OTHER ASSETS - 0.5% 2,101,879
NET ASSETS - 100% $ 420,614,489
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) The rate quoted is the annualized seven-day yield of the fund at
period end.
(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 percentage of total
value of investments in securities, is as follows (ratings are
(unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.1% AAA, AA, A 63.6%
Baa 19.4% BBB 21.0%
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 percentage not rated by Moody's or S&P amounted to 4.7%.
The distribution of municipal securities by revenue source, as a
percentage of net assets, is as follows:
General Obligations 19.3%
Electric Utilities 15.9
Transportation 14.4
Health Care 13.4
Education 8.0
Escrowed/Pre-Refunded 7.9
Industrial Development 6.4
Water & Sewer 5.7
Others (individually less 8.5
than 5%)
Net Other Assets 0.5
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $423,519,864. Net unrealized depreciation
aggregated $5,007,254, of which $6,610,938 related to appreciated
investment securities and $11,618,192 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $13,685,000 of which $7,417,000 and $6,268,000 will
expire on October 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 418,512,610
value (cost $423,519,864) -
See accompanying schedule
Receivable for investments 10,776,377
sold
Receivable for fund shares 198,989
sold
Interest receivable 7,068,772
Other receivables 22,338
TOTAL ASSETS 436,579,086
LIABILITIES
Payable for investments $ 10,664,053
purchased Regular delivery
Delayed delivery 3,449,619
Payable for fund shares 907,180
redeemed
Distributions payable 600,795
Accrued management fee 132,767
Distribution fees payable 129,306
Other payables and accrued 80,877
expenses
TOTAL LIABILITIES 15,964,597
NET ASSETS $ 420,614,489
Net Assets consist of:
Paid in capital $ 439,900,857
Accumulated undistributed net (14,279,114)
realized gain (loss) on
investments
Net unrealized appreciation (5,007,254)
(depreciation) on investments
NET ASSETS $ 420,614,489
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $11.69
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($10,721,810 (divided by)
917,460 shares)
Maximum offering price per $12.27
share (100/95.25 of $11.69)
CLASS T: NET ASSET VALUE and $11.70
redemption price per share
($329,926,390 (divided by)
28,197,578 shares)
Maximum offering price per $12.12
share (100/96.50 of $11.70)
CLASS B: NET ASSET VALUE and $11.67
offering price per share
($63,464,208 (divided by)
5,438,241 shares) A
CLASS C: NET ASSET VALUE and $11.70
offering price per share
($13,071,301 (divided by)
1,117,056 shares) A
INSTITUTIONAL CLASS: NET $11.65
ASSET VALUE, offering price
and redemption price per
share ($3,430,780 (divided
by) 294,537 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INTEREST INCOME $ 23,713,018
EXPENSES
Management fee $ 1,695,763
Transfer agent fees 460,510
Distribution fees 1,577,955
Accounting fees and expenses 141,615
Non-interested trustees' 1,358
compensation
Custodian fees and expenses 21,716
Registration fees 117,150
Audit 37,659
Legal 12,407
Total expenses before 4,066,133
reductions
Expense reductions (3,319) 4,062,814
NET INTEREST INCOME 19,650,204
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,459,744
Futures contracts 21,684 2,481,428
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (33,606,253)
Futures contracts (83,889) (33,690,142)
NET GAIN (LOSS) (31,208,714)
NET INCREASE (DECREASE) IN $ (11,558,510)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 19,650,204 $ 20,054,896
Net realized gain (loss) 2,481,428 842,117
Change in net unrealized (33,690,142) 13,362,203
appreciation (depreciation)
NET INCREASE (DECREASE) IN (11,558,510) 34,259,216
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (19,650,204) (20,054,896)
from net interest income
Share transactions - net (1,025,834) 279,500
increase (decrease)
TOTAL INCREASE (DECREASE) (32,234,548) 14,483,820
IN NET ASSETS
NET ASSETS
Beginning of period 452,849,037 438,365,217
End of period $ 420,614,489 $ 452,849,037
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .567 .571 .583 D .105 D, E
Net realized and unrealized (.850) .390 .445 .109
gain (loss)
Total from investment (.283) .961 1.028 .214
operations
Less Distributions
From net interest income (.567) (.571) (.616) E (.104)
In excess of net interest - - (.002) -
income
Total distributions (.567) (.571) (.618) (.104)
Net asset value, end of period $ 11.690 $ 12.540 $ 12.150 $ 11.740
TOTAL RETURN B, C (2.36)% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,722 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .72% .90% G .90% G .90% A, G
net assets
Ratio of net interest income 4.62% 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 23% 36% 36% 49%
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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.560 $ 12.150 $ 11.760 $ 11.880 $ 11.220
of period
Income from Investment
Operations
Net interest income .555 .571 .597 B .677 B, C .700
Net realized and unrealized (.860) .410 .407 (.136) .660
gain (loss)
Total from investment (.305) .981 1.004 .541 1.360
operations
Less Distributions
From net interest income (.555) (.571) (.612) C (.661) (.700)
In excess of net interest - - (.002) - -
income
Total distributions (.555) (.571) (.614) (.661) (.700)
Net asset value, end of period $ 11.700 $ 12.560 $ 12.150 $ 11.760 $ 11.880
TOTAL RETURN A (2.53)% 8.15% 8.89% 4.68% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 329,926 $ 380,325 $ 392,075 $ 480,432 $ 565,131
(000 omitted)
Ratio of expenses to average .81% .87% .89% .89% .91%
net assets
Ratio of net interest income 4.51% 4.62% 5.04% 5.74% 6.06%
to average net assets
Portfolio turnover rate 23% 36% 36% 49% 37%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.530 $ 12.130 $ 11.740 $ 11.860 $ 11.210
of period
Income from Investment
Operations
Net interest income .476 .491 .515 C .596 C, D .612
Net realized and unrealized (.860) .400 .416 (.136) .650
gain (loss)
Total from investment (.384) .891 .931 .460 1.262
operations
Less Distributions
From net interest income (.476) (.491) (.539) D (.580) (.612)
In excess of net interest - - (.002) - -
income
Total distributions (.476) (.491) (.541) (.580) (.612)
Net asset value, end of period $ 11.670 $ 12.530 $ 12.130 $ 11.740 $ 11.860
TOTAL RETURN A, B (3.16)% 7.47% 8.15% 3.98% 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 63,464 $ 55,032 $ 41,024 $ 39,389 $ 32,395
(000 omitted)
Ratio of expenses to average 1.46% 1.53% 1.56% 1.57% 1.86% E
net assets
Ratio of net interest income 3.88% 3.96% 4.35% 5.06% 5.18%
to average net assets
Portfolio turnover rate 23% 36% 36% 49% 37%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED 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.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .465 .455
Net realized and unrealized (.860) .430
gain (loss)
Total from investment (.395) .885
operations
Less Distributions
From net interest income (.465) (.455)
Net asset value, end of period $ 11.700 $ 12.560
TOTAL RETURN B, C (3.24)% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,071 $ 7,031
(000 omitted)
Ratio of expenses to average 1.56% 1.75% A, E
net assets
Ratio of net interest income 3.79% 3.60% A
to average net assets
Portfolio turnover rate 23% 36%
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
YEARS ENDED OCTOBER 31, 1999 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 .584 .592 .609 D .707 D, E .232
Net realized and unrealized (.860) .390 .464 (.197) .180
gain (loss)
Total from investment (.276) .982 1.073 .510 .412
operations
Less Distributions
From net interest income (.584) (.592) (.671) E (.670) (.232)
In excess of net interest - - (.002) - -
income
Total distributions (.584) (.592) (.673) (.670) (.232)
Net asset value, end of period $ 11.650 $ 12.510 $ 12.120 $ 11.720 $ 11.880
TOTAL RETURN B, C (2.31)% 8.28% 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,431 $ 3,741 $ 1,511 $ 927 $ 154
(000 omitted)
Ratio of expenses to average .60% .75% G .75% G .75% G .75% A, G
net assets
Ratio of net interest income 4.75% 4.75% 5.11% 5.88% 5.89% A
to average net assets
Portfolio turnover rate 23% 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 October 31, 1999
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. 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 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 transactions. 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 after the
customary settlement period for that security. 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 $100,137,443 and $107,267,340, 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 .0920% 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 annual rate of .38% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 WITH AFFILIATES - 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 $ 14,240 $ 71
CLASS T 900,188 11,550
CLASS B 552,424 399,100
CLASS C 111,103 87,365
$ 1,577,955 $ 498,086
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 is 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 $ 50,968 $ 28,875
CLASS T 204,851 72,163
CLASS B 209,085 209,085*
CLASS C 16,279 16,279*
$ 481,183 $ 326,402
* 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. Effective June 14, 1999, Citibank,
N.A. (Citibank) replaced UMB Bank, n.a. as the custodian, transfer
agent, and shareholder servicing agent for the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares. Citibank 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 Citibank, 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 $ 11,061 .12
CLASS T 368,638 .10
CLASS B 63,218 .10
CLASS C 12,116 .11
INSTITUTIONAL CLASS 5,477 .15
$ 460,510
Citibank 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.
Through arrangements with the fund's custodian and each class'
transfer agent, 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 $694 under the custodian
arrangement, and Class T's transfer agent fees were reduced by $2,625
under the transfer agent arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1999 1998 A
FROM NET INTEREST INCOME
Class A $ 439,029 $ 231,309
Class T 16,229,661 17,722,552
Class B 2,381,487 1,865,869
Class C 421,752 106,528
Institutional Class 178,275 128,638
Total $ 19,650,204 $ 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> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 565,131 362,699 $ 6,989,179 $ 4,479,496
Reinvestment of
distributions 25,296 11,508 307,568 142,669
Shares redeemed (208,996) (147,406) (2,558,328) (1,811,982)
Net increase (decrease) 381,631 226,801 $ 4,738,419 $ 2,810,183
CLASS T Shares sold 3,793,311 4,799,958 $ 46,774,471 $ 59,544,980
Reinvestment of
distributions 835,205 873,770 10,221,698 10,820,895
Shares redeemed (6,722,556) (7,639,811) (82,551,608) (94,496,816)
Net increase (decrease) (2,094,040) (1,966,083) $ (25,555,439) $ (24,130,941)
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 A 1999 1998 A
CLASS B Shares sold 2,125,759 1,497,112 $ 26,076,418 $ 18,512,808
Reinvestment of
distributions 115,598 86,162 1,407,504 1,065,255
Shares redeemed (1,196,611) (572,594) (14,568,680) (7,073,528)
Net increase (decrease) 1,044,746 1,010,680 $ 12,915,242 $ 12,504,535
CLASS C Shares sold 871,985 650,179 $ 10,752,375 $ 8,065,902
Reinvestment of
distributions 22,987 4,455 280,065 55,539
Shares redeemed (337,753) (94,797) (4,112,814) (1,177,225)
Net increase (decrease) 557,219 559,837 $ 6,919,626 $ 6,944,216
INSTITUTIONAL CLASS Shares 103,836 238,568 $ 1,286,178 $ 2,943,409
sold
Reinvestment of
distributions 7,731 6,313 93,765 77,958
Shares redeemed (116,192) (70,388) (1,423,625) (869,860)
Net increase (decrease) (4,625) 174,493 $ (43,682) $ 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.
8. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Advisor Municipal Income Fund (the
fund) has approved an Agreement and Plan of Reorganization
("Agreement") between the fund and Fidelity Advisor Intermediate
Municipal Income Fund ("Reorganization"). The Agreement provides for
the transfer of all of the assets and the assumption of all of the
liabilities of Fidelity Advisor Intermediate Municipal Income Fund in
exchange solely for the number of shares of Class A, Class T, Class B,
Class C and Institutional Class of the fund having the same relative
net asset value as the outstanding shares of Class A, Class T, Class
B, Class C and Institutional Class of Fidelity Advisor Intermediate
Municipal Income Fund as of the close of business of the New York
Stock Exchange on the day that the Reorganization is effective. The
Reorganization can be consummated only if, among other things, it is
approved by the vote of a majority (as defined by the 1940 Act) of
outstanding voting securities of Fidelity Advisor Intermediate
Municipal Income Fund. A Special Meeting of Shareholders ("Meeting")
of Fidelity Advisor Intermediate Municipal Income Fund will be held on
April 19, 2000 to vote on the Agreement. A detailed description of the
proposed transactions and voting information will be sent to
shareholders of Fidelity Advisor Intermediate Municipal Income Fund in
February, 2000. If the Agreement is approved at the Meeting, the
Reorganization is expected to become effective on or about May 25,
2000.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Municipal Income Fund (formerly a fund of Fidelity
Advisor Series V):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Municipal Income Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Advisor Series V) at October
31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Municipal Income Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
DISTRIBUTIONS
During fiscal year ended 1999, 100% of the fund's income dividends was
free from federal income tax, and 18.03% of the fund's income
dividends was subject to the federal alternative minimum tax.
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
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
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Citibank, N.A.
New York, NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Citibank, N.A.
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88209
1.538417.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
MUNICIPAL INCOME FUND -
INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 41 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 42
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 five years and
past 10 years total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.31% 36.09% 101.78%
- - INST CL
LB Municipal Bond -1.77% 39.75% 99.11%
General Municipal Debt Funds -4.18% 33.04% 86.71%
Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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 one year average
represents a peer group of 263 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -2.31% 6.36% 7.27%
- - INST CL
LB Municipal Bond -1.77% 6.92% 7.13%
General Municipal Debt Funds -4.18% 5.87% 6.43%
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
1989/10/31 10000.00 10000.00
1989/11/30 10123.11 10175.00
1989/12/31 10219.35 10258.23
1990/01/31 10235.47 10209.71
1990/02/28 10308.83 10300.58
1990/03/31 10373.50 10303.67
1990/04/30 10278.62 10229.07
1990/05/31 10489.26 10452.37
1990/06/30 10612.85 10544.24
1990/07/31 10776.54 10699.25
1990/08/31 10703.82 10543.89
1990/09/30 10779.93 10549.90
1990/10/31 10927.93 10741.28
1990/11/30 11199.08 10957.28
1990/12/31 11270.53 11004.95
1991/01/31 11401.70 11152.64
1991/02/28 11489.36 11249.66
1991/03/31 11556.91 11253.71
1991/04/30 11745.09 11403.39
1991/05/31 11890.27 11504.76
1991/06/30 11917.94 11493.37
1991/07/31 12072.05 11633.36
1991/08/31 12181.07 11786.57
1991/09/30 12323.95 11940.04
1991/10/31 12460.51 12047.50
1991/11/30 12507.38 12081.11
1991/12/31 12643.41 12340.37
1992/01/31 12783.56 12368.51
1992/02/29 12853.01 12372.46
1992/03/31 12917.49 12377.04
1992/04/30 13034.08 12487.20
1992/05/31 13151.00 12634.17
1992/06/30 13331.33 12846.17
1992/07/31 13795.53 13231.30
1992/08/31 13688.71 13102.30
1992/09/30 13774.13 13187.98
1992/10/31 13607.90 13058.35
1992/11/30 13880.63 13292.22
1992/12/31 14047.99 13427.94
1993/01/31 14285.60 13584.10
1993/02/28 14790.04 14075.44
1993/03/31 14635.78 13926.66
1993/04/30 14790.98 14067.18
1993/05/31 14913.47 14146.24
1993/06/30 15152.58 14382.34
1993/07/31 15163.83 14401.18
1993/08/31 15554.38 14701.01
1993/09/30 15769.78 14868.46
1993/10/31 15778.24 14897.15
1993/11/30 15624.03 14765.91
1993/12/31 15984.82 15077.62
1994/01/31 16170.95 15249.80
1994/02/28 15743.55 14854.83
1994/03/31 14904.37 14249.95
1994/04/30 15003.27 14370.79
1994/05/31 15091.99 14495.38
1994/06/30 15036.43 14406.81
1994/07/31 15307.66 14670.89
1994/08/31 15331.71 14721.65
1994/09/30 15091.53 14505.54
1994/10/31 14826.98 14247.92
1994/11/30 14350.30 13990.32
1994/12/31 14698.10 14298.24
1995/01/31 15194.64 14706.89
1995/02/28 15604.04 15134.56
1995/03/31 15686.08 15308.46
1995/04/30 15737.64 15326.52
1995/05/31 16241.26 15815.59
1995/06/30 16113.86 15678.00
1995/07/31 16169.29 15826.63
1995/08/31 16336.27 16027.31
1995/09/30 16499.20 16128.76
1995/10/31 16693.85 16363.27
1995/11/30 17024.88 16634.74
1995/12/31 17175.96 16794.60
1996/01/31 17270.83 16921.40
1996/02/29 17231.94 16807.18
1996/03/31 16882.51 16592.38
1996/04/30 16814.21 16545.43
1996/05/31 16753.01 16538.81
1996/06/30 16950.12 16718.92
1996/07/31 17062.62 16871.06
1996/08/31 17101.51 16867.01
1996/09/30 17256.28 17103.15
1996/10/31 17429.81 17296.58
1996/11/30 17768.23 17613.11
1996/12/31 17707.29 17539.14
1997/01/31 17764.39 17572.28
1997/02/28 17946.91 17733.60
1997/03/31 17758.06 17497.21
1997/04/30 17901.01 17643.66
1997/05/31 18123.66 17909.02
1997/06/30 18359.30 18099.75
1997/07/31 18890.63 18601.12
1997/08/31 18724.08 18426.82
1997/09/30 18961.09 18645.55
1997/10/31 19075.95 18765.44
1997/11/30 19202.93 18875.78
1997/12/31 19517.78 19151.18
1998/01/31 19710.75 19348.82
1998/02/28 19735.47 19354.62
1998/03/31 19769.01 19371.66
1998/04/30 19669.58 19284.29
1998/05/31 19973.88 19589.56
1998/06/30 20049.58 19666.74
1998/07/31 20095.74 19716.11
1998/08/31 20402.45 20020.72
1998/09/30 20659.14 20270.18
1998/10/31 20656.16 20269.77
1998/11/30 20718.50 20340.92
1998/12/31 20749.72 20392.18
1999/01/31 20981.34 20634.64
1999/02/28 20855.35 20544.47
1999/03/31 20856.37 20573.03
1999/04/30 20904.11 20624.25
1999/05/31 20769.09 20504.84
1999/06/30 20443.43 20209.57
1999/07/31 20510.64 20283.13
1999/08/31 20355.29 20120.87
1999/09/30 20385.45 20129.12
1999/10/29 20178.22 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 094814 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Institutional
Class on October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have grown to $20,178 - a 101.78%
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 $19,911 - a
99.11% 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
YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.56% 5.06% 6.01% 5.76% 2.01%
Capital returns -6.87% 3.22% 3.43% -1.35% 1.54%
Total returns -2.31% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.98(cents) 29.42(cents) 58.36(cents)
Annualized dividend rate 5.02% 4.88% 4.78%
30-day annualized yield 4.92% - -
30-day annualized 7.69% - -
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 $11.69 over the past
one month, $11.96 over the past six months, and $12.21 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
Despite a municipal bond market
rally late in the period spurred by
attractively priced issues and yields
higher than they've been since
1997, munis produced lackluster
results during the 12-month period
ending October 31, 1999.
Following the global financial crisis
in the fall of 1998 and interest rate
jitters through most of 1999, the
Lehman Brothers Municipal Bond
Index - an index of approximately
50,000 investment-grade, fixed-rate,
tax-
exempt bonds - declined 1.77%
during the period. In comparison,
the Lehman Brothers Aggregate
Bond Index - a broad measure of
the taxable bond market - posted a
marginally positive return of
0.53%. In general, the negative
environment of increasing interest
rates and investors' persistent
concerns about inflation hit the
Lehman Brothers Long-Term
Government Bond Index the hardest,
as it fell 6.10% during the period.
While the supply of municipals was
relatively light during the period -
particularly compared to 1998's
near-record levels of issuance -
demand was similarly muted,
especially among institutional
investors. Muni bonds came under
further downward pressure in the
second half of the period following
two interest-rate hikes by the
Federal Reserve Board and
widespread belief among investors
that there would be a third hike in
November.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares had a total return of -2.31%. To get a
sense of how the fund did relative to its competitors, the general
municipal debt funds average returned -4.18% for the same 12-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 -1.77% for the same 12-month period.
Q. RISING INTEREST RATES MADE IT A FAIRLY DIFFICULT AND VOLATILE YEAR
FOR MUNICIPAL BONDS. WHY DID THE FUND OUTPERFORM ITS PEERS?
A. The fund's outperformance of its peers was in part due to duration
management. In keeping with Fidelity's investment approach, I managed
the fund's duration - a measure of its interest-rate sensitivity - to
be in line with the municipal market as a whole, as reflected by the
Lehman Brothers Municipal Bond Index. As a result, I don't lengthen or
shorten duration based on where I think interest rates will be at some
point down the road, because I don't believe that anyone can do so
with any accuracy over time. But other funds in the peer group do
actively manage duration and some increased their interest-rate
sensitivity, which likely caused their returns to suffer when interest
rates rose.
Q. WHICH BOND MATURITIES DID YOU FAVOR?
A. I emphasized intermediate-maturity bonds - those set to mature
within five to 15 years - which also was a plus for the fund's
performance. Although they were a disappointment early on, they
bounced back more recently. Initially, intermediates suffered
primarily from reduced demand and increased supply at the hands of
relatively heavy selling from some specific types of institutional
investors. In contrast, relatively strong demand from individual
investors helped to support the performance of shorter- and
longer-term bonds. Based on Fidelity's quantitative models,
intermediates offered the most attractive value for their given
interest-rate sensitivity and their total return potential. The fund's
focus on this maturity range worked in its favor during the past
several months because institutional investors came back into the
market with purchases of intermediate securities.
Q. THE FUND ALSO HAD A RELATIVELY LARGE EXPOSURE TO "PREMIUM" BONDS.
WHAT ARE PREMIUMS AND WHY WERE THEY ATTRACTIVE?
A. Premium coupon bonds pay interest rates above prevailing market
rates and trade at prices above face - or par - value. One appealing
aspect of premiums was that they were insulated from unfavorable tax
treatment that negatively affected the prices of lower coupon bonds as
interest rates rose.
Q. WHERE DID YOU FIND ATTRACTIVE OPPORTUNITIES?
A. I found some attractive opportunities in the education sector and
bought bonds backed by colleges and universities. Education bonds
offer diversification from the economically sensitive areas of the
market - such as general obligation bonds. In addition, demographic
trends support a growing number of students seeking to obtain advanced
degrees over the next several years. I also found opportunities in the
health care and utilities sectors, both of which are undergoing a wave
of consolidation. I looked for bonds I felt could benefit from
consolidation, either by being acquired or affiliating with a stronger
entity, through the restructuring of debt.
Q. WHAT'S YOUR OUTLOOK FOR THE MUNICIPAL MARKET AND THE FUND?
A. At the end of the period, municipals were priced attractively
compared to their Treasury counterparts. To the extent that investors
realize and act on that relative cheapness, municipals could gain
ground on Treasuries. Of course, the major determinant of the bond
market's performance will be the direction of interest rates, which I
don't spend time trying to forecast. Rather, I look for attractively
priced bonds that I believe will outperform, no matter where interest
rates end up.
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 October 31,
1999, more than $420
million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON
MUNICIPAL BOND DEMAND:
"The demand for municipals can vary
a great deal in response to the
behavior of various market
participants. Corporations, individual
investors and trust accounts tend to
favor short-term securities, which are
less interest-rate sensitive and,
therefore, less volatile. Individual
investors, along with mutual funds
and insurance companies - which
invest the insurance premiums they
collect in bonds - are the primary
purchasers of intermediate-maturity
bonds. Longer-term securities, which
are the most volatile, generally are
the domain of long-term mutual funds,
hedge funds and other investors
known as `arbitrageurs,' who seek to
exploit small differences between
various fixed-income investments. At
various points in time, a given
municipal bond maturity may look
cheap or expensive as different
categories of investors embrace them
or step away from them. With the help
of Fidelity's research team, I try to
take advantage of the anomalies that
can occur by investing in the bond
maturities that look cheap and selling
those that have performed well in
response to strong demand."
NOTE TO SHAREHOLDERS: The fund is
managed to have similar overall
interest-rate risk to a benchmark
index that serves as a proxy for the
market in which the fund invests.
Through the current fiscal year, the
fund used the Lehman Brothers
Municipal Bond Index for this purpose.
Going forward the fund will use a new
benchmark, the Lehman Brothers
3+ Year Municipal Bond Index. The
new benchmark excludes securities
with maturities of less than three
years, and is more representative of
the fund's investment universe.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF OCTOBER
31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
New York 18.0 19.0
Texas 8.4 3.6
Massachusetts 6.5 6.8
Colorado 5.3 5.2
Washington 5.1 4.9
TOP FIVE SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Obligations 19.3 20.7
Electric Utilities 15.9 17.6
Transportation 14.4 12.6
Health Care 13.4 14.0
Education 8.0 5.5
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 12.9 12.9
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 6.7 6.4
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.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF OCTOBER 31, 1999
Aaa 46.7%
Aa, A 24.3%
Baa 22.4%
Not Rated 4.7%
Short-term
Investments 1.9%
Row: 1, Col: 1, Value: 46.7
Row: 1, Col: 2, Value: 24.3
Row: 1, Col: 3, Value: 22.4
Row: 1, Col: 4, Value: 4.7
Row: 1, Col: 5, Value: 1.9
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
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.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
ALABAMA - 1.0%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,266,000
Series A, 7.7% 8/1/17
ALASKA - 2.0%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,307,732
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 1,505,520
(e)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,505,460
(e)
8,318,712
ARIZONA - 1.3%
Arizona Student Ln. Aquistion Aaa 1,300,000 1,274,676
Auth. Rev. Series A1, 5.875%
5/1/18 (e)
Maricopa County Ind. Dev. Baa1 4,495,000 4,262,923
Auth. Health Facilities Rev.
Rfdg. (Catholic Healthcare
West Proj.) Series A, 4.1%
7/1/03
5,537,599
ARKANSAS - 0.2%
Little Rock Arpt. Passenger Aaa 680,000 674,825
Facilities Charge Rev. 5.65%
5/1/16 (AMBAC Insured) (e)
CALIFORNIA - 3.8%
California Dept. of Wtr. Aa2 2,190,000 2,244,005
Resources Wtr. Sys. Rev.
(Central Valley Proj.)
Series J 2, 6.125% 12/1/13
California Hsg. Fin. Agcy.
Rev. (Home Mtg.):
Series B, 5.2% 8/1/26 (MBIA Aaa 850,000 852,491
Insured) (e)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,497,165
Insured) (e)
California Pub. Works Board A1 2,000,000 1,989,700
Lease Rev. Rfdg. (California
Univ. Proj.) Series A, 5.5%
10/1/13
Central Valley Fing. Auth. BBB- 4,500,000 4,589,010
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Foothill/Eastern Trans. Aaa 2,000,000 891,200
Corridor Agcy. Toll Road
Rev. (Cap. Appreciation) Sr.
Lien Series A, 0% 1/1/14
Northern California Pwr. Aaa 750,000 804,053
Agcy. Pub. Pwr. Rev. (Proj.
No. 3) 5.85% 7/1/10 (AMBAC
Insured) (Escrowed to
Maturity) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
CALIFORNIA - CONTINUED
Sacramento City Fing. Auth. Aaa $ 1,225,000 $ 642,721
Rev. (Cap. Appreciation)
Series B, 0% 11/1/11 (MBIA
Insured)
Sacramento City Fing. Auth. Aaa 2,000,000 1,908,100
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento Cogeneration Auth. BBB- 500,000 522,885
Cogeneration Proj. Rev.
(Procter & Gamble Proj.)
6.375% 7/1/10
15,941,330
COLORADO - 5.3%
Arapaho County Cap. Impt. Aaa 14,000,000 2,175,460
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa2 1,360,000 1,341,518
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist):
6.625% 2/1/13 Baa2 6,900,000 6,476,616
6.625% 2/1/22 Baa2 4,000,000 3,648,840
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,034,656
0% 1/1/08 (MBIA Insured) Aaa 870,000 568,867
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,841,911
Insured) (e)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,328,941
Insured) (e)
Series A:
7.5% 11/15/23 (e) Baa1 2,070,000 2,240,672
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 487,719
to 11/15/04 @ 102) (e)(f)
Series C, 6.55% 11/15/02 (e) Baa1 1,000,000 1,036,560
22,181,760
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
CONNECTICUT - 1.2%
Connecticut Health & Edl. AAA $ 2,170,000 $ 2,321,683
Facilities Auth. Rev. (New
Britain Memorial Hosp.)
Series A, 7.5% 7/1/06
(Pre-Refunded to 7/1/02 @
102) (f)
Eastern Connecticut Resources BBB 3,350,000 2,923,612
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(e)
5,245,295
DISTRICT OF COLUMBIA - 3.1%
District of Columbia Gen.
Oblig. Rfdg.:
Series A:
6% 6/1/07 (MBIA Insured) Aaa 1,850,000 1,944,054
6% 6/1/07 (MBIA Insured) Aaa 150,000 159,164
(Escrowed to Maturity) (f)
Series B, 5% 6/1/05 (MBIA Aaa 3,635,000 3,644,342
Insured)
District of Columbia Hosp. - 940,000 980,495
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 1,700,000
5.625% 11/1/10 Baa 485,000 490,616
District of Columbia Rev.:
(Nat'l. Academy of Science Aaa 2,500,000 2,170,575
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ.) Aaa 2,000,000 2,026,820
Series A, 5.95% 4/1/14 (MBIA
Insured)
13,116,066
FLORIDA - 2.5%
Broward County Resource A3 545,000 562,533
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,137,350
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (e)
Florida Board of Ed. Cap. Aa2 2,100,000 2,007,789
Outlay Rfdg. (Pub. Ed.
Proj.) Series D, 5.75%
6/1/22 (b)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,690,200
Rev. Series A, 7.5% 10/1/17
10,397,872
GEORGIA - 0.2%
Atlanta Wtr. & Wastewtr. Rev. Aaa 700,000 707,182
Rfdg. Series A, 5.5% 11/1/10
(FGIC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
HAWAII - 1.7%
Honolulu City & County Gen.
Oblig. Rfdg. Series C:
5% 7/1/07 (FGIC Insured) Aaa $ 3,500,000 $ 3,490,970
5.125% 7/1/12 (FGIC Insured) Aaa 4,000,000 3,841,560
7,332,530
ILLINOIS - 4.8%
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,377,930
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev.:
(Passenger Facility Charge) Aaa 2,500,000 2,526,025
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 3,917,227
(e)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,453,046
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,121,660
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Chicago School Reform Board Aaa 5,000,000 4,721,250
of Ed. (Chicago School
Reform) 5.75% 12/1/27 (AMBAC
Insured)
Du Page County Cmnty. High Aaa 1,640,000 1,726,641
School District #99 (Downers
Grove) Series A, 6% 2/1/06
(AMBAC Insured)
Illinois Edl. Facilities Aaa 1,200,000 1,271,784
Auth. Rev. Rfdg. (DePaul
Univ.) 6% 10/1/05 (AMBAC
Insured)
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.
Proj.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,079,920
to 5/1/02 @ 102) (f)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,082,840
5/1/02 @ 102) (f)
20,278,323
INDIANA - 0.2%
Indianapolis Econ. Dev. Rev. Baa2 1,000,000 1,056,830
Rfdg. (Nat'l. Benevolent
Assoc.) 7.625% 10/1/22
IOWA - 0.8%
Iowa Student Ln. Liquidity Aaa 3,500,000 3,567,900
Corp. Student Ln. Rev. Rfdg.
Series B, 5.75% 12/1/07 (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
KANSAS - 0.6%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth):
5% 12/1/13 (MBIA Insured) Aaa $ 2,390,000 $ 2,215,506
5% 12/1/14 (MBIA Insured) Aaa 500,000 455,285
2,670,791
KENTUCKY - 1.9%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 5,836,190
Int'l.) Series A, 6% 3/1/05
(MBIA Insured) (e)
(Spl. Facilities Delta Baa3 2,000,000 2,105,940
Airlines, Inc. Proj.)
Series A, 7.5% 2/1/20 (e)
7,942,130
MARYLAND - 1.2%
Maryland Health & Higher Edl.
Facilities Auth. Rev.:
(Good Samaritan Hosp.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,023,983
(Escrowed to Maturity) (f)
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,694,371
Maturity) (f)
Rfdg. (John Hopkins Univ.) 6% Aa2 2,000,000 2,143,960
7/1/10
4,862,314
MASSACHUSETTS - 6.5%
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College) Series J, Aaa 1,265,000 1,120,398
5% 7/1/17 (MBIA Insured)
(Fairview Extended Care) Aaa 5,000,000 5,483,500
Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @
103) (f)
(Hebrew Rehab. Ctr. for Aged) A 2,000,000 1,807,060
Series C, 5.25% 7/1/17
(New England Med. Ctr. Hosp.) Aaa 500,000 453,405
Series G, 5.375% 7/1/24
(MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 968,590
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
Massachusetts Ind. Fin. Agcy.
Rev.:
(Atlanticare Med. Ctr.) - 600,000 612,000
Series B, 10.125% 11/1/14
(Pre-Refunded to 11/1/99 @
102) (f)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
MASSACHUSETTS - CONTINUED
Massachusetts Ind. Fin. Agcy.
Rev.: - continued
(Cap. Appreciation)
(Massachusetts Biomedical)
Series A 2:
0% 8/1/08 A+ $ 800,000 $ 503,608
0% 8/1/10 - 4,500,000 2,464,785
Massachusetts Muni. Wholesale Baa2 1,000,000 1,052,260
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Tpk. Auth. Aaa 5,000,000 4,370,450
Metro. Hwy. Sys. Rev. Series
A, 5.125% 1/1/23 (MBIA
Insured)
Massachusetts Wtr. Poll.
Abatement Trust Rev. (MWRA
Ln. Prog.) Series A:
5.25% 8/1/13 Aa1 100,000 96,728
5.25% 8/1/14 Aa1 300,000 285,105
New England Ed. Ln. Marketing A3 3,880,000 3,971,335
Corp. Massachusetts Rfdg.
(Student Ln. Proj.) Series
F, 5.625% 7/1/04 (e)
New England Ed. Ln. Marketing Aaa 4,005,000 4,103,443
Corp. Massachusetts Student
Ln. Rev. Issue A, 5.8% 3/1/02
27,292,667
MICHIGAN - 2.3%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Hosp.) Series Baa2 4,250,000 4,056,923
A, 5.5% 10/1/18 (Escrowed to
Maturity) (f)
(Pontiac Osteopathic Hosp.) Baa2 2,000,000 1,756,600
Series A, 6% 2/1/24
Michigan Strategic Fund Rev. Aaa 1,500,000 1,366,170
Rfdg. (Detroit Edison Co.
Proj.) Series A, 5.55%
9/1/29 (MBIA Insured) (e)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,435,387
Rev. Rfdg. (William
Beaumont Hosp.) 6.25% 1/1/09
9,615,080
MINNESOTA - 1.3%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,519,110
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp.) Series A, 4.75%
11/15/18 (AMBAC Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
MINNESOTA - CONTINUED
Minnesota Hsg. Fin. Agcy. Aa2 $ 2,000,000 $ 2,039,640
Single Family Mtg. (Single
Family Mtg.) Series D, 6.4%
7/1/15 (e)
Rochester Health Care AA+ 2,000,000 1,860,000
Facilities Rev. (Mayo
Foundation) Series A, 5.5%
11/15/27
5,418,750
MISSISSIPPI - 1.0%
Mississippi Gen. Oblig. 6.2% Aaa 3,720,000 3,987,617
2/1/08 (Escrowed to
Maturity) (f)
Mississippi Home Corp. Single Aaa 164,000 170,780
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
4,158,397
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,478,355
6.1% 6/15/14 BBB+ 1,000,000 999,740
2,478,095
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 480,000 502,354
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc.) Series A, 9.5% 5/1/20
(Pre-Refunded to 5/1/00 @
102) (f)
NEW JERSEY - 2.1%
New Jersey Edl. Facilities
Auth. Rev. Rfdg. (Seton
Hall Univ. Proj.):
5% 7/1/18 (AMBAC Insured) Aaa 1,000,000 886,280
5.25% 7/1/07 (AMBAC Insured) Aaa 1,610,000 1,634,263
New Jersey Trans. Trust Fund Aaa 4,000,000 4,066,920
Auth. Rfdg. (Trans. Sys.)
Series A, 5.5% 6/15/11 (MBIA
Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,253,475
Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
8,840,938
NEW MEXICO - 1.8%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,213,996
(e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NEW MEXICO - CONTINUED
Albuquerque Arpt. Rev. Rfdg.:
- - continued
6.75% 7/1/11 (AMBAC Insured) Aaa $ 1,805,000 $ 2,006,420
(e)
New Mexico Edl. Assistance Aaa 1,350,000 1,353,267
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (e)
7,573,683
NEW YORK - 18.0%
Long Island Pwr. Auth. New Aaa 9,390,000 8,209,959
York Elec. Sys. Rev. Series
A, 5.125% 12/1/22 (FSA
Insured)
Metro. Trans. Auth. Dedicated Aaa 1,000,000 889,050
Tax Fund Series A, 5.25%
4/1/26 (MBIA Insured)
Metro. Trans. Auth. New York
Commuter Facilities Rev.:
Rfdg. (Svc. Contract) Series R:
5% 7/1/02 Baa1 2,370,000 2,394,530
5% 7/1/03 Baa1 2,490,000 2,512,211
Series A:
5.625% 7/1/27 (MBIA Insured) Aaa 200,000 188,896
6.125% 7/1/29 Baa1 6,750,000 6,672,578
Metro. Trans. Auth. New York Baa1 1,010,000 988,245
Svc. Contract Rev. Series P,
5.75% 7/1/15
Metro. Trans. Auth. New York
Trans. Facilities Rev. Rfdg.
(Svc. Contract Proj.) Series
8:
5.25% 7/1/17 Baa1 500,000 448,780
5.375% 7/1/21 (FSA Insured) Aaa 700,000 640,073
New York City:
Rfdg.:
Series A, 7% 8/1/03 A3 2,000,000 2,148,960
Series B:
5.7% 8/15/02 A3 1,130,000 1,163,233
5.7% 8/15/02 (Escrowed to A3 35,000 36,159
Maturity) (f)
6.75% 8/15/03 A3 2,000,000 2,134,700
Series E, 6.5% 2/15/04 (FGIC Aaa 1,000,000 1,064,970
Insured)
Series D, 5.5% 2/15/04 A3 2,000,000 2,050,180
Series H:
6.875% 2/1/02 A3 160,000 167,629
6.875% 2/1/02 (Escrowed to Aaa 80,000 84,233
Maturity) (f)
New York City Ind. Dev. Agcy. Aaa 1,000,000 1,045,910
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15
(FSA Insured) (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NEW YORK - CONTINUED
New York City Ind. Dev. Agcy. A3 $ 8,680,000 $ 8,957,586
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (e)
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa 3,500,000 3,247,370
5.75% 6/15/26 A1 5,000,000 4,745,550
5.75% 6/15/29 A1 4,000,000 3,777,800
New York State Dorm. Auth.
Rev.:
(City Univ. Sys. Baa1 3,000,000 3,108,930
Consolidated) Series A, 5.7%
7/1/05
Rfdg. (Jamaica Hosp.) Series Aaa 6,150,000 5,763,965
F, 5.2% 2/15/14 (MBIA
Insured)
New York State Envir.
Facilities Corp.:
Clean Wtr. & Drinking Rev.
(Revolving Funds) Series F:
4.875% 6/15/18 Aa1 1,000,000 860,480
4.875% 6/15/20 Aa1 1,300,000 1,102,049
5% 6/15/15 Aa1 700,000 627,445
New York State Envir. Aa1 1,000,000 883,850
Facilities Corp. Poll. Cont.
Rev. 5.125% 6/15/19
New York State Local Govt. A3 7,500,000 7,200,000
Assistance Corp. Rfdg.
Series C, 5.5% 4/1/17
New York State Thruway Auth. Baa1 2,000,000 2,090,100
Svc. Contract Rev. (Local
Hwy. & Bridges) 5.9% 4/1/07
Triborough Bridge & Tunnel Aaa 500,000 492,700
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11 (FGIC
Insured)
75,698,121
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 4,112,160
Insured)
Series B:
6% 1/1/06 Baa3 4,175,000 4,218,587
7.25% 1/1/07 Baa3 1,000,000 1,078,380
Series C:
5.125% 1/1/03 Baa1 2,700,000 2,667,708
5.25% 1/1/04 Baa1 1,365,000 1,347,159
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,044,840
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
NORTH CAROLINA - CONTINUED
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 Baa1 $ 1,750,000 $ 1,763,615
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,187,801
18,420,250
OHIO - 4.5%
Cincinnati Student Ln. Fdg. - 1,215,000 1,241,208
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (e)
Franklin County Hosp. Rev. Baa3 5,000,000 4,791,300
(Doctor's Ohio Health Corp.)
Series A 4.75% 12/1/03
Gateway Economic Dev. Corp. - 3,000,000 3,003,780
Greater Cleveland Stadium
Rev. 6.5% 9/15/14 (e)
Marion County Hosp. Impt. BBB+ 1,000,000 1,001,720
Rev. Rfdg. (Comnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Tpk. Commission Rfdg. Aaa 5,000,000 4,749,250
Series A, 5.5% 2/15/24 (FGIC
Insured)
Ohio Wtr. Dev. Auth. Poll.
Cont. Rev. (Wtr. Cont. Ln.
Fund):
State Match Series, 6.5% Aaa 1,835,000 1,988,039
12/1/04 (MBIA Insured)
Wtr. Quality Series, 5.625% Aaa 2,000,000 2,087,260
6/1/06 (MBIA Insured)
18,862,557
OKLAHOMA - 1.2%
Sapulpa Muni. Auth. Util. Aaa 1,000,000 972,360
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,261,480
(American Airlines Corp.
Proj.) 7.35% 12/1/11
5,233,840
PENNSYLVANIA - 3.8%
Allegheny County Arpt. Rev. Aaa 1,000,000 1,030,000
Rfdg. (Pittsburgh Int'l
Arpt. Proj.) Series A, 5.75%
1/1/07 (MBIA Insured) (e)
Allegheny County Ind. Dev. - 325,000 339,573
Auth. Rev. (YMCA Pittsburgh
Proj.) Series A, 8.75% 3/1/10
Butler County Ind. Dev. Auth. A 3,000,000 2,904,960
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 Baa3 3,250,000 3,283,345
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
PENNSYLVANIA - CONTINUED
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health): - continued
6.8% 11/15/23 Baa3 $ 1,000,000 $ 1,004,670
Delaware County Auth. Rev.
(1st. Mtg. Riddle Village
Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,604,870
Maturity) (f)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,220,743
6/1/02 @ 102) (f)
Pennsylvania Ind. Dev. Auth. Aaa 1,345,000 1,396,635
Rev. (Econ. Dev.) 5.8%
7/1/09 (AMBAC Insured)
15,784,796
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Aaa 4,000,000 4,506,640
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (e)
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,822,805
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
TENNESSEE - 0.3%
Metro. Govt. Nashville & Aaa 1,000,000 720,210
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
Tennessee Gen. Oblig. Rfdg. Aaa 400,000 426,564
Series A, 6% 5/1/07
1,146,774
TEXAS - 8.4%
Conroe Independent School Aaa 750,000 457,643
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
Dallas-Fort Worth Int'l. Baa1 6,000,000 6,247,260
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc.) 7.5% 11/1/25 (e)
Fort Bend Independent School AAA 2,500,000 2,496,675
District Rfdg. 5.25% 2/15/10
Midlothian Independent School Aaa 1,845,000 1,500,317
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev. Aa1 75,000 77,913
Rfdg. 5.5% 2/1/20
(Pre-Refunded to 2/1/07 @
101) (f)
San Antonio Gen. Oblig. Aa2 1,390,000 1,323,711
Series 2000, 5% 2/1/11 (b)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
TEXAS - CONTINUED
San Antonio Independent Aaa $ 3,650,000 $ 3,808,921
School District 5.75% 8/15/10
Texas Gen. Oblig. (Texas Pub. Aa1 5,000,000 4,602,550
Fing. Auth. Proj.) Series A,
5% 10/1/14
Texas Muni. Pwr. Agcy. Rev. Aaa 3,930,000 2,040,063
Rfdg. (Cap. Appreciation)
0% 9/1/11 (AMBAC Insured)
Travis County Health Aaa 4,000,000 4,058,600
Facilities Dev. Corp. Rev.
(Ascension Health Cr. Prog.)
Series A, 6.25% 11/15/19
(MBIA Insured)
Univ. of Texas Univ. Revs Aa1 6,275,000 6,339,507
Rfdg. (Fing. Sys. Proj.)
Series B, 5.625% 8/15/12
Yselta Independent School Aaa 4,065,000 2,415,423
District Rfdg. (Cap.
Appreciation) 0% 8/15/09
35,368,583
UTAH - 2.6%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa 1,000,000 1,092,440
Insured)
Series B, 5.75% 7/1/16 (MBIA Aaa 2,500,000 2,465,025
Insured)
Rfdg. Spl. Oblig. 6th Series Aaa 7,000,000 7,061,180
B, 6% 7/1/16 (MBIA Insured)
South Salt Lake City Ind. - 250,000 264,948
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
10,883,593
VIRGINIA - 0.3%
Loudoun County Ind. Dev. - 1,000,000 1,127,590
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (f)
WASHINGTON - 5.1%
King County Gen. Oblig. Aa1 3,990,000 4,111,057
Series D, 5.75% 12/1/11
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
(A)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A:
5% 7/1/05 Aa1 $ 3,050,000 $ 3,045,974
5.9% 7/1/04 Aa1 1,000,000 1,041,160
5.4% 7/1/12 Aa1 14,000,000 13,351,091
21,549,282
TOTAL MUNICIPAL BONDS 410,382,254
(Cost $415,389,508)
</TABLE>
CASH EQUIVALENTS - 1.9%
SHARES
Municipal Central Cash Fund, 8,130,356 8,130,356
3.56% (c)(d) (Cost
$8,130,356)
TOTAL INVESTMENT PORTFOLIO - 418,512,610
99.5%
(Cost $423,519,864)
NET OTHER ASSETS - 0.5% 2,101,879
NET ASSETS - 100% $ 420,614,489
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) The rate quoted is the annualized seven-day yield of the fund at
period end.
(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 percentage of total
value of investments in securities, is as follows (ratings are
(unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.1% AAA, AA, A 63.6%
Baa 19.4% BBB 21.0%
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 percentage not rated by Moody's or S&P amounted to 4.7%.
The distribution of municipal securities by revenue source, as a
percentage of net assets, is as follows:
General Obligations 19.3%
Electric Utilities 15.9
Transportation 14.4
Health Care 13.4
Education 8.0
Escrowed/Pre-Refunded 7.9
Industrial Development 6.4
Water & Sewer 5.7
Others (individually less 8.5
than 5%)
Net Other Assets 0.5
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $423,519,864. Net unrealized depreciation
aggregated $5,007,254, of which $6,610,938 related to appreciated
investment securities and $11,618,192 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $13,685,000 of which $7,417,000 and $6,268,000 will
expire on October 31, 2003 and 2004, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 418,512,610
value (cost $423,519,864) -
See accompanying schedule
Receivable for investments 10,776,377
sold
Receivable for fund shares 198,989
sold
Interest receivable 7,068,772
Other receivables 22,338
TOTAL ASSETS 436,579,086
LIABILITIES
Payable for investments $ 10,664,053
purchased Regular delivery
Delayed delivery 3,449,619
Payable for fund shares 907,180
redeemed
Distributions payable 600,795
Accrued management fee 132,767
Distribution fees payable 129,306
Other payables and accrued 80,877
expenses
TOTAL LIABILITIES 15,964,597
NET ASSETS $ 420,614,489
Net Assets consist of:
Paid in capital $ 439,900,857
Accumulated undistributed net (14,279,114)
realized gain (loss) on
investments
Net unrealized appreciation (5,007,254)
(depreciation) on investments
NET ASSETS $ 420,614,489
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $11.69
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($10,721,810 (divided by)
917,460 shares)
Maximum offering price per $12.27
share (100/95.25 of $11.69)
CLASS T: NET ASSET VALUE and $11.70
redemption price per share
($329,926,390 (divided by)
28,197,578 shares)
Maximum offering price per $12.12
share (100/96.50 of $11.70)
CLASS B: NET ASSET VALUE and $11.67
offering price per share
($63,464,208 (divided by)
5,438,241 shares) A
CLASS C: NET ASSET VALUE and $11.70
offering price per share
($13,071,301 (divided by)
1,117,056 shares) A
INSTITUTIONAL CLASS: NET $11.65
ASSET VALUE, offering price
and redemption price per
share ($3,430,780 (divided
by) 294,537 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INTEREST INCOME $ 23,713,018
EXPENSES
Management fee $ 1,695,763
Transfer agent fees 460,510
Distribution fees 1,577,955
Accounting fees and expenses 141,615
Non-interested trustees' 1,358
compensation
Custodian fees and expenses 21,716
Registration fees 117,150
Audit 37,659
Legal 12,407
Total expenses before 4,066,133
reductions
Expense reductions (3,319) 4,062,814
NET INTEREST INCOME 19,650,204
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,459,744
Futures contracts 21,684 2,481,428
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (33,606,253)
Futures contracts (83,889) (33,690,142)
NET GAIN (LOSS) (31,208,714)
NET INCREASE (DECREASE) IN $ (11,558,510)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 19,650,204 $ 20,054,896
Net realized gain (loss) 2,481,428 842,117
Change in net unrealized (33,690,142) 13,362,203
appreciation (depreciation)
NET INCREASE (DECREASE) IN (11,558,510) 34,259,216
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (19,650,204) (20,054,896)
from net interest income
Share transactions - net (1,025,834) 279,500
increase (decrease)
TOTAL INCREASE (DECREASE) (32,234,548) 14,483,820
IN NET ASSETS
NET ASSETS
Beginning of period 452,849,037 438,365,217
End of period $ 420,614,489 $ 452,849,037
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .567 .571 .583 D .105 D, E
Net realized and unrealized (.850) .390 .445 .109
gain (loss)
Total from investment (.283) .961 1.028 .214
operations
Less Distributions
From net interest income (.567) (.571) (.616) E (.104)
In excess of net interest - - (.002) -
income
Total distributions (.567) (.571) (.618) (.104)
Net asset value, end of period $ 11.690 $ 12.540 $ 12.150 $ 11.740
TOTAL RETURN B, C (2.36)% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,722 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .72% .90% G .90% G .90% A, G
net assets
Ratio of net interest income 4.62% 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 23% 36% 36% 49%
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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.560 $ 12.150 $ 11.760 $ 11.880 $ 11.220
of period
Income from Investment
Operations
Net interest income .555 .571 .597 B .677 B, C .700
Net realized and unrealized (.860) .410 .407 (.136) .660
gain (loss)
Total from investment (.305) .981 1.004 .541 1.360
operations
Less Distributions
From net interest income (.555) (.571) (.612) C (.661) (.700)
In excess of net interest - - (.002) - -
income
Total distributions (.555) (.571) (.614) (.661) (.700)
Net asset value, end of period $ 11.700 $ 12.560 $ 12.150 $ 11.760 $ 11.880
TOTAL RETURN A (2.53)% 8.15% 8.89% 4.68% 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 329,926 $ 380,325 $ 392,075 $ 480,432 $ 565,131
(000 omitted)
Ratio of expenses to average .81% .87% .89% .89% .91%
net assets
Ratio of net interest income 4.51% 4.62% 5.04% 5.74% 6.06%
to average net assets
Portfolio turnover rate 23% 36% 36% 49% 37%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
C 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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 12.530 $ 12.130 $ 11.740 $ 11.860 $ 11.210
of period
Income from Investment
Operations
Net interest income .476 .491 .515 C .596 C, D .612
Net realized and unrealized (.860) .400 .416 (.136) .650
gain (loss)
Total from investment (.384) .891 .931 .460 1.262
operations
Less Distributions
From net interest income (.476) (.491) (.539) D (.580) (.612)
In excess of net interest - - (.002) - -
income
Total distributions (.476) (.491) (.541) (.580) (.612)
Net asset value, end of period $ 11.670 $ 12.530 $ 12.130 $ 11.740 $ 11.860
TOTAL RETURN A, B (3.16)% 7.47% 8.15% 3.98% 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 63,464 $ 55,032 $ 41,024 $ 39,389 $ 32,395
(000 omitted)
Ratio of expenses to average 1.46% 1.53% 1.56% 1.57% 1.86% E
net assets
Ratio of net interest income 3.88% 3.96% 4.35% 5.06% 5.18%
to average net assets
Portfolio turnover rate 23% 36% 36% 49% 37%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED 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.
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.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .465 .455
Net realized and unrealized (.860) .430
gain (loss)
Total from investment (.395) .885
operations
Less Distributions
From net interest income (.465) (.455)
Net asset value, end of period $ 11.700 $ 12.560
TOTAL RETURN B, C (3.24)% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,071 $ 7,031
(000 omitted)
Ratio of expenses to average 1.56% 1.75% A, E
net assets
Ratio of net interest income 3.79% 3.60% A
to average net assets
Portfolio turnover rate 23% 36%
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
YEARS ENDED OCTOBER 31, 1999 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 .584 .592 .609 D .707 D, E .232
Net realized and unrealized (.860) .390 .464 (.197) .180
gain (loss)
Total from investment (.276) .982 1.073 .510 .412
operations
Less Distributions
From net interest income (.584) (.592) (.671) E (.670) (.232)
In excess of net interest - - (.002) - -
income
Total distributions (.584) (.592) (.673) (.670) (.232)
Net asset value, end of period $ 11.650 $ 12.510 $ 12.120 $ 11.720 $ 11.880
TOTAL RETURN B, C (2.31)% 8.28% 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,431 $ 3,741 $ 1,511 $ 927 $ 154
(000 omitted)
Ratio of expenses to average .60% .75% G .75% G .75% G .75% A, G
net assets
Ratio of net interest income 4.75% 4.75% 5.11% 5.88% 5.89% A
to average net assets
Portfolio turnover rate 23% 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 October 31, 1999
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. 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 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 transactions. 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 after the
customary settlement period for that security. 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 $100,137,443 and $107,267,340, 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 .0920% 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 annual rate of .38% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 WITH AFFILIATES - 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 $ 14,240 $ 71
CLASS T 900,188 11,550
CLASS B 552,424 399,100
CLASS C 111,103 87,365
$ 1,577,955 $ 498,086
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 is 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 $ 50,968 $ 28,875
CLASS T 204,851 72,163
CLASS B 209,085 209,085*
CLASS C 16,279 16,279*
$ 481,183 $ 326,402
* 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. Effective June 14, 1999, Citibank,
N.A. (Citibank) replaced UMB Bank, n.a. as the custodian, transfer
agent, and shareholder servicing agent for the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares. Citibank 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 Citibank, 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 $ 11,061 .12
CLASS T 368,638 .10
CLASS B 63,218 .10
CLASS C 12,116 .11
INSTITUTIONAL CLASS 5,477 .15
$ 460,510
Citibank 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.
Through arrangements with the fund's custodian and each class'
transfer agent, 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 $694 under the custodian
arrangement, and Class T's transfer agent fees were reduced by $2,625
under the transfer agent arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1999 1998 A
FROM NET INTEREST INCOME
Class A $ 439,029 $ 231,309
Class T 16,229,661 17,722,552
Class B 2,381,487 1,865,869
Class C 421,752 106,528
Institutional Class 178,275 128,638
Total $ 19,650,204 $ 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> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 565,331 362,699 $ 6,989,179 $ 4,479,496
Reinvestment of
distributions 25,296 11,508 307,568 142,669
Shares redeemed (208,996) (147,406) (2,558,328) (1,811,982)
Net increase (decrease) 381,631 226,801 $ 4,738,419 $ 2,810,183
CLASS T Shares sold 3,793,311 4,799,958 $ 46,774,471 $ 59,544,980
Reinvestment of
distributions 835,205 873,770 10,221,698 10,820,895
Shares redeemed (6,722,556) (7,639,811) (82,551,608) (94,496,816)
Net increase (decrease) (2,094,040) (1,966,083) $ (25,555,439) $ (24,130,941)
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 A 1999 1998 A
CLASS B Shares sold 2,125,759 1,497,112 $ 26,076,418 $ 18,512,808
Reinvestment of
distributions 115,598 86,162 1,407,504 1,065,255
Shares redeemed (1,196,611) (572,594) (14,568,680) (7,073,528)
Net increase (decrease) 1,044,746 1,010,680 $ 12,915,242 $ 12,504,535
CLASS C Shares sold 871,985 650,179 $ 10,752,375 $ 8,065,902
Reinvestment of
distributions 22,987 4,455 280,065 55,539
Shares redeemed (337,753) (94,797) (4,112,814) (1,177,225)
Net increase (decrease) 557,219 559,837 $ 6,919,626 $ 6,944,216
INSTITUTIONAL CLASS Shares 103,836 238,568 $ 1,286,178 $ 2,943,409
sold
Reinvestment of
distributions 7,731 6,313 93,765 77,958
Shares redeemed (116,192) (70,388) (1,423,625) (869,860)
Net increase (decrease) (4,625) 174,493 $ (43,682) $ 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.
8. PROPOSED REORGANIZATION.
The Board of Trustees of Fidelity Advisor Municipal Income Fund (the
fund) has approved an Agreement and Plan of Reorganization
("Agreement") between the fund and Fidelity Advisor Intermediate
Municipal Income Fund ("Reorganization"). The Agreement provides for
the transfer of all of the assets and the assumption of all of the
liabilities of Fidelity Advisor Intermediate Municipal Income Fund in
exchange solely for the number of shares of Class A, Class T, Class B,
Class C and Institutional Class of the fund having the same relative
net asset value as the outstanding shares of Class A, Class T, Class
B, Class C and Institutional Class of Fidelity Advisor Intermediate
Municipal Income Fund as of the close of business of the New York
Stock Exchange on the day that the Reorganization is effective. The
Reorganization can be consummated only if, among other things, it is
approved by the vote of a majority (as defined by the 1940 Act) of
outstanding voting securities of Fidelity Advisor Intermediate
Municipal Income Fund. A Special Meeting of Shareholders ("Meeting")
of Fidelity Advisor Intermediate Municipal Income Fund will be held on
April 19, 2000 to vote on the Agreement. A detailed description of the
proposed transactions and voting information will be sent to
shareholders of Fidelity Advisor Intermediate Municipal Income Fund in
February, 2000. If the Agreement is approved at the Meeting, the
Reorganization is expected to become effective on or about May 25,
2000.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Municipal Income Fund (formerly a fund of Fidelity
Advisor Series V):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Municipal Income Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Advisor Series V) at October
31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Municipal Income Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
DISTRIBUTIONS
During fiscal year ended 1999, 100% of the fund's income dividends was
free from federal income tax, and 18.03% of the fund's income
dividends was subject to the federal alternative minimum tax.
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
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
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Citibank, N.A.
New York, NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Citibank, N.A.
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88096
1.538463.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
HIGH YIELD
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 66 The auditors' opinion.
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 year and the past 10 year total returns
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A 11.98% 59.73% 248.47%
FIDELITY ADV HIGH YIELD - CL 6.66% 52.14% 231.92%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master 4.48% 56.00% 174.49%
ML High Yield Master II 5.61% 57.51% 183.10%
High Current Yield Funds 6.61% 47.68% 150.96%
Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the 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 one year average represents a peer
group of 306 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A 11.98% 9.82% 13.30%
FIDELITY ADV HIGH YIELD - CL 6.66% 8.75% 12.75%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master 4.48% 9.30% 10.62%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
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
1989/10/31 9525.00 10000.00
1989/11/30 9552.77 10015.05
1989/12/31 9673.72 9974.42
1990/01/31 9533.38 9704.88
1990/02/28 9482.77 9558.22
1990/03/31 9649.81 9731.96
1990/04/30 9765.83 9798.95
1990/05/31 10093.83 9962.55
1990/06/30 10381.92 10215.54
1990/07/31 10623.46 10469.25
1990/08/31 10362.67 9990.42
1990/09/30 10100.69 9572.64
1990/10/31 9865.56 9298.97
1990/11/30 10173.58 9396.61
1990/12/31 10380.01 9539.38
1991/01/31 10618.82 9734.65
1991/02/28 11228.20 10579.16
1991/03/31 11649.42 11093.15
1991/04/30 12004.15 11486.47
1991/05/31 12132.02 11531.21
1991/06/30 12457.73 11785.95
1991/07/31 12907.77 12109.42
1991/08/31 13075.31 12384.90
1991/09/30 13251.87 12563.39
1991/10/31 13779.59 12989.72
1991/11/30 13938.67 13126.55
1991/12/31 14007.25 13276.06
1992/01/31 14649.34 13724.48
1992/02/29 15255.75 14067.51
1992/03/31 15688.19 14269.36
1992/04/30 15830.96 14343.32
1992/05/31 16003.68 14547.14
1992/06/30 16245.25 14723.09
1992/07/31 16538.16 15009.26
1992/08/31 16843.96 15200.42
1992/09/30 17024.36 15361.56
1992/10/31 16805.65 15159.72
1992/11/30 16989.28 15395.93
1992/12/31 17241.47 15591.91
1993/01/31 17702.32 15954.66
1993/02/28 18090.08 16240.04
1993/03/31 18509.83 16525.03
1993/04/30 18615.26 16638.42
1993/05/31 18868.43 16841.38
1993/06/30 19328.87 17169.12
1993/07/31 19582.65 17336.92
1993/08/31 19735.16 17500.04
1993/09/30 19772.76 17577.72
1993/10/31 20245.33 17903.17
1993/11/30 20392.02 18005.56
1993/12/31 20767.25 18194.89
1994/01/31 21363.95 18588.20
1994/02/28 21276.22 18459.05
1994/03/31 20627.60 17862.47
1994/04/30 20397.82 17640.28
1994/05/31 20524.45 17601.71
1994/06/30 20486.58 17682.17
1994/07/31 20565.86 17788.91
1994/08/31 20713.02 17929.94
1994/09/30 20818.29 17926.37
1994/10/31 20780.23 17973.65
1994/11/30 20447.83 17819.00
1994/12/31 20457.03 18006.75
1995/01/31 20632.94 18259.59
1995/02/28 21297.20 18844.84
1995/03/31 21488.91 19099.50
1995/04/30 22182.39 19583.41
1995/05/31 22679.37 20198.12
1995/06/30 22631.51 20333.92
1995/07/31 23188.85 20598.72
1995/08/31 23320.25 20706.81
1995/09/30 23600.89 20947.45
1995/10/31 23908.69 21124.51
1995/11/30 24038.31 21333.88
1995/12/31 24399.31 21691.32
1996/01/31 24973.40 22053.67
1996/02/29 25310.20 22121.06
1996/03/31 25137.29 22030.63
1996/04/30 25432.55 22061.51
1996/05/31 25623.84 22220.52
1996/06/30 25662.76 22309.04
1996/07/31 25666.38 22455.70
1996/08/31 26033.43 22729.60
1996/09/30 26895.50 23263.86
1996/10/31 26960.22 23465.78
1996/11/30 27282.31 23931.39
1996/12/31 27599.20 24136.01
1997/01/31 27869.03 24317.34
1997/02/28 28411.62 24691.18
1997/03/31 27651.03 24351.55
1997/04/30 27844.24 24663.78
1997/05/31 28664.77 25183.08
1997/06/30 29185.25 25572.27
1997/07/31 30158.04 26250.10
1997/08/31 30305.94 26218.50
1997/09/30 31374.55 26690.13
1997/10/31 31053.30 26826.41
1997/11/30 31342.09 27065.39
1997/12/31 31759.47 27337.95
1998/01/31 32611.71 27773.62
1998/02/28 32991.84 27886.15
1998/03/31 33654.39 28151.02
1998/04/30 33673.12 28271.94
1998/05/31 33438.61 28441.95
1998/06/30 33489.52 28588.84
1998/07/31 33756.71 28771.04
1998/08/31 30096.69 27318.71
1998/09/30 30234.01 27389.81
1998/10/31 29641.02 26798.77
1998/11/30 31712.18 28195.68
1998/12/31 31624.87 28145.16
1999/01/31 32700.56 28519.71
1999/02/28 32491.13 28330.93
1999/03/31 33465.81 28660.03
1999/04/30 34833.76 29184.39
1999/05/31 33979.85 28916.67
1999/06/30 33897.50 28845.00
1999/07/31 33710.72 28883.80
1999/08/31 33397.73 28578.62
1999/09/30 33056.29 28464.04
1999/10/29 33191.67 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991115 133502 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class A on October 31,
1989, and the current 4.75% sales charge was paid. As the chart shows,
by October 31, 1999, the value of the investment would have grown to
$33,192 - a 231.92% 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 $28,310 - a 183.10% increase. Going forward, 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 10.58% A 7.65% 9.54% 1.17%
Capital returns 1.40% -12.20% 5.64% 2.41%
Total returns 11.98% -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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 7.57(cents) 47.17(cents) 114.87(cents)
Annualized dividend rate 8.01% 8.12% 9.92%
30-day annualized yield 9.71% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $11.13 over the past one
month, $11.52 over the past six months and $11.58 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 4.9(CENTS) PER SHARE PAID DURING 1999 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2000.
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 year total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T 11.83% 59.78% 248.58%
FIDELITY ADV HIGH YIELD - CL 7.91% 54.19% 236.38%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master 4.48% 56.00% 174.49%
ML High Yield Master II 5.61% 57.51% 183.10%
High Current Yield Funds 6.61% 47.68% 150.96%
Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the 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 one year average represents a peer
group of 306 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T 11.83% 9.83% 13.30%
FIDELITY ADV HIGH YIELD - CL 7.91% 9.05% 12.90%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master 4.48% 9.30% 10.62%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
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
1989/10/31 9650.00 10000.00
1989/11/30 9678.14 10015.05
1989/12/31 9800.68 9974.42
1990/01/31 9658.49 9704.88
1990/02/28 9607.22 9558.22
1990/03/31 9776.45 9731.96
1990/04/30 9893.99 9798.95
1990/05/31 10226.29 9962.55
1990/06/30 10518.17 10215.54
1990/07/31 10762.88 10469.25
1990/08/31 10498.66 9990.42
1990/09/30 10233.24 9572.64
1990/10/31 9995.03 9298.97
1990/11/30 10307.09 9396.61
1990/12/31 10516.23 9539.38
1991/01/31 10758.17 9734.65
1991/02/28 11375.55 10579.16
1991/03/31 11802.30 11093.15
1991/04/30 12161.69 11486.47
1991/05/31 12291.23 11531.21
1991/06/30 12621.22 11785.95
1991/07/31 13077.16 12109.42
1991/08/31 13246.90 12384.90
1991/09/30 13425.78 12563.39
1991/10/31 13960.42 12989.72
1991/11/30 14121.59 13126.55
1991/12/31 14191.08 13276.06
1992/01/31 14841.59 13724.48
1992/02/29 15455.96 14067.51
1992/03/31 15894.08 14269.36
1992/04/30 16038.71 14343.32
1992/05/31 16213.70 14547.14
1992/06/30 16458.44 14723.09
1992/07/31 16755.20 15009.26
1992/08/31 17065.01 15200.42
1992/09/30 17247.77 15361.56
1992/10/31 17026.19 15159.72
1992/11/30 17212.23 15395.93
1992/12/31 17467.73 15591.91
1993/01/31 17934.64 15954.66
1993/02/28 18327.49 16240.04
1993/03/31 18752.74 16525.03
1993/04/30 18859.56 16638.42
1993/05/31 19116.05 16841.38
1993/06/30 19582.53 17169.12
1993/07/31 19839.64 17336.92
1993/08/31 19994.15 17500.04
1993/09/30 20032.24 17577.72
1993/10/31 20511.02 17903.17
1993/11/30 20659.63 18005.56
1993/12/31 21039.79 18194.89
1994/01/31 21644.32 18588.20
1994/02/28 21555.44 18459.05
1994/03/31 20898.30 17862.47
1994/04/30 20665.50 17640.28
1994/05/31 20793.79 17601.71
1994/06/30 20755.43 17682.17
1994/07/31 20835.76 17788.91
1994/08/31 20984.84 17929.94
1994/09/30 21091.50 17926.37
1994/10/31 21052.94 17973.65
1994/11/30 20716.17 17819.00
1994/12/31 20725.50 18006.75
1995/01/31 20903.72 18259.59
1995/02/28 21576.70 18844.84
1995/03/31 21770.91 19099.50
1995/04/30 22473.50 19583.41
1995/05/31 22977.00 20198.12
1995/06/30 22928.51 20333.92
1995/07/31 23493.17 20598.72
1995/08/31 23626.29 20706.81
1995/09/30 23910.61 20947.45
1995/10/31 24222.45 21124.51
1995/11/30 24353.77 21333.88
1995/12/31 24719.51 21691.32
1996/01/31 25301.13 22053.67
1996/02/29 25642.35 22121.06
1996/03/31 25467.17 22030.63
1996/04/30 25766.31 22061.51
1996/05/31 25960.11 22220.52
1996/06/30 25999.54 22309.04
1996/07/31 26003.21 22455.70
1996/08/31 26375.08 22729.60
1996/09/30 27260.62 23263.86
1996/10/31 27351.85 23465.78
1996/11/30 27681.67 23931.39
1996/12/31 27998.04 24136.01
1997/01/31 28293.99 24317.34
1997/02/28 28822.72 24691.18
1997/03/31 28033.34 24351.55
1997/04/30 28256.65 24663.78
1997/05/31 29070.47 25183.08
1997/06/30 29599.27 25572.27
1997/07/31 30586.59 26250.10
1997/08/31 30760.93 26218.50
1997/09/30 31843.12 26690.13
1997/10/31 31511.88 26826.41
1997/11/30 31800.36 27065.39
1997/12/31 32222.31 27337.95
1998/01/31 33083.41 27773.62
1998/02/28 33468.37 27886.15
1998/03/31 34163.64 28151.02
1998/04/30 34179.56 28271.94
1998/05/31 33914.11 28441.95
1998/06/30 33962.59 28588.84
1998/07/31 34230.55 28771.04
1998/08/31 30519.05 27318.71
1998/09/30 30655.40 27389.81
1998/10/31 30080.41 26798.77
1998/11/30 32174.23 28195.68
1998/12/31 32079.73 28145.16
1999/01/31 33164.84 28519.71
1999/02/28 32948.70 28330.93
1999/03/31 33900.91 28660.03
1999/04/30 35313.24 29184.39
1999/05/31 34447.88 28916.67
1999/06/30 34361.98 28845.00
1999/07/31 34170.67 28883.80
1999/08/31 33851.25 28578.62
1999/09/30 33503.39 28464.04
1999/10/29 33638.01 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991115 085238 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class T on October 31,
1989, and the current 3.50% sales charge was paid. As the chart shows,
by October 31, 1999, the value of the investment would have grown to
$33,638 - a 236.38% 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 $28,310 - a 183.10% increase. Going forward, 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.
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 10.43% A 7.57% 9.57% 9.56% 8.90%
Capital returns 1.40% -12.11% 5.64% 3.36% 6.15%
Total returns 11.83% -4.54% 15.21% 12.92% 15.05%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 7.49(cents) 46.71(cents) 113.49(cents)
Annualized dividend rate 7.91% 8.03% 9.79%
30-day annualized yield 9.73% - -
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 $11.15 over the past one
month, $11.54 over the past six months and $11.59 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 4.8(CENTS) PER SHARE PAID DURING 1999 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2000.
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 one year, past
five year and past 10 year total return figures are 5%, 2% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses
during the periods shown, the past 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B 11.10% 54.22% 234.80%
FIDELITY ADV HIGH YIELD - CL 6.10% 52.24% 234.80%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 4.48% 56.00% 174.49%
ML High Yield Master II 5.61% 57.51% 183.10%
High Current Yield Funds 6.61% 47.68% 150.96%
Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the 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 one year average represents a peer
group of 306 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B 11.10% 9.05% 12.84%
FIDELITY ADV HIGH YIELD - CL 6.10% 8.77% 12.84%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 4.48% 9.30% 10.62%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
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
1989/10/31 10000.00 10000.00
1989/11/30 10029.16 10015.05
1989/12/31 10156.14 9974.42
1990/01/31 10008.79 9704.88
1990/02/28 9955.66 9558.22
1990/03/31 10131.03 9731.96
1990/04/30 10252.84 9798.95
1990/05/31 10597.19 9962.55
1990/06/30 10899.66 10215.54
1990/07/31 11153.24 10469.25
1990/08/31 10879.45 9990.42
1990/09/30 10604.39 9572.64
1990/10/31 10357.54 9298.97
1990/11/30 10680.93 9396.61
1990/12/31 10897.65 9539.38
1991/01/31 11148.37 9734.65
1991/02/28 11788.13 10579.16
1991/03/31 12230.36 11093.15
1991/04/30 12602.79 11486.47
1991/05/31 12737.03 11531.21
1991/06/30 13078.98 11785.95
1991/07/31 13551.46 12109.42
1991/08/31 13727.36 12384.90
1991/09/30 13912.72 12563.39
1991/10/31 14466.76 12989.72
1991/11/30 14633.77 13126.55
1991/12/31 14705.78 13276.06
1992/01/31 15379.88 13724.48
1992/02/29 16016.54 14067.51
1992/03/31 16470.55 14269.36
1992/04/30 16620.43 14343.32
1992/05/31 16801.77 14547.14
1992/06/30 17055.38 14723.09
1992/07/31 17362.90 15009.26
1992/08/31 17683.95 15200.42
1992/09/30 17873.34 15361.56
1992/10/31 17643.72 15159.72
1992/11/30 17836.51 15395.93
1992/12/31 18101.28 15591.91
1993/01/31 18585.12 15954.66
1993/02/28 18992.21 16240.04
1993/03/31 19432.90 16525.03
1993/04/30 19543.58 16638.42
1993/05/31 19809.38 16841.38
1993/06/30 20292.78 17169.12
1993/07/31 20559.22 17336.92
1993/08/31 20719.33 17500.04
1993/09/30 20758.80 17577.72
1993/10/31 21254.94 17903.17
1993/11/30 21408.95 18005.56
1993/12/31 21802.89 18194.89
1994/01/31 22429.35 18588.20
1994/02/28 22337.24 18459.05
1994/03/31 21656.27 17862.47
1994/04/30 21415.03 17640.28
1994/05/31 21547.97 17601.71
1994/06/30 21508.22 17682.17
1994/07/31 21555.35 17788.91
1994/08/31 21690.23 17929.94
1994/09/30 21783.59 17926.37
1994/10/31 21709.32 17973.65
1994/11/30 21366.84 17819.00
1994/12/31 21342.39 18006.75
1995/01/31 21512.44 18259.59
1995/02/28 22191.87 18844.84
1995/03/31 22378.02 19099.50
1995/04/30 23066.81 19583.41
1995/05/31 23589.34 20198.12
1995/06/30 23524.27 20333.92
1995/07/31 24069.24 20598.72
1995/08/31 24212.49 20706.81
1995/09/30 24469.65 20947.45
1995/10/31 24775.38 21124.51
1995/11/30 24875.07 21333.88
1995/12/31 25255.93 21691.32
1996/01/31 25814.52 22053.67
1996/02/29 26147.79 22121.06
1996/03/31 25953.64 22030.63
1996/04/30 26245.98 22061.51
1996/05/31 26452.28 22220.52
1996/06/30 26455.41 22309.04
1996/07/31 26465.82 22455.70
1996/08/31 26807.33 22729.60
1996/09/30 27694.66 23263.86
1996/10/31 27773.02 23465.78
1996/11/30 28071.44 23931.39
1996/12/31 28401.29 24136.01
1997/01/31 28687.39 24317.34
1997/02/28 29208.97 24691.18
1997/03/31 28391.17 24351.55
1997/04/30 28602.28 24663.78
1997/05/31 29388.27 25183.08
1997/06/30 29932.30 25572.27
1997/07/31 30915.84 26250.10
1997/08/31 31051.80 26218.50
1997/09/30 32130.71 26690.13
1997/10/31 31756.68 26826.41
1997/11/30 32058.58 27065.39
1997/12/31 32467.66 27337.95
1998/01/31 33320.39 27773.62
1998/02/28 33690.59 27886.15
1998/03/31 34348.25 28151.02
1998/04/30 34345.56 28271.94
1998/05/31 34084.67 28441.95
1998/06/30 34115.57 28588.84
1998/07/31 34366.99 28771.04
1998/08/31 30637.75 27318.71
1998/09/30 30732.35 27389.81
1998/10/31 30136.12 26798.77
1998/11/30 32225.52 28195.68
1998/12/31 32119.09 28145.16
1999/01/31 33164.16 28519.71
1999/02/28 32931.72 28330.93
1999/03/31 33903.71 28660.03
1999/04/30 35272.09 29184.39
1999/05/31 34413.29 28916.67
1999/06/30 34308.65 28845.00
1999/07/31 34068.68 28883.80
1999/08/31 33730.49 28578.62
1999/09/30 33363.96 28464.04
1999/10/29 33480.28 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991115 085223 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class B on October 31,
1989. As the chart shows, by October 31, 1999, the value of the
investment would have grown to $33,480 - a 234.80% 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 $28,310 - a 183.10%
increase. Going forward, 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.
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 9.79% A 6.98% 8.85% 8.82% 8.05%
Capital returns 1.31% -12.08% 5.49% 3.28% 6.07%
Total returns 11.10% -5.10% 14.34% 12.10% 14.12%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.88(cents) 42.90(cents) 106.43(cents)
Annualized dividend rate 7.30% 7.41% 9.21%
30-day annualized yield 9.46% - -
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 $11.10 over the past one
month, $11.49 over the past six months, and $11.55 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 4.5(CENTS) PER SHARE PAID DURING 1999 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2000.
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 one year, past five
year and past 10 year total return figures are 1%, 0% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses
during the period shown, the past 10 year total returns would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C 11.00% 53.74% 233.76%
FIDELITY ADV HIGH YIELD - CL 10.00% 53.74% 233.76%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 4.48% 56.00% 174.49%
ML High Yield Master II 5.61% 57.51% 183.10%
High Current Yield Funds 6.61% 47.68% 150.96%
Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to those of the 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 one year average represents a peer
group of 306 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C 11.00% 8.98% 12.81%
FIDELITY ADV HIGH YIELD - CL 10.00% 8.98% 12.81%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master 4.48% 9.30% 10.62%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
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
1989/10/31 10000.00 10000.00
1989/11/30 10029.16 10015.05
1989/12/31 10156.14 9974.42
1990/01/31 10008.79 9704.88
1990/02/28 9955.66 9558.22
1990/03/31 10131.03 9731.96
1990/04/30 10252.84 9798.95
1990/05/31 10597.19 9962.55
1990/06/30 10899.66 10215.54
1990/07/31 11153.24 10469.25
1990/08/31 10879.45 9990.42
1990/09/30 10604.39 9572.64
1990/10/31 10357.54 9298.97
1990/11/30 10680.93 9396.61
1990/12/31 10897.65 9539.38
1991/01/31 11148.37 9734.65
1991/02/28 11788.13 10579.16
1991/03/31 12230.36 11093.15
1991/04/30 12602.79 11486.47
1991/05/31 12737.03 11531.21
1991/06/30 13078.98 11785.95
1991/07/31 13551.46 12109.42
1991/08/31 13727.36 12384.90
1991/09/30 13912.72 12563.39
1991/10/31 14466.76 12989.72
1991/11/30 14633.77 13126.55
1991/12/31 14705.78 13276.06
1992/01/31 15379.88 13724.48
1992/02/29 16016.54 14067.51
1992/03/31 16470.55 14269.36
1992/04/30 16620.43 14343.32
1992/05/31 16801.77 14547.14
1992/06/30 17055.38 14723.09
1992/07/31 17362.90 15009.26
1992/08/31 17683.95 15200.42
1992/09/30 17873.34 15361.56
1992/10/31 17643.72 15159.72
1992/11/30 17836.51 15395.93
1992/12/31 18101.28 15591.91
1993/01/31 18585.12 15954.66
1993/02/28 18992.21 16240.04
1993/03/31 19432.90 16525.03
1993/04/30 19543.58 16638.42
1993/05/31 19809.38 16841.38
1993/06/30 20292.78 17169.12
1993/07/31 20559.22 17336.92
1993/08/31 20719.33 17500.04
1993/09/30 20758.80 17577.72
1993/10/31 21254.94 17903.17
1993/11/30 21408.95 18005.56
1993/12/31 21802.89 18194.89
1994/01/31 22429.35 18588.20
1994/02/28 22337.24 18459.05
1994/03/31 21656.27 17862.47
1994/04/30 21415.03 17640.28
1994/05/31 21547.97 17601.71
1994/06/30 21508.22 17682.17
1994/07/31 21555.35 17788.91
1994/08/31 21690.23 17929.94
1994/09/30 21783.59 17926.37
1994/10/31 21709.32 17973.65
1994/11/30 21366.84 17819.00
1994/12/31 21342.39 18006.75
1995/01/31 21512.44 18259.59
1995/02/28 22191.87 18844.84
1995/03/31 22378.02 19099.50
1995/04/30 23066.81 19583.41
1995/05/31 23589.34 20198.12
1995/06/30 23524.27 20333.92
1995/07/31 24069.24 20598.72
1995/08/31 24212.49 20706.81
1995/09/30 24469.65 20947.45
1995/10/31 24775.38 21124.51
1995/11/30 24875.07 21333.88
1995/12/31 25255.93 21691.32
1996/01/31 25814.52 22053.67
1996/02/29 26147.79 22121.06
1996/03/31 25953.64 22030.63
1996/04/30 26245.98 22061.51
1996/05/31 26452.28 22220.52
1996/06/30 26455.41 22309.04
1996/07/31 26465.82 22455.70
1996/08/31 26807.33 22729.60
1996/09/30 27694.66 23263.86
1996/10/31 27773.02 23465.78
1996/11/30 28071.44 23931.39
1996/12/31 28401.29 24136.01
1997/01/31 28687.39 24317.34
1997/02/28 29208.97 24691.18
1997/03/31 28391.17 24351.55
1997/04/30 28602.28 24663.78
1997/05/31 29388.27 25183.08
1997/06/30 29932.30 25572.27
1997/07/31 30915.84 26250.10
1997/08/31 31051.80 26218.50
1997/09/30 32130.71 26690.13
1997/10/31 31756.68 26826.41
1997/11/30 32047.51 27065.39
1997/12/31 32423.95 27337.95
1998/01/31 33293.36 27773.62
1998/02/28 33636.40 27886.15
1998/03/31 34318.05 28151.02
1998/04/30 34283.78 28271.94
1998/05/31 34012.97 28441.95
1998/06/30 34040.76 28588.84
1998/07/31 34289.08 28771.04
1998/08/31 30546.27 27318.71
1998/09/30 30663.70 27389.81
1998/10/31 30068.32 26798.77
1998/11/30 32148.72 28195.68
1998/12/31 32045.10 28145.16
1999/01/31 33084.97 28519.71
1999/02/28 32880.08 28330.93
1999/03/31 33818.06 28660.03
1999/04/30 35176.74 29184.39
1999/05/31 34317.41 28916.67
1999/06/30 34210.64 28845.00
1999/07/31 33969.36 28883.80
1999/08/31 33629.65 28578.62
1999/09/30 33262.59 28464.04
1999/10/29 33375.83 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991123 133221 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class C on October 31,
1989. As the chart shows, by October 31, 1999, the value of the
investment would have grown to $33,376 - a 233.76% 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 $28,310 - a 183.10%
increase. Going forward, 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.
TOTAL RETURN COMPONENTS
YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 9.69% A 6.74%
Capital returns 1.31% -12.47%
Total returns 11.00% -5.73%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 6.79(cents) 42.32(cents) 105.63(cents)
Annualized dividend rate 7.19% 7.29% 9.13%
30-day annualized yield 9.35% - -
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 $11.12 over the past one
month, $11.51 over the past six months and $11.57 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 4.5(CENTS) PER SHARE PAID DURING 1999 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2000.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic recovery in the global
economy triggered an impressive
rally in the high-yield bond market
during the first six months of the
12-month period ending October 31,
1999. In November of last year, the
third in a series of 0.25 percentage
point interest-rate cuts by the Federal
Reserve Board set the stage for
restored confidence in global
markets and an impressive rebound
in the high-yield market. To illustrate
the strength of the recovery, the
Merrill Lynch High Yield Master Index
- - a broad measure of the high-yield
market - produced a total return
of 4.48% for the 12-month period
ending October 31, 1999 despite
posting a loss of 2.69% during the
past six months. The sustained
strength in the domestic economy,
combined with concerns of higher
wage pressures, caused investors
and the Fed to shift their focus back
toward inflation and the prospects
of higher interest rates over the past
six months. Following the Fed's two
rate hikes in June and August and
persistent concerns about inflation,
the rally in the high-yield market was
essentially stopped in its tracks. Even
so, the overall U.S. bond market did
not fare as well in comparison. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the
taxable bond market - returned
0.53% during the 12-month period.
(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 12-month period that ended October 31, 1999, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
11.98%, 11.83%, 11.10% and 11.00%, respectively. To get a sense of how
the fund did relative to its competitors, the high current yield funds
average returned 6.61% for the same 12-month period, according to
Lipper Inc. The Merrill Lynch High Yield Master II Index returned
5.61%.
Q. WHY DID THE FUND OUTPACE ITS LIPPER PEER GROUP AND ITS BENCHMARK
INDEX DURING THE PAST 12 MONTHS?
A. The primary reason for the fund's outperformance was its relatively
large weighting in cable and telecommunications companies, which,
after lagging the high-yield market in the fall of 1998, were among
its best performers during the past year. The fund's holdings in cable
company EchoStar, for example, were boosted by a number of favorable
developments, including the fairly rapid addition of new customers.
CableVision and Adelphia also performed well. Holdings in
telecommunications companies NEXTLINK and Nextel were winners, with
both companies continuing to successfully execute their business
plans. Other strong performers in the telecommunications area included
Canadian-based MetroNet, which was purchased by AT&T Canada, and IXC,
which was purchased by Cincinnati Bell.
Q. OUTSIDE THE TELECOMMUNICATIONS AND CABLE SECTORS, WHERE WERE THE
OTHER WINNERS?
A. The fund's growing stake in energy companies performed well as the
price of oil rose. During most of the first half of the period, the
fund was dramatically underweighted in energy companies. But as the
price of oil began to move higher in the second half of the year, I
added companies such as Chesapeake and Ocean Energy, which did well.
Q. WHICH HOLDINGS PROVED DISAPPOINTING DURING THE YEAR?
A. The biggest disappointment was supermarket chain Jitney-Jungle. The
company suffered from intense competition and turnover in its
management team, which ultimately served to undermine investors'
confidence in the company. To a lesser extent, Integrated Health,
which provides post-acute medical services such as home respitory
services, was another disappointment. It struggled against a difficult
regulatory backdrop for hospitals.
Q. WHAT CHANGES HAVE YOU MADE TO THE FUND DURING THE PAST 12 MONTHS?
A. For one, I reduced the fund's stake in deferred-interest bonds
(DIBs) and pay-in-kind securities (PIKs), thereby reducing the fund's
volatility. While the fund's overall credit quality remained roughly
the same, I made some changes there as well. I reduced the fund's
stake in bonds rated Ba - which are the highest-rated bonds in the
non-investment-grade category - because they are quite vulnerable to
rising interest rates. The fund's stake in Caa-rated bonds also fell
as some of our holdings were bought out or retired. In addition, I
sold some of the lowest-rated Caa-rated bonds in response to rising
default rates. Finally, I added to the fund's stake in cyclical
companies - those that generally do well when the economy is strong -
including paper and chemical companies. With the U.S. economy
continuing to roll along and the Asian economy showing signs of
strengthening, I felt that cyclical companies had the potential to
increase prices and improve their financial results.
Q. WHAT'S YOUR OUTLOOK?
A. In my view, high-yield bond prices offered good value at the end of
the period. Spreads on high-yield bonds - the amount of yield
investors demanded over Treasury bond yields - had narrowed somewhat,
but were still quite wide when viewed on a historical basis. It's true
that part of that wider spread reflects the fact that the default rate
has ticked up. I believe that to some extent the higher default rate
does justify a wider spread than a couple of years ago when the
default rates were very, very low. Even so, I think the yield spread
currently is overcompensating investors for risk. In addition, the
market is placing a premium on liquidity, meaning it will pay more for
bonds that are better-known and more easily traded. In light of that,
I've increasingly tilted the fund's holdings toward more liquid,
larger holdings.
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 October 31,
1999, more than $4.1
billion
MANAGER: Margaret Eagle,
since 1987; joined
Fidelity in 1980
MARGARET EAGLE ON
TELECOMMUNICATIONS
COMPANIES:
"Throughout the past couple of
years, the fund has held relatively
large weightings in
telecommunications companies,
which I think will continue to
offer a lot of opportunity. The fund
is focused on companies that are
building the infrastructure that
will define communications in the
next century. Phone systems as
they exist now, both here and
abroad, are not equipped to
handle the voice and data
transmission demands that will be
placed on them over the next
decade or so. The explosion of the
Internet and the need for
companies to move more data
globally already have put pressure
on existing systems. Despite all
this potential, I anticipate that the
industry will see more
consolidation. When evaluating
these companies, I look for those
that are building quality assets,
are successfully executing
well-thought-out business plans,
are attracting the right type of
customer and are led by quality
management teams."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
EchoStar DBS Corp. 2.7 2.1
Adelphia Communications Corp 2.6 3.3
NTL, Inc. 2.6 3.8
Nextel Communications, Inc. 2.3 2.7
WinStar Communications, Inc. 2.3 1.7
12.5 13.6
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
MEDIA & LEISURE 33.1 32.8
UTILITIES 26.8 34.5
BASIC INDUSTRIES 8.0 3.6
ENERGY 5.4 2.1
TECHNOLOGY 3.8 3.1
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.0
Baa 0.6 0.2
Ba 8.0 9.1
B 53.1 43.2
Caa, Ca, C 13.7 13.0
Not Rated 5.4 10.6
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT OCTOBER
31, 1999 AND APRIL 30, 1999 ACCOUNT FOR 5.4% AND 10.6% RESPECTIVELY
OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Nonconvertible bonds 77.6% Nonconvertible bonds 73.5%
Convertible bonds, preferred Convertible bonds, preferred
stocks 12.4% stocks 13.1%
Common stocks 3.9% Common stocks 6.1%
Other investments 1.4% Other investments 1.1%
Short-term investments and Short-term investments and
net other assets 4.7% net other assets 6.2%
* FOREIGN INVESTMENTS 8.8% ** FOREIGN INVESTMENTS 9.6%
Row: 1, Col: 1, Value: 77.59999999999999 Row: 1, Col: 1, Value: 73.5
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 12.4 Row: 1, Col: 3, Value: 13.1
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.9 Row: 1, Col: 5, Value: 6.1
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.4 Row: 1, Col: 7, Value: 1.1
Row: 1, Col: 8, Value: 4.7 Row: 1, Col: 8, Value: 6.2
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 78.3%
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.7%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Rockefeller Center - $ 12,700 $ 10,668
Properties, Inc. 0% 12/31/00
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Total Renal Care Holdings, B1 20,740 13,274
Inc. 7% 5/15/09 (d)
MEDIA & LEISURE - 0.1%
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 6,560 3,936
3/15/04
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc. - 110 108
0% 12/15/05 (c)(d)
TOTAL CONVERTIBLE BONDS 27,986
NONCONVERTIBLE BONDS - 77.6%
BASIC INDUSTRIES - 7.8%
CHEMICALS & PLASTICS - 3.9%
Huntsman Corp.:
9.5% 7/1/07 (d) B2 16,270 15,212
9.5% 7/1/07 (d) B2 20,470 19,139
Huntsman ICI Chemicals LLC B2 26,360 26,360
10.125% 7/1/09 (d)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 5,350 5,283
9.875% 5/1/07 Ba3 32,710 32,383
10.875% 5/1/09 B2 32,490 32,165
Sterling Chemicals, Inc. Caa3 4,330 2,533
11.25% 4/1/07
Zeneca Specialty Chemicals B2 28,890 28,962
PLC 11% 7/1/09 (d)
162,037
PACKAGING & CONTAINERS - 2.0%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 16,153
9.75% 6/15/07 Caa1 6,340 5,975
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS -
CONTINUED
Gaylord Container Corp.: -
continued
9.875% 2/15/08 Caa2 $ 28,165 $ 24,644
Norampac, Inc. 9.5% 2/1/08 B2 12,450 12,761
Packaging Corp. of America B3 23,840 24,138
9.625% 4/1/09
Sweetheart Cup, Inc. 10.5% Caa1 2,525 2,260
9/1/03
85,931
PAPER & FOREST PRODUCTS - 1.9%
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 370 218
12% 3/15/04 B3 7,420 4,378
Container Corp. of America
gtd.:
9.75% 4/1/03 B2 3,490 3,586
11.25% 5/1/04 B2 4,550 4,721
Florida Coast Paper Co. Ca 35,780 22,452
LLC/Florida Coast Paper
Finance Corp. Series B,
12.75% 6/1/03 (b)
Millar Western Forest B3 17,375 16,984
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 3,780 3,818
yankee 10.625% 4/15/05 Caa1 2,460 2,202
Stone Container Corp. 12.58% B2 18,740 20,052
8/1/16 (e)
78,411
TOTAL BASIC INDUSTRIES 326,379
CONSTRUCTION & REAL ESTATE -
0.9%
CONSTRUCTION - 0.3%
Blount, Inc.:
7% 6/15/05 B2 5,770 4,905
13% 8/1/09 (d) B3 7,160 7,375
12,280
REAL ESTATE INVESTMENT TRUSTS
- - 0.6%
Ocwen Asset Investment Corp. - 30,010 24,908
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 37,188
ESTATE
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.6%
Blue Bird Body Co. 10.75% B2 $ 5,760 $ 6,451
11/15/06
Federal-Mogul Corp. 7.5% Ba2 21,090 18,749
1/15/09
25,200
CONSUMER DURABLES - 0.1%
Corning Consumer Products Co. B3 4,570 3,610
9.625% 5/1/08
HOME FURNISHINGS - 0.5%
Sealy Corp., Inc. 10% - 12,603 12,225
12/18/08 pay-in-kind (g)
Sealy Mattress Co.:
0% 12/15/07 (c) B3 6,930 4,652
9.875% 12/15/07 B3 5,550 5,390
22,267
TEXTILES & APPAREL - 0.3%
Pillowtex Corp.:
9% 12/15/07 B3 5,340 1,495
10% 11/15/06 B3 4,370 1,224
WestPoint Stevens, Inc. Ba3 10,705 9,554
7.875% 6/15/08
12,273
TOTAL DURABLES 63,350
ENERGY - 5.3%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 14,659
9.625% 5/15/08
ENERGY SERVICES - 1.4%
DI Industries, Inc. 8.875% B1 11,140 9,942
7/1/07
Parker Drilling Co. 9.75% B1 6,061 5,819
11/15/06
R&B Falcon Corp.:
9.5% 12/15/08 Ba3 17,740 17,252
12.25% 3/15/06 Ba3 7,940 8,416
RBF Finance Co.:
11% 3/15/06 Ba3 8,420 8,883
11.375% 3/15/09 Ba3 5,800 6,119
56,431
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - 3.6%
Belden & Blake Corp. 9.875% Caa1 $ 2,002 $ 1,081
6/15/07
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 2,580 2,309
8.5% 3/15/12 B3 1,340 1,085
9.125% 4/15/06 B3 2,320 2,088
9.625% 5/1/05 B3 27,355 25,850
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 15,780 14,991
9.25% 4/1/07 B2 2,940 2,896
Flores & Rucks, Inc. 9.75% B1 3,680 3,790
10/1/06
Gothic Production Corp. B3 9,380 7,926
11.125% 5/1/05
Lomak Petroleum, Inc. 8.75% B2 8,777 7,899
1/15/07
Ocean Energy, Inc.:
7.875% 8/1/03 Ba1 1,940 1,896
8.375% 7/1/08 B1 5,280 5,082
8.625% 8/1/05 Ba3 4,310 4,240
8.875% 7/15/07 B1 760 752
10.375% 10/15/05 B2 590 617
Pioneer Natural Resources Co. Ba2 11,920 10,043
6.5% 1/15/08
Plains Resources, Inc.:
Series B 10.25% 3/15/06 B2 2,780 2,780
10.25% 3/15/06 (d) B2 9,340 9,293
Seven Seas Petroleum, Inc. Caa1 3,425 1,370
12.5% 5/15/05
Snyder Oil Corp. 8.75% 6/15/07 Ba3 4,090 3,967
Swift Energy Co. 10.25% 8/1/09 B2 18,430 18,407
Tesoro Petroleum Corp. 9% B1 14,830 14,274
7/1/08
Vintage Petroleum, Inc.:
9% 12/15/05 B1 1,620 1,580
9.75% 6/30/09 B1 3,590 3,608
147,824
TOTAL ENERGY 218,914
FINANCE - 2.9%
CREDIT & OTHER FINANCE - 2.8%
Ameriserve Finance B2 14,170 13,107
Trust/Ameriserve Capital
Corp. 12% 9/15/06 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 13,890 $ 7,917
10% 3/15/04 Caa3 2,950 1,682
ContiFinancial Corp.:
7.5% 3/15/02 Caa2 5,410 1,190
8.125% 4/1/08 Caa2 21,330 5,546
8.375% 8/15/03 Caa2 9,450 1,985
Denbury Management, Inc. 9% B3 27,120 24,883
3/1/08
Digital Television Services B3 12,450 13,073
LLC/ DTS Capital, Inc. 12.5%
8/1/07
Dobson/Sygnet Communications - 1,230 1,316
Co. 12.25% 12/15/08
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 8,708
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 6,670 5,069
7.6% 8/1/07 Ba2 6,970 4,287
7.875% 8/1/03 Ba2 15,230 10,128
Ocwen Capital Trust 10.875% B2 4,780 3,155
8/1/27
Stone Container Finance Co. B2 8,330 8,747
11.5% 8/15/06 (d)
WinStar Equipment II Corp. CCC+ 5,450 5,627
12.5% 3/15/04
116,420
INSURANCE - 0.1%
ITT Corp. 6.75% 11/15/03 Ba1 4,240 3,920
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (d) - 5 5
TOTAL FINANCE 120,345
HEALTH - 2.2%
DRUGS & PHARMACEUTICALS - 0.5%
Global Health Sciences, Inc. Caa1 44,000 21,120
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- - 0.2%
Graham-Field Health Products, Caa1 13,670 3,691
Inc. 9.75% 8/15/07
PharMerica, Inc. 8.375% 4/1/08 B2 8,500 5,950
9,641
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - 1.5%
Concentra Operating Corp. 13% B3 $ 1,260 $ 1,134
8/15/09 (d)
Everest Healthcare Services, B3 3,740 3,422
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 6,771
4/15/08
Harborside Healthcare Corp. B3 24,000 6,000
0% 8/1/08 (c)
Integrated Health Services,
Inc.:
9.25% 1/15/08 B2 26,657 1,333
9.5% 9/15/07 B2 14,565 1,020
Oxford Health Plans, Inc. 11% Caa1 29,600 27,232
5/15/05
Tenet Healthcare Corp. 8.125% Ba3 4,900 4,361
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 9,370 9,393
(d)
60,666
TOTAL HEALTH 91,427
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
ELECTRICAL EQUIPMENT - 0.8%
L-3 Communications Corp.:
8% 8/1/08 B2 10,600 9,699
10.375% 5/1/07 B2 2,600 2,691
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B2 5,910 6,146
11.5% 9/15/09 (d) B2 10,590 11,067
11.625% 8/15/06 B2 2,510 2,636
32,239
POLLUTION CONTROL - 1.3%
Allied Waste North America, B2 67,975 57,099
Inc. 10% 8/1/09 (d)
TOTAL INDUSTRIAL MACHINERY & 89,338
EQUIPMENT
MEDIA & LEISURE - 24.7%
BROADCASTING - 19.2%
ACME Television LLC/ACME B3 11,102 9,770
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 26,030 23,427
8.375% 2/1/08 B1 13,640 12,839
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Adelphia Communications
Corp.: - continued
9.25% 10/1/02 B1 $ 8,200 $ 8,282
9.875% 3/1/07 B1 36,755 37,444
Ascent Entertainment Group, B3 11,280 8,629
Inc. 0% 12/15/04 (c)
Avalon Cable Michigan, B3 3,830 3,830
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
Benedek Communications Corp. B3 12,680 10,905
0% 5/15/06 (c)
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (c) B3 9,910 8,820
9.25% 7/1/07 B2 6,270 6,442
Century Communications Corp.:
8.375% 12/15/07 B1 620 577
8.75% 10/1/07 B1 2,250 2,149
9.5% 3/1/05 B1 1,770 1,774
Chancellor Media Corp.:
8% 11/1/08 Ba2 31,890 31,252
8.125% 12/15/07 B1 9,935 9,736
9% 10/1/08 B1 17,475 17,825
Charter Communications B2 12,210 11,477
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 1,810 1,792
10.25% 7/1/07 B3 10,990 11,375
Classic Cable, Inc. 9.375% B3 3,995 3,875
8/1/09
Classic Communications, Inc. Caa1 9,500 6,413
0% 8/1/09 (c)
Comcast UK Cable Partners B2 5,370 4,887
Ltd. 0% 11/15/07 (c)
Diamond Cable Communications B3 22,410 20,225
PLC yankee 0% 12/15/05 (c)
EchoStar DBS Corp. 9.375% B2 113,095 111,956
2/1/09
Emmis Communications Corp. B2 5,245 4,996
8.125% 3/15/09
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (c) B2 39,515 28,648
8.375% 4/15/10 B2 25,680 25,616
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Holdings B1 $ 36,450 $ 31,256
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (c)
FrontierVision Holdings Caa1 22,460 19,259
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(c)
Golden Sky DBS, Inc. 0% Caa1 18,240 10,123
3/1/07 (c)
International Cabletel, Inc. B3 51,577 44,872
0% 2/1/06 (c)
LIN Holdings Corp. 0% 3/1/08 B3 11,210 7,287
(c)
NTL Communications Corp.:
0% 10/1/08 (c) B3 30,780 20,777
11.5% 10/1/08 B3 35,980 38,319
NTL, Inc.:
0% 4/1/08 (c) B3 43,000 28,810
10% 2/15/07 B3 28,600 29,172
Pegasus Communications Corp.:
9.625% 10/15/05 B3 640 622
9.75% 12/1/06 B3 2,100 2,042
Satelites Mexicanos SA de CV:
9.26% 6/30/04 (d)(e) B1 17,115 15,831
10.125% 11/1/04 B3 34,710 24,991
Telewest Communications PLC B1 5,360 5,789
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 9,399
0% 10/1/07 (c) B1 29,550 26,891
United International B3 7,110 4,026
Holdings, Inc. 0% 2/15/08 (c)
United Pan-Europe
Communications NV:
10.875% 8/1/09 (d) B2 23,150 22,456
11.25% 11/1/09 (d) B2 31,010 31,010
797,893
ENTERTAINMENT - 1.9%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 19,370 16,852
9.5% 2/1/11 B3 4,310 3,750
Cinemark USA, Inc. 8.5% 8/1/08 B2 3,390 2,788
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 4,749
Livent, Inc. 9.375% 10/15/04 - 11,100 3,330
(b)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Mohegan Tribal Gaming Ba3 $ 3,630 $ 3,553
Authority 8.75% 1/1/09
Premier Parks, Inc.:
9.25% 4/1/06 B3 13,110 12,487
9.75% 6/15/07 B3 8,280 8,094
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 8,770 6,380
9.5% 6/1/08 Caa1 8,450 6,422
Waterford Gaming B1 10,754 10,404
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (d)
78,809
LODGING & GAMING - 3.2%
Circus Circus Enterprises, Ba2 5,620 4,721
Inc. 7.625% 7/15/13
Florida Panthers Holdings, B2 17,210 16,177
Inc. 9.875% 4/15/09
Horseshoe Gaming LLC 8.625% B2 37,840 36,043
5/15/09
ITT Corp.:
6.75% 11/15/05 Ba1 6,420 5,601
7.375% 11/15/15 Ba1 11,015 8,862
KSL Recreation Group, Inc. B3 7,830 7,673
10.25% 5/1/07
Signature Resorts, Inc. 9.75% B3 22,680 19,051
10/1/07
Station Casinos, Inc. 8.875% B2 15,820 15,306
12/1/08
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 2,800 2,625
8.625% 12/15/07 Ba3 17,690 16,231
132,290
RESTAURANTS - 0.4%
Host Marriott Travel Plazas, Ba3 11,050 11,216
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 8,990 7,934
7/15/08
19,150
TOTAL MEDIA & LEISURE 1,028,142
NONDURABLES - 1.2%
FOODS - 0.7%
Del Monte Corp. 12.25% 4/15/07 B3 7,225 7,948
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Del Monte Foods Co. 0% Caa2 $ 16,544 $ 12,408
12/15/07 (c)
Gorges/Quik-To-Fix Foods, Caa1 18,290 8,779
Inc. 11.5% 12/1/06
29,135
HOUSEHOLD PRODUCTS - 0.5%
AKI Holding Corp. 0% 7/1/09 Caa1 17,930 8,248
(c)
AKI, Inc. 10.5% 7/1/08 B2 13,150 11,572
19,820
TOTAL NONDURABLES 48,955
RETAIL & WHOLESALE - 2.3%
GENERAL MERCHANDISE STORES -
0.2%
Kmart Corp. 7.95% 2/1/23 Ba1 8,850 7,865
GROCERY STORES - 2.0%
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 7,890 7,062
10.5% 12/1/04 B3 7,160 6,587
Jitney-Jungle Stores of C 70,419 880
America, Inc. 10.375%
9/15/07 (b)
Pathmark Stores, Inc.:
9.625% 5/1/03 Caa1 6,220 6,033
11.625% 6/15/02 Caa2 35,975 34,896
12.625% 6/15/02 Caa2 18,050 17,509
Smiths Food & Drug Centers,
Inc. 1994 Pass Through Trust:
8.64% 7/2/12 BBB- 5,000 5,013
9.2% 7/2/18 BBB- 3,700 3,746
81,726
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
U.S. Office Products Co. B3 10,755 5,539
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 95,130
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 1.8%
LEASING & RENTAL - 0.2%
Anthony Crane Rentals B3 $ 8,210 $ 6,896
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
PRINTING - 0.6%
Sullivan Graphics, Inc. Caa1 15,420 15,574
12.75% 8/1/05
World Color Press, Inc. Baa3 11,330 11,033
8.375% 11/15/08
26,607
SERVICES - 1.0%
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 2,922
Iron Mountain, Inc. 8.75% B2 6,990 6,588
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 5,424
SITEL Corp. 9.25% 3/15/06 B3 13,760 12,659
Spin Cycle, Inc. 0% 5/1/05 (c) - 12,950 1,943
Young American Corp. 11.625% Caa1 15,920 11,144
2/15/06
40,680
TOTAL SERVICES 74,183
TECHNOLOGY - 3.5%
COMPUTER SERVICES & SOFTWARE
- - 2.2%
Concentric Network Corp. B- 27,280 28,371
12.75% 12/15/07
DecisionOne Corp. 9.75% B3 26,350 99
8/1/07 (b)
DecisionOne Holdings Corp. 0% Caa1 10,835 7
8/1/08 unit (b)(c)
Federal Data Corp. 10.125% B3 4,270 2,989
8/1/05
PSINet, Inc. 11% 8/1/09 (d) B3 29,995 30,595
Splitrock Services, Inc. - 22,500 20,700
11.75% 7/15/08
Verio, Inc. 11.25% 12/1/08 B3 7,350 7,662
90,423
ELECTRONIC INSTRUMENTS - 1.0%
Fisher Scientific B3 21,815 20,506
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 23,655 22,177
Co. LLC 9.75% 5/15/08
42,683
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.3%
Intersil Corp. 13.25% 8/15/09 B3 $ 7,350 $ 7,791
unit (d)
Stellex Industries, Inc. 9.5% B3 3,750 2,738
11/1/07
10,529
TOTAL TECHNOLOGY 143,635
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.1%
Kitty Hawk, Inc. 9.95% B1 3,260 3,097
11/15/04
RAILROADS - 0.1%
TFM SA de CV 10.25% 6/15/07 B2 4,610 4,080
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,316
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 12,493
UTILITIES - 21.1%
CELLULAR - 4.3%
Clearnet Communications, Inc. B3 7,240 4,344
0% 5/1/09 (c)
ESAT Holdings Ltd. 0% 2/1/07 B3 15,520 11,407
(c)
Intercel, Inc. 0% 2/1/06 (c) B2 4,250 3,655
McCaw International Ltd. 0% Caa1 24,270 15,169
4/15/07 (c)
Millicom International Caa1 20,340 14,848
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 9/15/07 (c) B1 8,510 6,383
0% 2/15/08 (c) B1 3,790 2,681
9.75% 8/15/04 B1 6,950 7,080
12% 11/1/08 B1 22,320 24,831
Orbital Imaging Corp.:
11.625% 3/1/05 CCC+ 35,250 23,618
11.625% 3/1/05 CCC+ 5,910 3,960
Rogers Cantel, Inc. 8.8% B2 10,630 10,630
10/1/07
Rogers Communications, Inc. B2 11,390 11,504
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 25,000 15,250
(c)(d)
Tritel PCS, Inc. 0% 5/15/09 B3 10,140 6,109
(c)(d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Triton PCS, Inc. 0% 5/1/08 (c) Caa1 $ 14,300 $ 9,831
US Unwired, Inc. 0% 11/1/09 Caa1 12,130 6,399
(d)
177,699
ELECTRIC UTILITY - 0.4%
CMS Energy Corp. 6.75% 1/15/04 Ba3 12,240 11,322
Niagara Mohawk Power Corp. 0% Baa3 8,690 6,431
7/1/10 (c)
17,753
TELEPHONE SERVICES - 16.4%
Allegiance Telecom, Inc. B3 19,580 21,244
12.875% 5/15/08
Call-Net Enterprises, Inc. B2 12,800 11,584
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (c) B3 28,270 15,902
12.5% 2/15/09 B3 7,200 7,128
e.spire Communications, Inc.:
0% 11/1/05 (c) - 2,550 1,492
0% 4/1/06 (c) - 3,940 2,522
13.75% 7/15/07 - 24,670 21,710
Esat Telecom Group PLC:
0% 2/1/07 (c) B3 7,530 5,535
11.875% 12/1/08 Caa1 4,680 4,797
Firstworld Communications, - 19,020 9,700
Inc. 0% 4/15/08 (c)
Global Crossing Holdings Ltd. Ba2 27,560 28,042
9.625% 5/15/08
Globenet Communication Group Caa1 30,660 30,737
Ltd. 13% 7/15/07 (d)
GST Network Funding, Inc. 0% - 30,160 13,723
5/1/08 (c)
GST Equipment Funding, Inc. - 13,760 13,485
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 26,382
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (c) - 24,990 18,992
Hermes Europe Railtel BV B3 20,320 20,066
11.5% 8/15/07
Hyperion Telecommunications,
Inc.:
0% 4/15/03 (c) B3 3,690 3,146
12% 11/1/07 Caa1 1,690 1,741
ICG Services, Inc.:
0% 2/15/08 (c) B3 91,530 44,850
0% 5/1/08 (c) B3 6,390 3,067
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Insight Midwst LP/Insight B1 $ 3,340 $ 3,424
Capital, Inc. 9.75% 10/1/09
(d)
Intermedia Communications,
Inc.:
8.5% 1/15/08 B2 2,490 2,210
8.6% 6/1/08 B2 11,320 10,103
8.875% 11/1/07 B2 2,070 1,863
9.5% 3/1/09 B2 11,250 10,406
IXC Communications, Inc. 9% B3 18,335 18,335
4/15/08
KMC Telecom Holdings, Inc.:
0% 2/15/08 (c) Caa2 28,410 14,844
13.5% 5/15/09 (d) Caa2 10,070 9,869
Level 3 Communications, Inc. B3 34,930 32,529
9.125% 5/1/08
Logix Communications - 17,455 12,568
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (c) B1 1,440 1,138
8.375% 3/15/08 B1 5,140 4,883
9.25% 7/15/07 B1 12,240 12,240
9.5% 11/1/08 B1 13,730 13,833
Metromedia Fiber Network, B2 24,497 24,252
Inc. 10% 11/15/08
MGC Communications, Inc. 13% Caa2 5,340 4,806
10/1/04
Netia Holdings BV 10.25% B3 8,425 7,161
11/1/07
NEXTLINK Communications LLC B3 28,040 29,793
12.5% 4/15/06
NEXTLINK Communications, Inc. B3 10,590 10,842
10.75% 6/1/09
Rhythms NetConnections, Inc.:
0% 5/15/08 (c) B3 16,270 7,972
12.75% 4/15/09 B3 16,860 15,090
RSL Communications Ltd./RSL B2 3,385 3,385
Communications PLC 12.25%
11/15/06
Teligent, Inc. 11.5% 12/1/07 Caa1 6,510 5,940
Viatel, Inc. 11.25% 4/15/08 B3 13,290 12,626
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 13,930 12,154
0% 10/15/05 (c) Caa1 2,030 2,659
0% 3/15/08 (c) CCC 29,240 25,877
10% 3/15/08 CCC 39,930 33,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
- - continued
15% 3/1/07 CCC $ 7,240 $ 8,398
WinStar Equipment Corp. 12.5% B3 21,140 21,827
3/15/04
680,413
TOTAL UTILITIES 875,865
TOTAL NONCONVERTIBLE BONDS 3,225,344
TOTAL CORPORATE BONDS 3,253,330
(Cost $3,617,820)
ASSET-BACKED SECURITIES - 0.4%
Airplanes pass through trust Ba2 18,415 15,100
10.875% 3/15/19 (Cost
$19,398)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,613 1,714
12.5%, 11/1/08 (g)
First Chicago/Lennar Trust I - 10,700 7,590
Series 1997-CHL1 Class E,
8.1104% 4/1/39 (e)
Resolution Trust Corp. Series Ba3 3,301 2,674
1991 M2 Class A3, 7.2498%
9/25/20 (e)
Structured Asset Securities
Corp.:
Series 1995-C1:
Class E, 7.375% 9/25/24 (d) BB 4,000 3,571
Class F, 7.375% 9/25/24 (d) - 2,500 1,948
Series 1996-CFL Class G, B+ 9,260 7,799
7.75% 2/25/28 (d)
TOTAL COMMERCIAL MORTGAGE 25,296
SECURITIES
(Cost $24,647)
</TABLE>
COMMON STOCKS - 3.9%
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 3 $ 287
Ltd. (f)
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 2,883
A (a)
2,884
TOTAL BASIC INDUSTRIES 3,171
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 6
Inc. warrants 5/1/02 (a)(d)
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. 75,769 710
Plains Resources, Inc. (a) 70,500 1,212
1,922
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. (a) 118,000 347
SAVINGS & LOANS - 0.0%
Ocwen Financial Corp. (a) 116,760 781
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (d) 900 79
TOTAL FINANCE 1,207
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Oxford Health Plans, Inc. (a) 180,000 $ 2,126
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 407,000 4,274
(a)
MEDIA & LEISURE - 2.6%
BROADCASTING - 2.5%
Adelphia Communications Corp. 8,000 437
Class A (a)
Classic Communications, Inc. 28,500 475
(a)(d)
CS Wireless Systems, Inc. 439 0
(a)(d)
EchoStar Communications Corp. 1,102,548 68,220
Class A (a)
MediaOne Group, Inc. 250,000 17,766
NTL, Inc. (a) 98,250 7,406
NTL, Inc. warrants 12/31/08 53,424 2,671
(a)
Pegasus Communications Corp. 6,509 6,704
unit (a)
Telewest Communications PLC 15,000 660
sponsored ADR (a)
UIH Australia/Pacific, Inc. 19,690 591
warrants 5/15/06 (a)
104,930
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 0
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc. Series I 1,460 0
warrants 11/14/99 (a)(d)
LODGING & GAMING - 0.1%
Station Casinos, Inc. (a) 90,455 2,188
Sunterra Corp. (a) 275,500 2,755
4,943
TOTAL MEDIA & LEISURE 109,873
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Kroger Co. (a) 59,400 1,236
SERVICES - 0.0%
Spin Cycle, Inc. warrants 12,950 0
5/1/05 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Concentric Network Corp. (a) 102,600 $ 2,629
Concentric Network Corp. 8,680 1,910
warrants 12/15/07 (a)(d)
Splitrock Services, Inc. (a) 65,426 1,431
5,970
UTILITIES - 0.8%
CELLULAR - 0.1%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 103
.47) (a)
warrants 1/15/07 (CV ratio 18,480 134
.6) (a)
McCaw International Ltd. 66,290 149
warrants 4/15/07 (a)(d)
Orbital Imaging Corp. 28,510 342
warrants 3/1/05 (a)(d)
Powertel, Inc. warrants 85,408 3,331
2/1/06 (a)
4,059
ELECTRIC UTILITY - 0.0%
Niagara Mohawk Holdings, Inc. 93,300 1,481
(a)
GAS - 0.1%
Ocean Energy, Inc. (a) 211,410 1,942
TELEPHONE SERVICES - 0.6%
e.spire Communications, Inc. 74,800 538
(a)
Firstworld Communications, 19,020 1,331
Inc. warrants 4/15/08 (a)(d)
GST Telecommunications, Inc. 356,900 2,409
(a)
ICG Communications, Inc. (a) 202,500 3,316
Intermedia Communications, 2,500 239
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(d)
McLeodUSA, Inc. Class A (a) 100,000 4,463
Metromedia Fiber Network, 150,000 4,959
Inc. Class A (a)
MGC Communications, Inc. 28,787 792
(a)(d)
Rhythms NetConnections, Inc. 70,000 2,043
(a)
RSL Communications Ltd./RSL 25,710 2,160
Communications PLC warrants
11/15/06 (a)(d)
Source Media, Inc. warrants 48,052 192
11/1/07 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Versatel Telecom BV warrants 7,060 $ 1,017
5/15/08 (a)(d)
Viatel, Inc. (a) 63,246 2,111
25,665
TOTAL UTILITIES 33,147
TOTAL COMMON STOCKS 163,988
(Cost $81,469)
PREFERRED STOCKS - 11.7%
CONVERTIBLE PREFERRED STOCKS
- - 0.3%
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Host Marriott Financial Trust 146,600 4,911
$3.375 QUIPS
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
IXC Communications, Inc. 179,000 7,484
$3.375 (d)
TOTAL CONVERTIBLE PREFERRED 12,395
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 11.4%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 34,684 3,711
$12.375 pay-in-kind (a)
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
California Federal Preferred 533,897 12,013
Capital Corp. $2.2812
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 70
Series 1
FINANCE - 0.2%
INSURANCE - 0.2%
American Annuity Group 10,340 9,970
Capital Trust II 8.875%
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fresenius Medical Care 9,847 $ 9,463
Capital Trust 9%
MEDIA & LEISURE - 5.6%
BROADCASTING - 4.7%
Adelphia Communications Corp. 228,536 25,653
$13.00
Benedek Communications Corp. 11,712 8,960
11.5% pay-in-kind
Citadel Broadcasting Co. 80,251 9,108
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 579,680 62,316
Series H, 11.75% pay-in-kind 185,849 20,118
Granite Broadcasting Corp. 28,728 28,010
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 34,382 36,531
Pegasus Communications Corp. 1,820 1,856
12.75% pay-in-kind (a)
192,552
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 7,049
8.625% 6,185 541
Series D, $10.00 309,863 30,212
37,802
TOTAL MEDIA & LEISURE 230,354
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Supermarkets General Holdings 116,319 3,955
Corp. $3.52 pay-in-kind (a)
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. 7,870 7,477
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Ampex Corp. 8% non-cumulative 170 265
TOTAL TECHNOLOGY 7,742
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - 4.7%
CELLULAR - 1.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 11,265 $ 11,547
Series D, 13% pay-in-kind 41,489 44,186
55,733
TELEPHONE SERVICES - 3.4%
e.spire Communications, Inc.:
$127.50 pay-in-kind 30,903 10,507
14.75% pay-in-kind 10,696 4,064
ICG Holdings, Inc. 14.25% 11,472 10,325
pay-in-kind
Intermedia Communications, 60,457 55,620
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 42,057 46,683
12.5% pay-in-kind
Source Media, Inc. 13.50% 112,156 561
pay-in-kind (a)
WinStar Communications, Inc. 16,106 12,321
14.25%
140,081
TOTAL UTILITIES 195,814
TOTAL NONCONVERTIBLE 473,092
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 485,487
(Cost $546,283)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.4%
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S)
Lyondell Chemical Co. sr. - $ 13,930 13,808
secured Tranche E term loan
9.355% 5/17/06 (e)
Oxford Health Plans, Inc. sr. B3 3,000 2,985
secured term loan 9.335%
5/13/03 (e)
TOTAL PURCHASED BANK DEBT 16,793
(Cost $16,913)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 3.3%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase
agreements (U.S. Treasury
obligations), in a joint
trading account at:
5%, dated 10/29/99 due 11/1/99 $ 10,912 $ 10,907
5.22%, dated 10/29/99 due 127,666 127,610
11/1/99
TOTAL CASH EQUIVALENTS 138,517
(Cost $138,517)
TOTAL INVESTMENT PORTFOLIO - 4,098,511
98.6%
(Cost $4,445,047)
NET OTHER ASSETS - 1.4% 57,709
NET ASSETS - 100% $ 4,156,220
</TABLE>
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(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 $439,500,000 or 10.6% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Share amount represents number of units held.
(g) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Bardell Associates Note Trust 4/19/94 $ 1,640
12.5%, 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 9/30/99 $ 11,762
12/18/08 pay-in-kind
(h) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
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 0.4% BBB 0.8%
Ba 7.9% BB 7.9%
B 52.2% B 52.9%
Caa 10.7% CCC 10.6%
Ca, C 0.6% CC, C 0.4%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 5.4%. FMR has
determined that unrated debt securities that are lower quality account
for 5.4% of the total value of investment in securities.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $4,446,073,000. Net unrealized depreciation
aggregated $347,562,000, of which $163,248,000 related to appreciated
investment securities and $510,810,000 related to depreciated
investment securities.
The fund hereby designates approximately $70,359,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $34,789,000 all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 4,098,511
value (including repurchase
agreements of $138,517)
(cost $4,445,047) - See
accompanying schedule
Receivable for investments 6,209
sold
Receivable for fund shares 30,451
sold
Dividends receivable 950
Interest receivable 78,982
Other receivables 192
TOTAL ASSETS 4,215,295
LIABILITIES
Payable for investments $ 37,611
purchased
Payable for fund shares 9,852
redeemed
Distributions payable 7,094
Accrued management fee 1,986
Distribution fees payable 1,626
Other payables and accrued 906
expenses
TOTAL LIABILITIES 59,075
NET ASSETS $ 4,156,220
Net Assets consist of:
Paid in capital $ 4,486,265
Undistributed net investment 52,902
income
Accumulated undistributed net (36,445)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (346,502)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,156,220
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) OCTOBER 31, 1999
CALCULATION OF MAXIMUM $11.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($221,009
(divided by) 19,875 shares)
Maximum offering price per $11.67
share (100/95.25 of $11.12)
CLASS T: NET ASSET VALUE and $11.14
redemption price per share
($2,351,469 (divided by)
211,113 shares)
Maximum offering price per $11.54
share (100/96.50 of $11.14)
CLASS B: NET ASSET VALUE and $11.09
offering price per share
($1,192,458 (divided by)
107,488 shares) A
CLASS C: NET ASSET VALUE and $11.11
offering price per share
($268,655 (divided by)
24,172 shares) A
INSTITUTIONAL CLASS: NET $10.90
ASSET VALUE, offering price
and redemption price per
share ($122,629 (divided by)
11,250 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 YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 59,932
Dividends
Interest 350,409
TOTAL INCOME 410,341
EXPENSES
Management fee $ 24,193
Transfer agent fees 7,192
Distribution fees 18,904
Accounting fees and expenses 927
Non-interested trustees' 13
compensation
Custodian fees and expenses 127
Registration fees 371
Audit 55
Legal 140
Total expenses before 51,922
reductions
Expense reductions (51) 51,871
NET INVESTMENT INCOME 358,470
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (56,488)
Foreign currency transactions 7 (56,481)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 120,278
Assets and liabilities in 34 120,312
foreign currencies
NET GAIN (LOSS) 63,831
NET INCREASE (DECREASE) IN $ 422,301
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 358,470 $ 313,431
income
Net realized gain (loss) (56,481) 61,426
Change in net unrealized 120,312 (597,544)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 422,301 (222,687)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (352,867) (282,288)
From net investment income
From net realized gain (40,674) (70,360)
In excess of net realized (29,684) -
gain
Return of capital (16,824) -
TOTAL DISTRIBUTIONS (440,049) (352,648)
Share transactions - net 568,709 1,259,000
increase (decrease)
TOTAL INCREASE (DECREASE) 550,961 683,665
IN NET ASSETS
NET ASSETS
Beginning of period 3,605,259 2,921,594
End of period (including $ 4,156,220 $ 3,605,259
undistributed net investment
income of $52,902 and
$74,600, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 1.022 1.111 1.058 .163
Net realized and unrealized .287 (1.603) .710 .267
gain (loss)
Total from investment 1.309 (.492) 1.768 .430
operations
Less Distributions
From net investment income (1.030) H (1.048) (1.078) (.140)
From net realized gain (.120) H (.300) (.060) -
In excess of net realized gain (.080) - - -
Return of capital (.049) - - -
Total distributions (1.279) (1.348) (1.138) (.140)
Net asset value, end of period $ 11.120 $ 11.090 $ 12.930 $ 12.300
TOTAL RETURN B, C 11.98% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 221 $ 117 $ 44 $ 4
millions)
Ratio of expenses to average .95% 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .95% 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 8.89% 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 61% 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.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
of period
Income from Investment
Operations
Net investment income C 1.021 1.119 1.086 1.105 .930
Net realized and unrealized .274 (1.612) .686 .364 .680
gain (loss)
Total from investment 1.295 (.493) 1.772 1.469 1.610
operations
Less Distributions
From net investment income (1.017) E (1.037) (1.082) (1.069) (.920)
From net realized gain (.120) E (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.048) - - - -
Total distributions (1.265) (1.337) (1.142) (1.069) (.920)
Net asset value, end of period $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910
TOTAL RETURN A, B 11.83% (4.54)% 15.21% 12.92% 15.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,351 $ 2,322 $ 2,208 $ 1,709 $ 1,200
(in millions)
Ratio of expenses to average 1.04% 1.07% 1.09% 1.12% 1.15%
net assets
Ratio of expenses to average 1.04% 1.07% 1.08% D 1.11% D 1.15%
net assets after expense
reductions
Ratio of net investment 8.80% 8.91% 8.72% 9.20% 8.32%
income to average net assets
Portfolio turnover rate 61% 75% 105% 121% 112%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
of period
Income from Investment
Operations
Net investment income C .938 1.024 .998 1.017 .794
Net realized and unrealized .276 (1.588) .674 .361 .721
gain (loss)
Total from investment 1.214 (.564) 1.672 1.378 1.515
operations
Less Distributions
From net investment income (.949) E (.956) (1.002) (.988) (.835)
From net realized gain (.120) E (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.045) - - - -
Total distributions (1.194) (1.256) (1.062) (.988) (.835)
Net asset value, end of period $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890
TOTAL RETURN A, B 11.10% (5.10)% 14.34% 12.10% 14.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,192 $ 923 $ 593 $ 344 $ 156
(in millions)
Ratio of expenses to average 1.70% 1.74% 1.74% 1.79% 2.01%
net assets
Ratio of expenses to average 1.69% D 1.74% 1.74% 1.79% 2.01%
net assets after expense
reductions
Ratio of net investment 8.15% 8.25% 8.04% 8.52% 7.46%
income to average net assets
Portfolio turnover rate 61% 75% 105% 121% 112%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .926 .988
Net realized and unrealized .280 (1.639)
gain (loss)
Total from investment 1.206 (.651)
operations
Less Distributions
From net investment income (.941) F (.929)
From net realized gain (.120) F (.300)
In excess of net realized gain (.080) -
Return of capital (.045) -
Total distributions (1.186) (1.229)
Net asset value, end of period $ 11.110 $ 11.090
TOTAL RETURN B, C 11.00% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 269 $ 130
millions)
Ratio of expenses to average 1.78% 1.86% A
net assets
Ratio of net investment 8.06% 8.21% A
income to average net assets
Portfolio turnover rate 61% 75%
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 THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 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 1.024 1.123 1.094 1.070 .390
Net realized and unrealized .269 (1.562) .671 .368 .193
gain (loss)
Total from investment 1.293 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (1.044) G (1.071) (1.115) (1.078) (.383)
From net realized gain (.120) G (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.049) - - - -
Total distributions (1.293) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURN B, C 12.05% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 123 $ 113 $ 76 $ 38 $ 0.1
(in millions)
Ratio of expenses to average .82% .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .81% F .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.03% 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 61% 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.
G THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
differing treatments for paydown gains/losses on certain securities,
market discount, partnerships, 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.
For the period ended October 31, 1999 the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to reductions in
taxable income available for distribution after certain distributions
had been made. ( The tax treatment of distributions for the 1999
calender year will be reported to shareholders prior to February 1,
2000)
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.
2. OPERATING POLICIES - CONTINUED
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $13,939,000 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 $16,793,000 or 0.4% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,789,453,000 and $2,396,112,000, 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 .0920% to .3700% for the
period. The annual individual fund fee rate is 0.45%. 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 annual 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 has 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 WITH AFFILIATES - 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 $ 252,000 $ 1,000
CLASS T 6,308,000 96,000
CLASS B 10,173,000 7,351,000
CLASS C 2,171,000 1,611,000
$ 18,904,000 $ 9,059,000
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 is 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 $ 831,000 $ 324,000
CLASS T 1,848,000 827,000
CLASS B 3,139,000 3,139,00 *
CLASS C 180,000 180,000 *
$ 5,998,000 $ 4,470,000
* 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 $ 305,000 .18
CLASS T 4,275,000 .17
CLASS B 1,999,000 .18
CLASS C 357,000 .16
INSTITUTIONAL CLASS 256,000 .20
$ 7,192,000
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
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. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which the loan
was outstanding amounted to $6,326,000. The weighted average interest
rate was 5.30%. Interest earned from the interfund lending program
amounted to $1,000 and is included in interest income on the Statement
of Operations.
6. 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 $28,000 under this arrangement.
In addition, through an arrangement with the fund's custodian, 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 $23,000 under this arrangement
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
AMOUNTS IN THOUSANDS YEARS ENDED OCTOBER 31,
1999 1998 A
FROM NET INVESTMENT INCOME
Class A $ 14,241 $ 6,814
Class T 218,969 201,133
Class B 91,163 60,100
Class C 16,708 4,494
Institutional Class 11,786 9,747
Total $ 352,867 $ 282,288
RETURN OF CAPITAL
Class A $ 679 $ -
Class T 10,440 -
Class B 4,346 -
Class C 797 -
Institutional Class 562 -
Total $ 16,824 $ -
FROM NET REALIZED GAIN
Class A $ 1,446 $ 1,152
Class T 25,543 52,313
Class B 10,501 14,488
Class C 1,751 165
Institutional Class 1,433 2,242
Total $ 40,674 $ 70,360
IN EXCESS OF NET REALIZED GAIN
Class A $ 1,056 $ -
Class T 18,641 -
Class B 7,663 -
Class C 1,278 -
Institutional Class 1,046 -
Total $ 29,684 $ -
Total Distributions $ 440,049 $ 352,648
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 A 1999 1998 A
CLASS A Shares sold 13,700 8,996 $ 158,674 $ 113,312
Reinvestment of
distributions 1,173 520 13,495 6,429
Shares redeemed (5,559) (2,377) (64,643) (29,080)
Net increase (decrease) 9,314 7,139 $ 107,526 $ 90,661
CLASS T Shares sold 101,408 100,128 $ 1,178,382 $ 1,257,106
Reinvestment of
distributions 18,746 16,088 216,117 201,460
Shares redeemed (118,096) (77,873) (1,367,579) (968,795)
Net increase (decrease) 2,058 38,343 $ 26,920 $ 489,771
CLASS B Shares sold 43,832 47,554 $ 507,464 $ 598,852
Reinvestment of
distributions 6,459 3,879 74,128 48,184
Shares redeemed (26,213) (14,038) (302,213) (172,228)
Net increase (decrease) 24,078 37,395 $ 279,379 $ 474,808
CLASS C Shares sold 20,267 15,155 $ 234,940 $ 191,117
Reinvestment of
distributions 1,004 210 11,541 2,549
Shares redeemed (8,802) (3,662) (101,978) (45,190)
Net increase (decrease) 12,469 11,703 $ 144,503 $ 148,476
INSTITUTIONAL CLASS Shares 11,210 10,756 $ 127,339 $ 133,230
sold
Reinvestment of
distributions 981 822 11,076 10,139
Shares redeemed (11,277) (7,206) (128,034) (88,085)
Net increase (decrease) 914 4,372 $ 10,381 $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor High Yield Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Fidelity Advisor High Yield
Fund as of October 31, 1999 and the related statements of operations ,
changes in net assets and financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1998 and the financial highlights for
each of the years in the four-year period ended October 31, 1998 were
audited by other auditors whose report, dated December 15, 1998,
expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999 by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor High Yield Fund at October 31, 1999, the results of
its operations, the changes in its net assets, and its financial
highlights for the year then ended in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
V
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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-ANN-1299 88097
1.538465.102
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 High Income 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(REGISTERED TRADEMARK) ADVISOR
HIGH YIELD
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 54 The auditors' opinion.
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 year total
returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - 12.05% 60.03% 249.13%
INST CL
ML High Yield Master 4.48% 56.00% 174.49%
ML High Yield Master II 5.61% 57.51% 183.10%
High Current Yield Funds 6.61% 47.68% 150.96%
Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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
one year average represents a peer group of 306 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - 12.05% 9.86% 13.32%
INST CL
ML High Yield Master 4.48% 9.30% 10.62%
ML High Yield Master II 5.61% 9.51% 10.97%
High Current Yield Funds 6.61% 8.07% 9.58%
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
1989/10/31 10000.00 10000.00
1989/11/30 10029.16 10015.05
1989/12/31 10156.14 9974.42
1990/01/31 10008.79 9704.88
1990/02/28 9955.66 9558.22
1990/03/31 10131.03 9731.96
1990/04/30 10252.84 9798.95
1990/05/31 10597.19 9962.55
1990/06/30 10899.66 10215.54
1990/07/31 11153.24 10469.25
1990/08/31 10879.45 9990.42
1990/09/30 10604.39 9572.64
1990/10/31 10357.54 9298.97
1990/11/30 10680.93 9396.61
1990/12/31 10897.65 9539.38
1991/01/31 11148.37 9734.65
1991/02/28 11788.13 10579.16
1991/03/31 12230.36 11093.15
1991/04/30 12602.79 11486.47
1991/05/31 12737.03 11531.21
1991/06/30 13078.98 11785.95
1991/07/31 13551.46 12109.42
1991/08/31 13727.36 12384.90
1991/09/30 13912.72 12563.39
1991/10/31 14466.76 12989.72
1991/11/30 14633.77 13126.55
1991/12/31 14705.78 13276.06
1992/01/31 15379.88 13724.48
1992/02/29 16016.54 14067.51
1992/03/31 16470.55 14269.36
1992/04/30 16620.43 14343.32
1992/05/31 16801.77 14547.14
1992/06/30 17055.38 14723.09
1992/07/31 17362.90 15009.26
1992/08/31 17683.95 15200.42
1992/09/30 17873.34 15361.56
1992/10/31 17643.72 15159.72
1992/11/30 17836.51 15395.93
1992/12/31 18101.28 15591.91
1993/01/31 18585.12 15954.66
1993/02/28 18992.21 16240.04
1993/03/31 19432.90 16525.03
1993/04/30 19543.58 16638.42
1993/05/31 19809.38 16841.38
1993/06/30 20292.78 17169.12
1993/07/31 20559.22 17336.92
1993/08/31 20719.33 17500.04
1993/09/30 20758.80 17577.72
1993/10/31 21254.94 17903.17
1993/11/30 21408.95 18005.56
1993/12/31 21802.89 18194.89
1994/01/31 22429.35 18588.20
1994/02/28 22337.24 18459.05
1994/03/31 21656.27 17862.47
1994/04/30 21415.03 17640.28
1994/05/31 21547.97 17601.71
1994/06/30 21508.22 17682.17
1994/07/31 21591.46 17788.91
1994/08/31 21745.95 17929.94
1994/09/30 21856.47 17926.37
1994/10/31 21816.51 17973.65
1994/11/30 21467.53 17819.00
1994/12/31 21477.20 18006.75
1995/01/31 21661.88 18259.59
1995/02/28 22359.27 18844.84
1995/03/31 22560.53 19099.50
1995/04/30 23288.60 19583.41
1995/05/31 23810.37 20198.12
1995/06/30 23760.11 20333.92
1995/07/31 24348.75 20598.72
1995/08/31 24493.21 20706.81
1995/09/30 24793.21 20947.45
1995/10/31 24980.47 21124.51
1995/11/30 25115.42 21333.88
1995/12/31 25496.11 21691.32
1996/01/31 26102.43 22053.67
1996/02/29 26439.51 22121.06
1996/03/31 26284.01 22030.63
1996/04/30 26571.61 22061.51
1996/05/31 26752.14 22220.52
1996/06/30 26796.55 22309.04
1996/07/31 26800.62 22455.70
1996/08/31 27165.51 22729.60
1996/09/30 28092.29 23263.86
1996/10/31 28181.22 23465.78
1996/11/30 28534.30 23931.39
1996/12/31 28872.03 24136.01
1997/01/31 29165.55 24317.34
1997/02/28 29727.27 24691.18
1997/03/31 28931.05 24351.55
1997/04/30 29170.11 24663.78
1997/05/31 30003.16 25183.08
1997/06/30 30562.69 25572.27
1997/07/31 31580.04 26250.10
1997/08/31 31769.64 26218.50
1997/09/30 32887.98 26690.13
1997/10/31 32525.38 26826.41
1997/11/30 32864.42 27065.39
1997/12/31 33288.79 27337.95
1998/01/31 34203.18 27773.62
1998/02/28 34616.00 27886.15
1998/03/31 35329.03 28151.02
1998/04/30 35354.27 28271.94
1998/05/31 35107.83 28441.95
1998/06/30 35138.94 28588.84
1998/07/31 35429.83 28771.04
1998/08/31 31606.62 27318.71
1998/09/30 31728.52 27389.81
1998/10/31 31156.61 26798.77
1998/11/30 33317.58 28195.68
1998/12/31 33228.21 28145.16
1999/01/31 34352.88 28519.71
1999/02/28 34131.39 28330.93
1999/03/31 35145.65 28660.03
1999/04/30 36584.45 29184.39
1999/05/31 35736.54 28916.67
1999/06/30 35652.06 28845.00
1999/07/31 35455.95 28883.80
1999/08/31 35124.90 28578.62
1999/09/30 34763.20 28464.04
1999/10/29 34912.51 28309.55
IMATRL PRASUN SHR__CHT 19991031 19991115 085247 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Institutional Class on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $34,913 - a 249.13% 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 $28,310 -
a 183.10% increase. Going forward, 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
YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 10.90% A 7.97% 10.03% 9.75% 3.34%
Capital returns 1.15% -12.18% 5.39% 3.06% 1.73%
Total returns 12.05% -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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share A 7.69(cents) 48.02(cents) 116.30(cents)
Annualized dividend rate 8.30% 8.43% 10.24%
30-day annualized yield 10.54% - -
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 $10.91 over the past one
month, $11.30 over the past six months, and $11.36 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis.
A NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS'
INVESTMENT INCOME AT THE TIME OF DISTRIBUTION. DIVIDENDS OF
APPROXIMATELY 4.9(CENTS) PER SHARE PAID DURING 1999 WERE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING
YOUR INCOME TAX RETURN WILL DEPEND UPON YOUR SHARE ACTIVITY AND WILL
BE REPORTED TO YOU IN JANUARY 2000.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
A dramatic recovery in the global
economy triggered an impressive
rally in the high-yield bond market
during the first six months of the
12-month period ending October 31,
1999. In November of last year, the
third in a series of 0.25 percentage
point interest-rate cuts by the Federal
Reserve Board set the stage for
restored confidence in global
markets and an impressive rebound
in the high-yield market. To illustrate
the strength of the recovery, the
Merrill Lynch High Yield Master Index
- - a broad measure of the high-yield
market - produced a total return
of 4.48% for the 12-month period
ending October 31, 1999 despite
posting a loss of 2.69% during the
past six months. The sustained
strength in the domestic economy,
combined with concerns of higher
wage pressures, caused investors
and the Fed to shift their focus back
toward inflation and the prospects
of higher interest rates over the past
six months. Following the Fed's two
rate hikes in June and August and
persistent concerns about inflation,
the rally in the high-yield market was
essentially stopped in its tracks. Even
so, the overall U.S. bond market did
not fare as well in comparison. The
Lehman Brothers Aggregate Bond
Index - a broad measure of the
taxable bond market - returned
0.53% during the 12-month period.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares provided a total return of 12.05%. To get a
sense of how the fund did relative to its competitors, the high
current yield funds average returned 6.61% for the same 12-month
period, according to Lipper Inc. The Merrill Lynch High Yield Master
II Index returned 5.61%.
Q. WHY DID THE FUND OUTPACE ITS LIPPER PEER GROUP AND ITS BENCHMARK
INDEX DURING THE PAST 12 MONTHS?
A. The primary reason for the fund's outperformance was its relatively
large weighting in cable and telecommunications companies, which,
after lagging the high-yield market in the fall of 1998, were among
its best performers during the past year. The fund's holdings in cable
company EchoStar, for example, were boosted by a number of favorable
developments, including the fairly rapid addition of new customers.
CableVision and Adelphia also performed well. Holdings in
telecommunications companies NEXTLINK and Nextel were winners, with
both companies continuing to successfully execute their business
plans. Other strong performers in the telecommunications area included
Canadian-based MetroNet, which was purchased by AT&T Canada, and IXC,
which was purchased by Cincinnati Bell.
Q. OUTSIDE THE TELECOMMUNICATIONS AND CABLE SECTORS, WHERE WERE THE
OTHER WINNERS?
A. The fund's growing stake in energy companies performed well as the
price of oil rose. During most of the first half of the period, the
fund was dramatically underweighted in energy companies. But as the
price of oil began to move higher in the second half of the year, I
added companies such as Chesapeake and Ocean Energy, which did well.
Q. WHICH HOLDINGS PROVED DISAPPOINTING DURING THE YEAR?
A. The biggest disappointment was supermarket chain Jitney-Jungle. The
company suffered from intense competition and turnover in its
management team, which ultimately served to undermine investors'
confidence in the company. To a lesser extent, Integrated Health,
which provides post-acute medical services such as home respitory
services, was another disappointment. It struggled against a difficult
regulatory backdrop for hospitals.
Q. WHAT CHANGES HAVE YOU MADE TO THE FUND DURING THE PAST 12 MONTHS?
A. For one, I reduced the fund's stake in deferred-interest bonds
(DIBs) and pay-in-kind securities (PIKs), thereby reducing the fund's
volatility. While the fund's overall credit quality remained roughly
the same, I made some changes there as well. I reduced the fund's
stake in bonds rated Ba - which are the highest-rated bonds in the
non-investment-grade category - because they are quite vulnerable to
rising interest rates. The fund's stake in Caa-rated bonds also fell
as some of our holdings were bought out or retired. In addition, I
sold some of the lowest-rated Caa-rated bonds in response to rising
default rates. Finally, I added to the fund's stake in cyclical
companies - those that generally do well when the economy is strong -
including paper and chemical companies. With the U.S. economy
continuing to roll along and the Asian economy showing signs of
strengthening, I felt that cyclical companies had the potential to
increase prices and improve their financial results.
Q. WHAT'S YOUR OUTLOOK?
A. In my view, high-yield bond prices offered good value at the end of
the period. Spreads on high-yield bonds - the amount of yield
investors demanded over Treasury bond yields - had narrowed somewhat,
but were still quite wide when viewed on a historical basis. It's true
that part of that wider spread reflects the fact that the default rate
has ticked up. I believe that to some extent the higher default rate
does justify a wider spread than a couple of years ago when the
default rates were very, very low. Even so, I think the yield spread
currently is overcompensating investors for risk. In addition, the
market is placing a premium on liquidity, meaning it will pay more for
bonds that are better-known and more easily traded. In light of that,
I've increasingly tilted the fund's holdings toward more liquid,
larger holdings.
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 October 31,
1999, more than $4.1
billion
MANAGER: Margaret Eagle,
since 1987; joined
Fidelity in 1980
MARGARET EAGLE ON
TELECOMMUNICATIONS
COMPANIES:
"Throughout the past couple of
years, the fund has held relatively
large weightings in
telecommunications companies,
which I think will continue to
offer a lot of opportunity. The fund
is focused on companies that are
building the infrastructure that
will define communications in the
next century. Phone systems as
they exist now, both here and
abroad, are not equipped to
handle the voice and data
transmission demands that will be
placed on them over the next
decade or so. The explosion of the
Internet and the need for
companies to move more data
globally already have put pressure
on existing systems. Despite all
this potential, I anticipate that the
industry will see more
consolidation. When evaluating
these companies, I look for those
that are building quality assets,
are successfully executing
well-thought-out business plans,
are attracting the right type of
customer and are led by quality
management teams."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF
OCTOBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
EchoStar DBS Corp. 2.7 2.1
Adelphia Communications Corp 2.6 3.3
NTL, Inc. 2.6 3.8
Nextel Communications, Inc. 2.3 2.7
WinStar Communications, Inc. 2.3 1.7
12.5 13.6
TOP FIVE MARKET SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
MEDIA & LEISURE 33.1 32.8
UTILITIES 26.8 34.5
BASIC INDUSTRIES 8.0 3.6
ENERGY 5.4 2.1
TECHNOLOGY 3.8 3.1
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.0 0.0
Baa 0.6 0.2
Ba 8.0 9.1
B 53.1 43.2
Caa, Ca, C 13.7 13.0
Not Rated 5.4 10.6
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P (registered trademark) RATINGS.
UNRATED DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT OCTOBER
31, 1999 AND APRIL 30, 1999 ACCOUNT FOR 5.4% AND 10.6% RESPECTIVELY
OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Nonconvertible bonds 77.6% Nonconvertible bonds 73.5%
Convertible bonds, preferred Convertible bonds, preferred
stocks 12.4% stocks 13.1%
Common stocks 3.9% Common stocks 6.1%
Other investments 1.4% Other investments 1.1%
Short-term investments and Short-term investments and
net other assets 4.7% net other assets 6.2%
* FOREIGN INVESTMENTS 8.8% ** FOREIGN INVESTMENTS 9.6%
Row: 1, Col: 1, Value: 77.59999999999999 Row: 1, Col: 1, Value: 73.5
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 12.4 Row: 1, Col: 3, Value: 13.1
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 3.9 Row: 1, Col: 5, Value: 6.1
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.4 Row: 1, Col: 7, Value: 1.1
Row: 1, Col: 8, Value: 4.7 Row: 1, Col: 8, Value: 6.2
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 78.3%
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
CONVERTIBLE BONDS - 0.7%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Rockefeller Center - $ 12,700 $ 10,668
Properties, Inc. 0% 12/31/00
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Total Renal Care Holdings, B1 20,740 13,274
Inc. 7% 5/15/09 (d)
MEDIA & LEISURE - 0.1%
RESTAURANTS - 0.1%
CKE Restaurants, Inc. 4.25% B1 6,560 3,936
3/15/04
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc. - 110 108
0% 12/15/05 (c)(d)
TOTAL CONVERTIBLE BONDS 27,986
NONCONVERTIBLE BONDS - 77.6%
BASIC INDUSTRIES - 7.8%
CHEMICALS & PLASTICS - 3.9%
Huntsman Corp.:
9.5% 7/1/07 (d) B2 16,270 15,212
9.5% 7/1/07 (d) B2 20,470 19,139
Huntsman ICI Chemicals LLC B2 26,360 26,360
10.125% 7/1/09 (d)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 5,350 5,283
9.875% 5/1/07 Ba3 32,710 32,383
10.875% 5/1/09 B2 32,490 32,165
Sterling Chemicals, Inc. Caa3 4,330 2,533
11.25% 4/1/07
Zeneca Specialty Chemicals B2 28,890 28,962
PLC 11% 7/1/09 (d)
162,037
PACKAGING & CONTAINERS - 2.0%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 16,153
9.75% 6/15/07 Caa1 6,340 5,975
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS -
CONTINUED
Gaylord Container Corp.: -
continued
9.875% 2/15/08 Caa2 $ 28,165 $ 24,644
Norampac, Inc. 9.5% 2/1/08 B2 12,450 12,761
Packaging Corp. of America B3 23,840 24,138
9.625% 4/1/09
Sweetheart Cup, Inc. 10.5% Caa1 2,525 2,260
9/1/03
85,931
PAPER & FOREST PRODUCTS - 1.9%
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 370 218
12% 3/15/04 B3 7,420 4,378
Container Corp. of America
gtd.:
9.75% 4/1/03 B2 3,490 3,586
11.25% 5/1/04 B2 4,550 4,721
Florida Coast Paper Co. Ca 35,780 22,452
LLC/Florida Coast Paper
Finance Corp. Series B,
12.75% 6/1/03 (b)
Millar Western Forest B3 17,375 16,984
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 3,780 3,818
yankee 10.625% 4/15/05 Caa1 2,460 2,202
Stone Container Corp. 12.58% B2 18,740 20,052
8/1/16 (e)
78,411
TOTAL BASIC INDUSTRIES 326,379
CONSTRUCTION & REAL ESTATE -
0.9%
CONSTRUCTION - 0.3%
Blount, Inc.:
7% 6/15/05 B2 5,770 4,905
13% 8/1/09 (d) B3 7,160 7,375
12,280
REAL ESTATE INVESTMENT TRUSTS
- - 0.6%
Ocwen Asset Investment Corp. - 30,010 24,908
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 37,188
ESTATE
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
0.6%
Blue Bird Body Co. 10.75% B2 $ 5,760 $ 6,451
11/15/06
Federal-Mogul Corp. 7.5% Ba2 21,090 18,749
1/15/09
25,200
CONSUMER DURABLES - 0.1%
Corning Consumer Products Co. B3 4,570 3,610
9.625% 5/1/08
HOME FURNISHINGS - 0.5%
Sealy Corp., Inc. 10% - 12,603 12,225
12/18/08 pay-in-kind (g)
Sealy Mattress Co.:
0% 12/15/07 (c) B3 6,930 4,652
9.875% 12/15/07 B3 5,550 5,390
22,267
TEXTILES & APPAREL - 0.3%
Pillowtex Corp.:
9% 12/15/07 B3 5,340 1,495
10% 11/15/06 B3 4,370 1,224
WestPoint Stevens, Inc. Ba3 10,705 9,554
7.875% 6/15/08
12,273
TOTAL DURABLES 63,350
ENERGY - 5.3%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 14,659
9.625% 5/15/08
ENERGY SERVICES - 1.4%
DI Industries, Inc. 8.875% B1 11,140 9,942
7/1/07
Parker Drilling Co. 9.75% B1 6,061 5,819
11/15/06
R&B Falcon Corp.:
9.5% 12/15/08 Ba3 17,740 17,252
12.25% 3/15/06 Ba3 7,940 8,416
RBF Finance Co.:
11% 3/15/06 Ba3 8,420 8,883
11.375% 3/15/09 Ba3 5,800 6,119
56,431
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
ENERGY - CONTINUED
OIL & GAS - 3.6%
Belden & Blake Corp. 9.875% Caa1 $ 2,002 $ 1,081
6/15/07
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 2,580 2,309
8.5% 3/15/12 B3 1,340 1,085
9.125% 4/15/06 B3 2,320 2,088
9.625% 5/1/05 B3 27,355 25,850
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 15,780 14,991
9.25% 4/1/07 B2 2,940 2,896
Flores & Rucks, Inc. 9.75% B1 3,680 3,790
10/1/06
Gothic Production Corp. B3 9,380 7,926
11.125% 5/1/05
Lomak Petroleum, Inc. 8.75% B2 8,777 7,899
1/15/07
Ocean Energy, Inc.:
7.875% 8/1/03 Ba1 1,940 1,896
8.375% 7/1/08 B1 5,280 5,082
8.625% 8/1/05 Ba3 4,310 4,240
8.875% 7/15/07 B1 760 752
10.375% 10/15/05 B2 590 617
Pioneer Natural Resources Co. Ba2 11,920 10,043
6.5% 1/15/08
Plains Resources, Inc.:
Series B 10.25% 3/15/06 B2 2,780 2,780
10.25% 3/15/06 (d) B2 9,340 9,293
Seven Seas Petroleum, Inc. Caa1 3,425 1,370
12.5% 5/15/05
Snyder Oil Corp. 8.75% 6/15/07 Ba3 4,090 3,967
Swift Energy Co. 10.25% 8/1/09 B2 18,430 18,407
Tesoro Petroleum Corp. 9% B1 14,830 14,274
7/1/08
Vintage Petroleum, Inc.:
9% 12/15/05 B1 1,620 1,580
9.75% 6/30/09 B1 3,590 3,608
147,824
TOTAL ENERGY 218,914
FINANCE - 2.9%
CREDIT & OTHER FINANCE - 2.8%
Ameriserve Finance B2 14,170 13,107
Trust/Ameriserve Capital
Corp. 12% 9/15/06 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 13,890 $ 7,917
10% 3/15/04 Caa3 2,950 1,682
ContiFinancial Corp.:
7.5% 3/15/02 Caa2 5,410 1,190
8.125% 4/1/08 Caa2 21,330 5,546
8.375% 8/15/03 Caa2 9,450 1,985
Denbury Management, Inc. 9% B3 27,120 24,883
3/1/08
Digital Television Services B3 12,450 13,073
LLC/ DTS Capital, Inc. 12.5%
8/1/07
Dobson/Sygnet Communications - 1,230 1,316
Co. 12.25% 12/15/08
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 8,708
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 6,670 5,069
7.6% 8/1/07 Ba2 6,970 4,287
7.875% 8/1/03 Ba2 15,230 10,128
Ocwen Capital Trust 10.875% B2 4,780 3,155
8/1/27
Stone Container Finance Co. B2 8,330 8,747
11.5% 8/15/06 (d)
WinStar Equipment II Corp. CCC+ 5,450 5,627
12.5% 3/15/04
116,420
INSURANCE - 0.1%
ITT Corp. 6.75% 11/15/03 Ba1 4,240 3,920
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (d) - 5 5
TOTAL FINANCE 120,345
HEALTH - 2.2%
DRUGS & PHARMACEUTICALS - 0.5%
Global Health Sciences, Inc. Caa1 44,000 21,120
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- - 0.2%
Graham-Field Health Products, Caa1 13,670 3,691
Inc. 9.75% 8/15/07
PharMerica, Inc. 8.375% 4/1/08 B2 8,500 5,950
9,641
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - 1.5%
Concentra Operating Corp. 13% B3 $ 1,260 $ 1,134
8/15/09 (d)
Everest Healthcare Services, B3 3,740 3,422
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 6,771
4/15/08
Harborside Healthcare Corp. B3 24,000 6,000
0% 8/1/08 (c)
Integrated Health Services,
Inc.:
9.25% 1/15/08 B2 26,657 1,333
9.5% 9/15/07 B2 14,565 1,020
Oxford Health Plans, Inc. 11% Caa1 29,600 27,232
5/15/05
Tenet Healthcare Corp. 8.125% Ba3 4,900 4,361
12/1/08
Unilab Corp. 12.75% 10/1/09 B3 9,370 9,393
(d)
60,666
TOTAL HEALTH 91,427
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.1%
ELECTRICAL EQUIPMENT - 0.8%
L-3 Communications Corp.:
8% 8/1/08 B2 10,600 9,699
10.375% 5/1/07 B2 2,600 2,691
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B2 5,910 6,146
11.5% 9/15/09 (d) B2 10,590 11,067
11.625% 8/15/06 B2 2,510 2,636
32,239
POLLUTION CONTROL - 1.3%
Allied Waste North America, B2 67,975 57,099
Inc. 10% 8/1/09 (d)
TOTAL INDUSTRIAL MACHINERY & 89,338
EQUIPMENT
MEDIA & LEISURE - 24.7%
BROADCASTING - 19.2%
ACME Television LLC/ACME B3 11,102 9,770
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 26,030 23,427
8.375% 2/1/08 B1 13,640 12,839
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Adelphia Communications
Corp.: - continued
9.25% 10/1/02 B1 $ 8,200 $ 8,282
9.875% 3/1/07 B1 36,755 37,444
Ascent Entertainment Group, B3 11,280 8,629
Inc. 0% 12/15/04 (c)
Avalon Cable Michigan, B3 3,830 3,830
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
Benedek Communications Corp. B3 12,680 10,905
0% 5/15/06 (c)
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (c) B3 9,910 8,820
9.25% 7/1/07 B2 6,270 6,442
Century Communications Corp.:
8.375% 12/15/07 B1 620 577
8.75% 10/1/07 B1 2,250 2,149
9.5% 3/1/05 B1 1,770 1,774
Chancellor Media Corp.:
8% 11/1/08 Ba2 31,890 31,252
8.125% 12/15/07 B1 9,935 9,736
9% 10/1/08 B1 17,475 17,825
Charter Communications B2 12,210 11,477
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 1,810 1,792
10.25% 7/1/07 B3 10,990 11,375
Classic Cable, Inc. 9.375% B3 3,995 3,875
8/1/09
Classic Communications, Inc. Caa1 9,500 6,413
0% 8/1/09 (c)
Comcast UK Cable Partners B2 5,370 4,887
Ltd. 0% 11/15/07 (c)
Diamond Cable Communications B3 22,410 20,225
PLC yankee 0% 12/15/05 (c)
EchoStar DBS Corp. 9.375% B2 113,095 111,956
2/1/09
Emmis Communications Corp. B2 5,245 4,996
8.125% 3/15/09
Falcon Holding Group
LP/Falcon Funding Corp.:
0% 4/15/10 (c) B2 39,515 28,648
8.375% 4/15/10 B2 25,680 25,616
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
FrontierVision Holdings B1 $ 36,450 $ 31,256
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (c)
FrontierVision Holdings Caa1 22,460 19,259
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(c)
Golden Sky DBS, Inc. 0% Caa1 18,240 10,123
3/1/07 (c)
International Cabletel, Inc. B3 51,577 44,872
0% 2/1/06 (c)
LIN Holdings Corp. 0% 3/1/08 B3 11,210 7,287
(c)
NTL Communications Corp.:
0% 10/1/08 (c) B3 30,780 20,777
11.5% 10/1/08 B3 35,980 38,319
NTL, Inc.:
0% 4/1/08 (c) B3 43,000 28,810
10% 2/15/07 B3 28,600 29,172
Pegasus Communications Corp.:
9.625% 10/15/05 B3 640 622
9.75% 12/1/06 B3 2,100 2,042
Satelites Mexicanos SA de CV:
9.26% 6/30/04 (d)(e) B1 17,115 15,831
10.125% 11/1/04 B3 34,710 24,991
Telewest Communications PLC B1 5,360 5,789
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 9,399
0% 10/1/07 (c) B1 29,550 26,891
United International B3 7,110 4,026
Holdings, Inc. 0% 2/15/08 (c)
United Pan-Europe
Communications NV:
10.875% 8/1/09 (d) B2 23,150 22,456
11.25% 11/1/09 (d) B2 31,010 31,010
797,893
ENTERTAINMENT - 1.9%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 19,370 16,852
9.5% 2/1/11 B3 4,310 3,750
Cinemark USA, Inc. 8.5% 8/1/08 B2 3,390 2,788
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 4,749
Livent, Inc. 9.375% 10/15/04 - 11,100 3,330
(b)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Mohegan Tribal Gaming Ba3 $ 3,630 $ 3,553
Authority 8.75% 1/1/09
Premier Parks, Inc.:
9.25% 4/1/06 B3 13,110 12,487
9.75% 6/15/07 B3 8,280 8,094
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 8,770 6,380
9.5% 6/1/08 Caa1 8,450 6,422
Waterford Gaming B1 10,754 10,404
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (d)
78,809
LODGING & GAMING - 3.2%
Circus Circus Enterprises, Ba2 5,620 4,721
Inc. 7.625% 7/15/13
Florida Panthers Holdings, B2 17,210 16,177
Inc. 9.875% 4/15/09
Horseshoe Gaming LLC 8.625% B2 37,840 36,043
5/15/09
ITT Corp.:
6.75% 11/15/05 Ba1 6,420 5,601
7.375% 11/15/15 Ba1 11,015 8,862
KSL Recreation Group, Inc. B3 7,830 7,673
10.25% 5/1/07
Signature Resorts, Inc. 9.75% B3 22,680 19,051
10/1/07
Station Casinos, Inc. 8.875% B2 15,820 15,306
12/1/08
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 2,800 2,625
8.625% 12/15/07 Ba3 17,690 16,231
132,290
RESTAURANTS - 0.4%
Host Marriott Travel Plazas, Ba3 11,050 11,216
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 8,990 7,934
7/15/08
19,150
TOTAL MEDIA & LEISURE 1,028,142
NONDURABLES - 1.2%
FOODS - 0.7%
Del Monte Corp. 12.25% 4/15/07 B3 7,225 7,948
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
FOODS - CONTINUED
Del Monte Foods Co. 0% Caa2 $ 16,544 $ 12,408
12/15/07 (c)
Gorges/Quik-To-Fix Foods, Caa1 18,290 8,779
Inc. 11.5% 12/1/06
29,135
HOUSEHOLD PRODUCTS - 0.5%
AKI Holding Corp. 0% 7/1/09 Caa1 17,930 8,248
(c)
AKI, Inc. 10.5% 7/1/08 B2 13,150 11,572
19,820
TOTAL NONDURABLES 48,955
RETAIL & WHOLESALE - 2.3%
GENERAL MERCHANDISE STORES -
0.2%
Kmart Corp. 7.95% 2/1/23 Ba1 8,850 7,865
GROCERY STORES - 2.0%
Fleming Companies, Inc.:
Series B, 10.625% 7/31/07 B3 7,890 7,062
10.5% 12/1/04 B3 7,160 6,587
Jitney-Jungle Stores of C 70,419 880
America, Inc. 10.375%
9/15/07 (b)
Pathmark Stores, Inc.:
9.625% 5/1/03 Caa1 6,220 6,033
11.625% 6/15/02 Caa2 35,975 34,896
12.625% 6/15/02 Caa2 18,050 17,509
Smiths Food & Drug Centers,
Inc. 1994 Pass Through Trust:
8.64% 7/2/12 BBB- 5,000 5,013
9.2% 7/2/18 BBB- 3,700 3,746
81,726
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
U.S. Office Products Co. B3 10,755 5,539
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 95,130
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 1.8%
LEASING & RENTAL - 0.2%
Anthony Crane Rentals B3 $ 8,210 $ 6,896
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
PRINTING - 0.6%
Sullivan Graphics, Inc. Caa1 15,420 15,574
12.75% 8/1/05
World Color Press, Inc. Baa3 11,330 11,033
8.375% 11/15/08
26,607
SERVICES - 1.0%
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 2,922
Iron Mountain, Inc. 8.75% B2 6,990 6,588
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 5,424
SITEL Corp. 9.25% 3/15/06 B3 13,760 12,659
Spin Cycle, Inc. 0% 5/1/05 (c) - 12,950 1,943
Young American Corp. 11.625% Caa1 15,920 11,144
2/15/06
40,680
TOTAL SERVICES 74,183
TECHNOLOGY - 3.5%
COMPUTER SERVICES & SOFTWARE
- - 2.2%
Concentric Network Corp. B- 27,280 28,371
12.75% 12/15/07
DecisionOne Corp. 9.75% B3 26,350 99
8/1/07 (b)
DecisionOne Holdings Corp. 0% Caa1 10,835 7
8/1/08 unit (b)(c)
Federal Data Corp. 10.125% B3 4,270 2,989
8/1/05
PSINet, Inc. 11% 8/1/09 (d) B3 29,995 30,595
Splitrock Services, Inc. - 22,500 20,700
11.75% 7/15/08
Verio, Inc. 11.25% 12/1/08 B3 7,350 7,662
90,423
ELECTRONIC INSTRUMENTS - 1.0%
Fisher Scientific B3 21,815 20,506
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 23,655 22,177
Co. LLC 9.75% 5/15/08
42,683
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.3%
Intersil Corp. 13.25% 8/15/09 B3 $ 7,350 $ 7,791
unit (d)
Stellex Industries, Inc. 9.5% B3 3,750 2,738
11/1/07
10,529
TOTAL TECHNOLOGY 143,635
TRANSPORTATION - 0.3%
AIR TRANSPORTATION - 0.1%
Kitty Hawk, Inc. 9.95% B1 3,260 3,097
11/15/04
RAILROADS - 0.1%
TFM SA de CV 10.25% 6/15/07 B2 4,610 4,080
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,316
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 12,493
UTILITIES - 21.1%
CELLULAR - 4.3%
Clearnet Communications, Inc. B3 7,240 4,344
0% 5/1/09 (c)
ESAT Holdings Ltd. 0% 2/1/07 B3 15,520 11,407
(c)
Intercel, Inc. 0% 2/1/06 (c) B2 4,250 3,655
McCaw International Ltd. 0% Caa1 24,270 15,169
4/15/07 (c)
Millicom International Caa1 20,340 14,848
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 9/15/07 (c) B1 8,510 6,383
0% 2/15/08 (c) B1 3,790 2,681
9.75% 8/15/04 B1 6,950 7,080
12% 11/1/08 B1 22,320 24,831
Orbital Imaging Corp.:
11.625% 3/1/05 CCC+ 35,250 23,618
11.625% 3/1/05 CCC+ 5,910 3,960
Rogers Cantel, Inc. 8.8% B2 10,630 10,630
10/1/07
Rogers Communications, Inc. B2 11,390 11,504
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 25,000 15,250
(c)(d)
Tritel PCS, Inc. 0% 5/15/09 B3 10,140 6,109
(c)(d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Triton PCS, Inc. 0% 5/1/08 (c) Caa1 $ 14,300 $ 9,831
US Unwired, Inc. 0% 11/1/09 Caa1 12,130 6,399
(d)
177,699
ELECTRIC UTILITY - 0.4%
CMS Energy Corp. 6.75% 1/15/04 Ba3 12,240 11,322
Niagara Mohawk Power Corp. 0% Baa3 8,690 6,431
7/1/10 (c)
17,753
TELEPHONE SERVICES - 16.4%
Allegiance Telecom, Inc. B3 19,580 21,244
12.875% 5/15/08
Call-Net Enterprises, Inc. B2 12,800 11,584
9.375% 5/15/09
Covad Communications Group,
Inc.:
0% 3/15/08 (c) B3 28,270 15,902
12.5% 2/15/09 B3 7,200 7,128
e.spire Communications, Inc.:
0% 11/1/05 (c) - 2,550 1,492
0% 4/1/06 (c) - 3,940 2,522
13.75% 7/15/07 - 24,670 21,710
Esat Telecom Group PLC:
0% 2/1/07 (c) B3 7,530 5,535
11.875% 12/1/08 Caa1 4,680 4,797
Firstworld Communications, - 19,020 9,700
Inc. 0% 4/15/08 (c)
Global Crossing Holdings Ltd. Ba2 27,560 28,042
9.625% 5/15/08
Globenet Communication Group Caa1 30,660 30,737
Ltd. 13% 7/15/07 (d)
GST Network Funding, Inc. 0% - 30,160 13,723
5/1/08 (c)
GST Equipment Funding, Inc. - 13,760 13,485
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 26,382
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (c) - 24,990 18,992
Hermes Europe Railtel BV B3 20,320 20,066
11.5% 8/15/07
Hyperion Telecommunications,
Inc.:
0% 4/15/03 (c) B3 3,690 3,146
12% 11/1/07 Caa1 1,690 1,741
ICG Services, Inc.:
0% 2/15/08 (c) B3 91,530 44,850
0% 5/1/08 (c) B3 6,390 3,067
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Insight Midwst LP/Insight B1 $ 3,340 $ 3,424
Capital, Inc. 9.75% 10/1/09
(d)
Intermedia Communications,
Inc.:
8.5% 1/15/08 B2 2,490 2,210
8.6% 6/1/08 B2 11,320 10,103
8.875% 11/1/07 B2 2,070 1,863
9.5% 3/1/09 B2 11,250 10,406
IXC Communications, Inc. 9% B3 18,335 18,335
4/15/08
KMC Telecom Holdings, Inc.:
0% 2/15/08 (c) Caa2 28,410 14,844
13.5% 5/15/09 (d) Caa2 10,070 9,869
Level 3 Communications, Inc. B3 34,930 32,529
9.125% 5/1/08
Logix Communications - 17,455 12,568
Enterprises, Inc. 12.25%
6/15/08
McLeodUSA, Inc.:
0% 3/1/07 (c) B1 1,440 1,138
8.375% 3/15/08 B1 5,140 4,883
9.25% 7/15/07 B1 12,240 12,240
9.5% 11/1/08 B1 13,730 13,833
Metromedia Fiber Network, B2 24,497 24,252
Inc. 10% 11/15/08
MGC Communications, Inc. 13% Caa2 5,340 4,806
10/1/04
Netia Holdings BV 10.25% B3 8,425 7,161
11/1/07
NEXTLINK Communications LLC B3 28,040 29,793
12.5% 4/15/06
NEXTLINK Communications, Inc. B3 10,590 10,842
10.75% 6/1/09
Rhythms NetConnections, Inc.:
0% 5/15/08 (c) B3 16,270 7,972
12.75% 4/15/09 B3 16,860 15,090
RSL Communications Ltd./RSL B2 3,385 3,385
Communications PLC 12.25%
11/15/06
Teligent, Inc. 11.5% 12/1/07 Caa1 6,510 5,940
Viatel, Inc. 11.25% 4/15/08 B3 13,290 12,626
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 13,930 12,154
0% 10/15/05 (c) Caa1 2,030 2,659
0% 3/15/08 (c) CCC 29,240 25,877
10% 3/15/08 CCC 39,930 33,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
- - continued
15% 3/1/07 CCC $ 7,240 $ 8,398
WinStar Equipment Corp. 12.5% B3 21,140 21,827
3/15/04
680,413
TOTAL UTILITIES 875,865
TOTAL NONCONVERTIBLE BONDS 3,225,344
TOTAL CORPORATE BONDS 3,253,330
(Cost $3,617,820)
ASSET-BACKED SECURITIES - 0.4%
Airplanes pass through trust Ba2 18,415 15,100
10.875% 3/15/19 (Cost
$19,398)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,613 1,714
12.5%, 11/1/08 (g)
First Chicago/Lennar Trust I - 10,700 7,590
Series 1997-CHL1 Class E,
8.1104% 4/1/39 (e)
Resolution Trust Corp. Series Ba3 3,301 2,674
1991 M2 Class A3, 7.2498%
9/25/20 (e)
Structured Asset Securities
Corp.:
Series 1995-C1:
Class E, 7.375% 9/25/24 (d) BB 4,000 3,571
Class F, 7.375% 9/25/24 (d) - 2,500 1,948
Series 1996-CFL Class G, B+ 9,260 7,799
7.75% 2/25/28 (d)
TOTAL COMMERCIAL MORTGAGE 25,296
SECURITIES
(Cost $24,647)
</TABLE>
COMMON STOCKS - 3.9%
SHARES VALUE (NOTE 1) (000S)
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 3 $ 287
Ltd. (f)
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 2,883
A (a)
2,884
TOTAL BASIC INDUSTRIES 3,171
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 6
Inc. warrants 5/1/02 (a)(d)
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. 75,769 710
Plains Resources, Inc. (a) 70,500 1,212
1,922
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. (a) 118,000 347
SAVINGS & LOANS - 0.0%
Ocwen Financial Corp. (a) 116,760 781
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (d) 900 79
TOTAL FINANCE 1,207
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Oxford Health Plans, Inc. (a) 180,000 $ 2,126
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 407,000 4,274
(a)
MEDIA & LEISURE - 2.6%
BROADCASTING - 2.5%
Adelphia Communications Corp. 8,000 437
Class A (a)
Classic Communications, Inc. 28,500 475
(a)(d)
CS Wireless Systems, Inc. 439 0
(a)(d)
EchoStar Communications Corp. 1,102,548 68,220
Class A (a)
MediaOne Group, Inc. 250,000 17,766
NTL, Inc. (a) 98,250 7,406
NTL, Inc. warrants 12/31/08 53,424 2,671
(a)
Pegasus Communications Corp. 6,509 6,704
unit (a)
Telewest Communications PLC 15,000 660
sponsored ADR (a)
UIH Australia/Pacific, Inc. 19,690 591
warrants 5/15/06 (a)
104,930
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 0
LEISURE DURABLES & TOYS - 0.0%
IHF Capital, Inc. Series I 1,460 0
warrants 11/14/99 (a)(d)
LODGING & GAMING - 0.1%
Station Casinos, Inc. (a) 90,455 2,188
Sunterra Corp. (a) 275,500 2,755
4,943
TOTAL MEDIA & LEISURE 109,873
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Kroger Co. (a) 59,400 1,236
SERVICES - 0.0%
Spin Cycle, Inc. warrants 12,950 0
5/1/05 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Concentric Network Corp. (a) 102,600 $ 2,629
Concentric Network Corp. 8,680 1,910
warrants 12/15/07 (a)(d)
Splitrock Services, Inc. (a) 65,426 1,431
5,970
UTILITIES - 0.8%
CELLULAR - 0.1%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 103
.47) (a)
warrants 1/15/07 (CV ratio 18,480 134
.6) (a)
McCaw International Ltd. 66,290 149
warrants 4/15/07 (a)(d)
Orbital Imaging Corp. 28,510 342
warrants 3/1/05 (a)(d)
Powertel, Inc. warrants 85,408 3,331
2/1/06 (a)
4,059
ELECTRIC UTILITY - 0.0%
Niagara Mohawk Holdings, Inc. 93,300 1,481
(a)
GAS - 0.1%
Ocean Energy, Inc. (a) 211,410 1,942
TELEPHONE SERVICES - 0.6%
e.spire Communications, Inc. 74,800 538
(a)
Firstworld Communications, 19,020 1,331
Inc. warrants 4/15/08 (a)(d)
GST Telecommunications, Inc. 356,900 2,409
(a)
ICG Communications, Inc. (a) 202,500 3,316
Intermedia Communications, 2,500 239
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(d)
McLeodUSA, Inc. Class A (a) 100,000 4,463
Metromedia Fiber Network, 150,000 4,959
Inc. Class A (a)
MGC Communications, Inc. 28,787 792
(a)(d)
Rhythms NetConnections, Inc. 70,000 2,043
(a)
RSL Communications Ltd./RSL 25,710 2,160
Communications PLC warrants
11/15/06 (a)(d)
Source Media, Inc. warrants 48,052 192
11/1/07 (a)(d)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Versatel Telecom BV warrants 7,060 $ 1,017
5/15/08 (a)(d)
Viatel, Inc. (a) 63,246 2,111
25,665
TOTAL UTILITIES 33,147
TOTAL COMMON STOCKS 163,988
(Cost $81,469)
PREFERRED STOCKS - 11.7%
CONVERTIBLE PREFERRED STOCKS
- - 0.3%
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Host Marriott Financial Trust 146,600 4,911
$3.375 QUIPS
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
IXC Communications, Inc. 179,000 7,484
$3.375 (d)
TOTAL CONVERTIBLE PREFERRED 12,395
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 11.4%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 34,684 3,711
$12.375 pay-in-kind (a)
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
California Federal Preferred 533,897 12,013
Capital Corp. $2.2812
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 70
Series 1
FINANCE - 0.2%
INSURANCE - 0.2%
American Annuity Group 10,340 9,970
Capital Trust II 8.875%
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Fresenius Medical Care 9,847 $ 9,463
Capital Trust 9%
MEDIA & LEISURE - 5.6%
BROADCASTING - 4.7%
Adelphia Communications Corp. 228,536 25,653
$13.00
Benedek Communications Corp. 11,712 8,960
11.5% pay-in-kind
Citadel Broadcasting Co. 80,251 9,108
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 579,680 62,316
Series H, 11.75% pay-in-kind 185,849 20,118
Granite Broadcasting Corp. 28,728 28,010
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 34,382 36,531
Pegasus Communications Corp. 1,820 1,856
12.75% pay-in-kind (a)
192,552
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 7,049
8.625% 6,185 541
Series D, $10.00 309,863 30,212
37,802
TOTAL MEDIA & LEISURE 230,354
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Supermarkets General Holdings 116,319 3,955
Corp. $3.52 pay-in-kind (a)
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.2%
Concentric Network Corp. 7,870 7,477
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Ampex Corp. 8% non-cumulative 170 265
TOTAL TECHNOLOGY 7,742
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - 4.7%
CELLULAR - 1.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 11,265 $ 11,547
Series D, 13% pay-in-kind 41,489 44,186
55,733
TELEPHONE SERVICES - 3.4%
e.spire Communications, Inc.:
$127.50 pay-in-kind 30,903 10,507
14.75% pay-in-kind 10,696 4,064
ICG Holdings, Inc. 14.25% 11,472 10,325
pay-in-kind
Intermedia Communications, 60,457 55,620
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 42,057 46,683
12.5% pay-in-kind
Source Media, Inc. 13.50% 112,156 561
pay-in-kind (a)
WinStar Communications, Inc. 16,106 12,321
14.25%
140,081
TOTAL UTILITIES 195,814
TOTAL NONCONVERTIBLE 473,092
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 485,487
(Cost $546,283)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.4%
MOODY'S RATINGS (UNAUDITED) (H) PRINCIPAL AMOUNT (000S)
Lyondell Chemical Co. sr. - $ 13,930 13,808
secured Tranche E term loan
9.355% 5/17/06 (e)
Oxford Health Plans, Inc. sr. B3 3,000 2,985
secured term loan 9.335%
5/13/03 (e)
TOTAL PURCHASED BANK DEBT 16,793
(Cost $16,913)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 3.3%
MATURITY AMOUNT (000S) VALUE (NOTE 1) (000S)
Investments in repurchase
agreements (U.S. Treasury
obligations), in a joint
trading account at:
5%, dated 10/29/99 due 11/1/99 $ 10,912 $ 10,907
5.22%, dated 10/29/99 due 127,666 127,610
11/1/99
TOTAL CASH EQUIVALENTS 138,517
(Cost $138,517)
TOTAL INVESTMENT PORTFOLIO - 4,098,511
98.6%
(Cost $4,445,047)
NET OTHER ASSETS - 1.4% 57,709
NET ASSETS - 100% $ 4,156,220
</TABLE>
SECURITY TYPE ABBREVIATIONS
QUIPS - Quarterly Income Preferred
Securities
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(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 $439,500,000 or 10.6% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Share amount represents number of units held.
(g) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST (000S)
Bardell Associates Note Trust 4/19/94 $ 1,640
12.5%, 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 9/30/99 $ 11,762
12/18/08 pay-in-kind
(h) Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
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 0.4% BBB 0.8%
Ba 7.9% BB 7.9%
B 52.2% B 52.9%
Caa 10.7% CCC 10.6%
Ca, C 0.6% CC, C 0.4%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 5.4%. FMR has
determined that unrated debt securities that are lower quality account
for 5.4% of the total value of investment in securities.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $4,446,073,000. Net unrealized depreciation
aggregated $347,562,000, of which $163,248,000 related to appreciated
investment securities and $510,810,000 related to depreciated
investment securities.
The fund hereby designates approximately $70,359,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $34,789,000 all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 4,098,511
value (including repurchase
agreements of $138,517)
(cost $4,445,047) - See
accompanying schedule
Receivable for investments 6,209
sold
Receivable for fund shares 30,451
sold
Dividends receivable 950
Interest receivable 78,982
Other receivables 192
TOTAL ASSETS 4,215,295
LIABILITIES
Payable for investments $ 37,611
purchased
Payable for fund shares 9,852
redeemed
Distributions payable 7,094
Accrued management fee 1,986
Distribution fees payable 1,626
Other payables and accrued 906
expenses
TOTAL LIABILITIES 59,075
NET ASSETS $ 4,156,220
Net Assets consist of:
Paid in capital $ 4,486,265
Undistributed net investment 52,902
income
Accumulated undistributed net (36,445)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (346,502)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,156,220
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS) OCTOBER 31, 1999
CALCULATION OF MAXIMUM $11.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($221,009
(divided by) 19,875 shares)
Maximum offering price per $11.67
share (100/95.25 of $11.12)
CLASS T: NET ASSET VALUE and $11.14
redemption price per share
($2,351,469 (divided by)
211,113 shares)
Maximum offering price per $11.54
share (100/96.50 of $11.14)
CLASS B: NET ASSET VALUE and $11.09
offering price per share
($1,192,458 (divided by)
107,488 shares) A
CLASS C: NET ASSET VALUE and $11.11
offering price per share
($268,655 (divided by)
24,172 shares) A
INSTITUTIONAL CLASS: NET $10.90
ASSET VALUE, offering price
and redemption price per
share ($122,629 (divided by)
11,250 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 YEAR
ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 59,932
Dividends
Interest 350,409
TOTAL INCOME 410,341
EXPENSES
Management fee $ 24,193
Transfer agent fees 7,192
Distribution fees 18,904
Accounting fees and expenses 927
Non-interested trustees' 13
compensation
Custodian fees and expenses 127
Registration fees 371
Audit 55
Legal 140
Total expenses before 51,922
reductions
Expense reductions (51) 51,871
NET INVESTMENT INCOME 358,470
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (56,488)
Foreign currency transactions 7 (56,481)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 120,278
Assets and liabilities in 34 120,312
foreign currencies
NET GAIN (LOSS) 63,831
NET INCREASE (DECREASE) IN $ 422,301
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 358,470 $ 313,431
income
Net realized gain (loss) (56,481) 61,426
Change in net unrealized 120,312 (597,544)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 422,301 (222,687)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (352,867) (282,288)
From net investment income
From net realized gain (40,674) (70,360)
In excess of net realized (29,684) -
gain
Return of capital (16,824) -
TOTAL DISTRIBUTIONS (440,049) (352,648)
Share transactions - net 568,709 1,259,000
increase (decrease)
TOTAL INCREASE (DECREASE) 550,961 683,665
IN NET ASSETS
NET ASSETS
Beginning of period 3,605,259 2,921,594
End of period (including $ 4,156,220 $ 3,605,259
undistributed net investment
income of $52,902 and
$74,600, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 1.022 1.111 1.058 .163
Net realized and unrealized .287 (1.603) .710 .267
gain (loss)
Total from investment 1.309 (.492) 1.768 .430
operations
Less Distributions
From net investment income (1.030) H (1.048) (1.078) (.140)
From net realized gain (.120) H (.300) (.060) -
In excess of net realized gain (.080) - - -
Return of capital (.049) - - -
Total distributions (1.279) (1.348) (1.138) (.140)
Net asset value, end of period $ 11.120 $ 11.090 $ 12.930 $ 12.300
TOTAL RETURN B, C 11.98% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 221 $ 117 $ 44 $ 4
millions)
Ratio of expenses to average .95% 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .95% 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 8.89% 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 61% 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.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
of period
Income from Investment
Operations
Net investment income C 1.021 1.119 1.086 1.105 .930
Net realized and unrealized .274 (1.612) .686 .364 .680
gain (loss)
Total from investment 1.295 (.493) 1.772 1.469 1.610
operations
Less Distributions
From net investment income (1.017) E (1.037) (1.082) (1.069) (.920)
From net realized gain (.120) E (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.048) - - - -
Total distributions (1.265) (1.337) (1.142) (1.069) (.920)
Net asset value, end of period $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910
TOTAL RETURN A, B 11.83% (4.54)% 15.21% 12.92% 15.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,351 $ 2,322 $ 2,208 $ 1,709 $ 1,200
(in millions)
Ratio of expenses to average 1.04% 1.07% 1.09% 1.12% 1.15%
net assets
Ratio of expenses to average 1.04% 1.07% 1.08% D 1.11% D 1.15%
net assets after expense
reductions
Ratio of net investment 8.80% 8.91% 8.72% 9.20% 8.32%
income to average net assets
Portfolio turnover rate 61% 75% 105% 121% 112%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
of period
Income from Investment
Operations
Net investment income C .938 1.024 .998 1.017 .794
Net realized and unrealized .276 (1.588) .674 .361 .721
gain (loss)
Total from investment 1.214 (.564) 1.672 1.378 1.515
operations
Less Distributions
From net investment income (.949) E (.956) (1.002) (.988) (.835)
From net realized gain (.120) E (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.045) - - - -
Total distributions (1.194) (1.256) (1.062) (.988) (.835)
Net asset value, end of period $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890
TOTAL RETURN A, B 11.10% (5.10)% 14.34% 12.10% 14.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,192 $ 923 $ 593 $ 344 $ 156
(in millions)
Ratio of expenses to average 1.70% 1.74% 1.74% 1.79% 2.01%
net assets
Ratio of expenses to average 1.69% D 1.74% 1.74% 1.79% 2.01%
net assets after expense
reductions
Ratio of net investment 8.15% 8.25% 8.04% 8.52% 7.46%
income to average net assets
Portfolio turnover rate 61% 75% 105% 121% 112%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .926 .988
Net realized and unrealized .280 (1.639)
gain (loss)
Total from investment 1.206 (.651)
operations
Less Distributions
From net investment income (.941) F (.929)
From net realized gain (.120) F (.300)
In excess of net realized gain (.080) -
Return of capital (.045) -
Total distributions (1.186) (1.229)
Net asset value, end of period $ 11.110 $ 11.090
TOTAL RETURN B, C 11.00% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 269 $ 130
millions)
Ratio of expenses to average 1.78% 1.86% A
net assets
Ratio of net investment 8.06% 8.21% A
income to average net assets
Portfolio turnover rate 61% 75%
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 THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 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 1.024 1.123 1.094 1.070 .390
Net realized and unrealized .269 (1.562) .671 .368 .193
gain (loss)
Total from investment 1.293 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (1.044) G (1.071) (1.115) (1.078) (.383)
From net realized gain (.120) G (.300) (.060) - -
In excess of net realized gain (.080) - - - -
Return of capital (.049) - - - -
Total distributions (1.293) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURN B, C 12.05% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 123 $ 113 $ 76 $ 38 $ 0.1
(in millions)
Ratio of expenses to average .82% .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .81% F .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.03% 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 61% 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.
G THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCE.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
settlement date on purchases and sales of securities. The effects of
changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. 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
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
differing treatments for paydown gains/losses on certain securities,
market discount, partnerships, 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.
For the period ended October 31, 1999 the fund's distributions
exceeded the aggregate amount of taxable income and net realized gains
resulting in a return of capital. This was due to reductions in
taxable income available for distribution after certain distributions
had been made. ( The tax treatment of distributions for the 1999
calender year will be reported to shareholders prior to February 1,
2000)
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.
2. OPERATING POLICIES - CONTINUED
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the fund, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the fund to borrow from, or lend money to, other
participating funds.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, restricted securities (excluding 144A
issues) amounted to $13,939,000 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 $16,793,000 or 0.4% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,789,453,000 and $2,396,112,000, 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 .0920% to .3700% for the
period. The annual individual fund fee rate is 0.45%. 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 annual 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 has 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 WITH AFFILIATES - 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 $ 252,000 $ 1,000
CLASS T 6,308,000 96,000
CLASS B 10,173,000 7,351,000
CLASS C 2,171,000 1,611,000
$ 18,904,000 $ 9,059,000
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 is 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 $ 831,000 $ 324,000
CLASS T 1,848,000 827,000
CLASS B 3,139,000 3,139,00 *
CLASS C 180,000 180,000 *
$ 5,998,000 $ 4,470,000
* 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 $ 305,000 .18
CLASS T 4,275,000 .17
CLASS B 1,999,000 .18
CLASS C 357,000 .16
INSTITUTIONAL CLASS 256,000 .20
$ 7,192,000
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
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. INTERFUND LENDING PROGRAM.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which the loan
was outstanding amounted to $6,326,000. The weighted average interest
rate was 5.30%. Interest earned from the interfund lending program
amounted to $1,000 and is included in interest income on the Statement
of Operations.
6. 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 $28,000 under this arrangement.
In addition, through an arrangement with the fund's custodian, 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 $23,000 under this arrangement
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
AMOUNTS IN THOUSANDS YEARS ENDED OCTOBER 31,
1999 1998 A
FROM NET INVESTMENT INCOME
Class A $ 14,241 $ 6,814
Class T 218,969 201,133
Class B 91,163 60,100
Class C 16,708 4,494
Institutional Class 11,786 9,747
Total $ 352,867 $ 282,288
RETURN OF CAPITAL
Class A $ 679 $ -
Class T 10,440 -
Class B 4,346 -
Class C 797 -
Institutional Class 562 -
Total $ 16,824 $ -
FROM NET REALIZED GAIN
Class A $ 1,446 $ 1,152
Class T 25,543 52,313
Class B 10,501 14,488
Class C 1,751 165
Institutional Class 1,433 2,242
Total $ 40,674 $ 70,360
IN EXCESS OF NET REALIZED GAIN
Class A $ 1,056 $ -
Class T 18,641 -
Class B 7,663 -
Class C 1,278 -
Institutional Class 1,046 -
Total $ 29,684 $ -
Total Distributions $ 440,049 $ 352,648
A SHARE TRANSACTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 A 1999 1998 A
CLASS A Shares sold 13,700 8,996 $ 158,674 $ 113,312
Reinvestment of
distributions 1,173 520 13,495 6,429
Shares redeemed (5,559) (2,377) (64,643) (29,080)
Net increase (decrease) 9,314 7,139 $ 107,526 $ 90,661
CLASS T Shares sold 101,408 100,128 $ 1,178,382 $ 1,257,106
Reinvestment of
distributions 18,746 16,088 216,117 201,460
Shares redeemed (118,096) (77,873) (1,367,579) (968,795)
Net increase (decrease) 2,058 38,343 $ 26,920 $ 489,771
CLASS B Shares sold 43,832 47,554 $ 507,464 $ 598,852
Reinvestment of
distributions 6,459 3,879 74,128 48,184
Shares redeemed (26,213) (14,038) (302,213) (172,228)
Net increase (decrease) 24,078 37,395 $ 279,379 $ 474,808
CLASS C Shares sold 20,267 15,155 $ 234,940 $ 191,117
Reinvestment of
distributions 1,004 210 11,541 2,549
Shares redeemed (8,802) (3,662) (101,978) (45,190)
Net increase (decrease) 12,469 11,703 $ 144,503 $ 148,476
INSTITUTIONAL CLASS Shares 11,210 10,756 $ 127,339 $ 133,230
sold
Reinvestment of
distributions 981 822 11,076 10,139
Shares redeemed (11,277) (7,206) (128,034) (88,085)
Net increase (decrease) 914 4,372 $ 10,381 $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and Shareholders of
Fidelity Advisor High Yield Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Fidelity Advisor High Yield
Fund as of October 31, 1999 and the related statements of operations ,
changes in net assets and financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1998 and the financial highlights for
each of the years in the four-year period ended October 31, 1998 were
audited by other auditors whose report, dated December 15, 1998,
expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999 by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor High Yield Fund at October 31, 1999, the results of
its operations, the changes in its net assets, and its financial
highlights for the year then ended in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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
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 High Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE BOND
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 51 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 52
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.
Other 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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 five year and past
10 year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 1.00% 34.34% 95.05%
FIDELITY ADV INT BOND - CL A -2.78% 29.30% 87.73%
(INCL. 3.75% SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 41.05% 104.47%
Short-Intermediate Investment 1.44% 35.05% 90.73%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the Lehman
Brothers Intermediate Government/Corporate Bond Index - a market
value-weighted 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 one year average represents
a peer group of 93 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 1.00% 6.08% 6.91%
FIDELITY ADV INT BOND - CL A -2.78% 5.27% 6.50%
(INCL. 3.75% SALES CHARGE)
LB Int Gov/Corp Bond 0.99% 7.12% 7.41%
Short-Intermediate Investment 1.44% 6.19% 6.67%
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
1989/10/31 9625.00 10000.00
1989/11/30 9704.17 10095.61
1989/12/31 9720.17 10123.24
1990/01/31 9623.49 10058.33
1990/02/28 9655.14 10094.95
1990/03/31 9641.64 10108.11
1990/04/30 9579.31 10073.02
1990/05/31 9806.83 9943.64
1990/06/30 9937.94 10432.22
1990/07/31 10070.62 10576.95
1990/08/31 9986.56 10533.53
1990/09/30 10060.38 10614.89
1990/10/31 10155.19 10738.13
1990/11/30 10330.97 10524.10
1990/12/31 10489.27 11050.17
1991/01/31 10567.24 11162.23
1991/02/28 10651.99 11251.48
1991/03/31 10719.48 11328.01
1991/04/30 10839.04 11451.47
1991/05/31 10896.86 11521.86
1991/06/30 10900.14 11529.98
1991/07/31 11022.73 11658.48
1991/08/31 11254.14 11881.06
1991/09/30 11463.17 12085.43
1991/10/31 11598.81 12223.37
1991/11/30 11709.79 12363.71
1991/12/31 12079.19 12665.67
1992/01/31 11924.63 12550.98
1992/02/29 11955.56 12600.54
1992/03/31 11912.53 12550.98
1992/04/30 11979.47 12661.29
1992/05/31 12198.40 12857.55
1992/06/30 12370.41 13047.89
1992/07/31 12661.56 13307.31
1992/08/31 12778.63 13440.42
1992/09/30 12927.28 13622.87
1992/10/31 12736.50 13446.12
1992/11/30 12769.01 13395.03
1992/12/31 12940.10 13574.40
1993/01/31 13198.02 13838.43
1993/02/28 13461.36 14056.62
1993/03/31 13549.77 14112.54
1993/04/30 13632.97 14226.13
1993/05/31 13642.55 14194.55
1993/06/30 13913.03 14417.35
1993/07/31 14020.79 14452.66
1993/08/31 14329.21 14681.81
1993/09/30 14370.25 14742.77
1993/10/31 14447.63 14782.25
1993/11/30 14364.90 14699.79
1993/12/31 14427.34 14767.12
1994/01/31 14579.71 14931.14
1994/02/28 14297.92 14710.32
1994/03/31 14020.96 14467.57
1994/04/30 13965.22 14369.11
1994/05/31 13917.03 14378.76
1994/06/30 13913.17 14380.73
1994/07/31 14045.20 14587.74
1994/08/31 14043.53 14633.35
1994/09/30 13973.82 14498.71
1994/10/31 13974.68 14496.73
1994/11/30 14014.74 14430.95
1994/12/31 14071.49 14482.04
1995/01/31 14224.45 14726.11
1995/02/28 14400.31 15031.58
1995/03/31 14473.90 15117.54
1995/04/30 14616.59 15304.15
1995/05/31 14973.63 15766.85
1995/06/30 15062.23 15872.55
1995/07/31 15054.17 15874.74
1995/08/31 15175.00 16019.25
1995/09/30 15281.84 16135.26
1995/10/31 15435.23 16315.07
1995/11/30 15616.20 16529.54
1995/12/31 15787.33 16702.78
1996/01/31 15917.81 16846.85
1996/02/29 15721.16 16649.05
1996/03/31 15660.27 16563.31
1996/04/30 15581.13 16504.76
1996/05/31 15562.10 16492.26
1996/06/30 15704.61 16667.47
1996/07/31 15745.77 16717.03
1996/08/31 15772.16 16730.19
1996/09/30 15944.83 16963.29
1996/10/31 16197.08 17263.06
1996/11/30 16383.93 17490.68
1996/12/31 16294.89 17378.62
1997/01/31 16363.81 17446.16
1997/02/28 16379.24 17479.50
1997/03/31 16277.30 17358.89
1997/04/30 16456.90 17562.83
1997/05/31 16560.01 17708.65
1997/06/30 16723.97 17870.27
1997/07/31 17030.64 18233.85
1997/08/31 16965.71 18142.19
1997/09/30 17141.01 18353.14
1997/10/31 17303.81 18556.42
1997/11/30 17335.94 18597.43
1997/12/31 17468.58 18746.11
1998/01/31 17681.32 18991.71
1998/02/28 17673.31 18977.24
1998/03/31 17740.04 19038.20
1998/04/30 17804.18 19133.59
1998/05/31 17937.45 19273.94
1998/06/30 18036.03 19396.96
1998/07/31 18085.81 19465.37
1998/08/31 18287.92 19771.28
1998/09/30 18625.03 20267.97
1998/10/31 18586.58 20248.02
1998/11/30 18635.64 20246.48
1998/12/31 18719.77 20327.84
1999/01/31 18839.49 20439.45
1999/02/28 18635.92 20139.03
1999/03/31 18755.88 20289.31
1999/04/30 18821.42 20351.61
1999/05/31 18660.65 20194.95
1999/06/30 18636.91 20209.04
1999/07/31 18617.84 20191.22
1999/08/31 18598.44 20206.55
1999/09/30 18773.96 20395.06
1999/10/29 18773.17 20447.00
IMATRL PRASUN SHR__CHT 19991031 19991112 091945 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class A on
October 31, 1989, and the current 3.75% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,773 - a 87.73% increase on the initial investment.
For comparison, look at how the Lehman Brothers Intermediate
Government/Corporate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $20,447 - a 104.47% 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
1999 1998 1997 1996
Dividend returns 5.36% 5.71% 6.16% 1.00%
Capital returns -4.36% 1.70% 0.67% 1.64%
Total returns 1.00% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.96(cents) 29.12(cents) 57.60(cents)
Annualized dividend rate 5.68% 5.56% 5.46%
30-day annualized yield 5.86% - -
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 $10.28 over the past one
month, $10.39 over the past six months and $10.54 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 would have
been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 0.98% 34.14% 94.76%
FIDELITY ADV INT BOND - CL T -1.80% 30.45% 89.40%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 41.05% 104.47%
Short-Intermediate Investment 1.44% 35.05% 90.73%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the Lehman
Brothers Intermediate Government/Corporate Bond Index - a market
value-weighted 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 one year average represents
a peer group of 93 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 0.98% 6.05% 6.89%
FIDELITY ADV INT BOND - CL T -1.80% 5.46% 6.60%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 7.12% 7.41%
Short-Intermediate Investment 1.44% 6.19% 6.67%
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
1989/10/31 9725.00 10000.00
1989/11/30 9804.99 10095.61
1989/12/31 9821.15 10123.24
1990/01/31 9723.47 10058.33
1990/02/28 9755.46 10094.95
1990/03/31 9741.81 10108.11
1990/04/30 9678.83 10073.02
1990/05/31 9908.72 9943.64
1990/06/30 10041.19 10432.22
1990/07/31 10175.25 10576.95
1990/08/31 10090.31 10533.53
1990/09/30 10164.90 10614.89
1990/10/31 10260.70 10738.13
1990/11/30 10438.31 10524.10
1990/12/31 10598.25 11050.17
1991/01/31 10677.03 11162.23
1991/02/28 10762.66 11251.48
1991/03/31 10830.85 11328.01
1991/04/30 10951.65 11451.47
1991/05/31 11010.07 11521.86
1991/06/30 11013.39 11529.98
1991/07/31 11137.25 11658.48
1991/08/31 11371.07 11881.06
1991/09/30 11582.27 12085.43
1991/10/31 11719.32 12223.37
1991/11/30 11831.45 12363.71
1991/12/31 12204.69 12665.67
1992/01/31 12048.52 12550.98
1992/02/29 12079.77 12600.54
1992/03/31 12036.29 12550.98
1992/04/30 12103.93 12661.29
1992/05/31 12325.13 12857.55
1992/06/30 12498.93 13047.89
1992/07/31 12793.11 13307.31
1992/08/31 12911.39 13440.42
1992/09/30 13061.59 13622.87
1992/10/31 12868.82 13446.12
1992/11/30 12901.67 13395.03
1992/12/31 13074.55 13574.40
1993/01/31 13335.14 13838.43
1993/02/28 13601.21 14056.62
1993/03/31 13690.55 14112.54
1993/04/30 13774.61 14226.13
1993/05/31 13784.29 14194.55
1993/06/30 14057.58 14417.35
1993/07/31 14166.46 14452.66
1993/08/31 14478.09 14681.81
1993/09/30 14519.56 14742.77
1993/10/31 14597.73 14782.25
1993/11/30 14514.15 14699.79
1993/12/31 14577.24 14767.12
1994/01/31 14731.19 14931.14
1994/02/28 14446.47 14710.32
1994/03/31 14166.64 14467.57
1994/04/30 14110.31 14369.11
1994/05/31 14061.62 14378.76
1994/06/30 14057.72 14380.73
1994/07/31 14191.12 14587.74
1994/08/31 14189.44 14633.35
1994/09/30 14119.01 14498.71
1994/10/31 14119.87 14496.73
1994/11/30 14160.35 14430.95
1994/12/31 14217.69 14482.04
1995/01/31 14372.23 14726.11
1995/02/28 14549.92 15031.58
1995/03/31 14624.27 15117.54
1995/04/30 14768.45 15304.15
1995/05/31 15129.20 15766.85
1995/06/30 15218.72 15872.55
1995/07/31 15210.58 15874.74
1995/08/31 15332.66 16019.25
1995/09/30 15440.62 16135.26
1995/10/31 15595.59 16315.07
1995/11/30 15778.44 16529.54
1995/12/31 15951.36 16702.78
1996/01/31 16083.19 16846.85
1996/02/29 15884.50 16649.05
1996/03/31 15822.97 16563.31
1996/04/30 15743.02 16504.76
1996/05/31 15723.79 16492.26
1996/06/30 15867.78 16667.47
1996/07/31 15909.36 16717.03
1996/08/31 15936.03 16730.19
1996/09/30 16126.17 16963.29
1996/10/31 16380.13 17263.06
1996/11/30 16583.76 17490.68
1996/12/31 16495.13 17378.62
1997/01/31 16548.18 17446.16
1997/02/28 16562.16 17479.50
1997/03/31 16458.91 17358.89
1997/04/30 16639.44 17562.83
1997/05/31 16742.98 17708.65
1997/06/30 16891.36 17870.27
1997/07/31 17216.91 18233.85
1997/08/31 17134.44 18142.19
1997/09/30 17326.81 18353.14
1997/10/31 17490.22 18556.42
1997/11/30 17505.45 18597.43
1997/12/31 17654.41 18746.11
1998/01/31 17868.50 18991.71
1998/02/28 17859.42 18977.24
1998/03/31 17926.00 19038.20
1998/04/30 17989.44 19133.59
1998/05/31 18106.40 19273.94
1998/06/30 18205.41 19396.96
1998/07/31 18255.03 19465.37
1998/08/31 18458.28 19771.28
1998/09/30 18797.08 20267.97
1998/10/31 18756.83 20248.02
1998/11/30 18802.86 20246.48
1998/12/31 18885.72 20327.84
1999/01/31 19021.74 20439.45
1999/02/28 18797.06 20139.03
1999/03/31 18916.17 20289.31
1999/04/30 18980.80 20351.61
1999/05/31 18834.31 20194.95
1999/06/30 18809.55 20209.04
1999/07/31 18770.43 20191.22
1999/08/31 18767.13 20206.55
1999/09/30 18942.56 20395.06
1999/10/29 18940.31 20447.00
IMATRL PRASUN SHR__CHT 19991031 19991112 092152 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class T on
October 31, 1989, and the current 2.75% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,940 - a 89.40% 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 $20,447 - a 104.47% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.25% 5.64% 6.12% 6.53% 6.46%
Capital returns -4.27% 1.60% 0.66% -1.50% 3.99%
Total returns 0.98% 7.24% 6.78% 5.03% 10.45%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.88(cents) 28.59(cents) 56.33(cents)
Annualized dividend rate 5.58% 5.46% 5.34%
30-day annualized yield 5.84% - -
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 $10.29 over the past one
month, $10.39 over the past six months and $10.54 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 one year, past
five years and past 10 years total return figures are 3%, 0% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five year and past 10 year total returns would have been
lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL B 0.37% 29.71% 87.54%
FIDELITY ADV INT BOND - CL B -2.51% 29.71% 87.54%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 41.05% 104.47%
Short-Intermediate Investment 1.44% 35.05% 90.73%
Grade Debt Funds Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the Lehman
Brothers Intermediate Government/Corporate Bond Index - a market
value-weighted 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 one year average represents
a peer group of 93 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY ADV INT BOND - CL B 0.37% 5.34% 6.49%
FIDELITY ADV INT BOND - CL B -2.51% 5.34% 6.49%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 7.12% 7.41%
Short-Intermediate Investment 1.44% 6.19% 6.67%
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
1989/10/31 10000.00 10000.00
1989/11/30 10082.25 10095.61
1989/12/31 10098.87 10123.24
1990/01/31 9998.43 10058.33
1990/02/28 10031.32 10094.95
1990/03/31 10017.29 10108.11
1990/04/30 9952.53 10073.02
1990/05/31 10188.91 9943.64
1990/06/30 10325.14 10432.22
1990/07/31 10462.99 10576.95
1990/08/31 10375.64 10533.53
1990/09/30 10452.34 10614.89
1990/10/31 10550.84 10738.13
1990/11/30 10733.48 10524.10
1990/12/31 10897.94 11050.17
1991/01/31 10978.96 11162.23
1991/02/28 11067.01 11251.48
1991/03/31 11137.12 11328.01
1991/04/30 11261.34 11451.47
1991/05/31 11321.41 11521.86
1991/06/30 11324.82 11529.98
1991/07/31 11452.18 11658.48
1991/08/31 11692.61 11881.06
1991/09/30 11909.79 12085.43
1991/10/31 12050.71 12223.37
1991/11/30 12166.01 12363.71
1991/12/31 12549.81 12665.67
1992/01/31 12389.22 12550.98
1992/02/29 12421.36 12600.54
1992/03/31 12376.65 12550.98
1992/04/30 12446.20 12661.29
1992/05/31 12673.66 12857.55
1992/06/30 12852.37 13047.89
1992/07/31 13154.87 13307.31
1992/08/31 13276.50 13440.42
1992/09/30 13430.94 13622.87
1992/10/31 13232.72 13446.12
1992/11/30 13266.50 13395.03
1992/12/31 13444.26 13574.40
1993/01/31 13712.23 13838.43
1993/02/28 13985.82 14056.62
1993/03/31 14077.69 14112.54
1993/04/30 14164.13 14226.13
1993/05/31 14174.08 14194.55
1993/06/30 14455.09 14417.35
1993/07/31 14567.05 14452.66
1993/08/31 14887.49 14681.81
1993/09/30 14930.13 14742.77
1993/10/31 15010.52 14782.25
1993/11/30 14924.57 14699.79
1993/12/31 14989.45 14767.12
1994/01/31 15147.75 14931.14
1994/02/28 14854.98 14710.32
1994/03/31 14567.23 14467.57
1994/04/30 14509.32 14369.11
1994/05/31 14459.25 14378.76
1994/06/30 14455.24 14380.73
1994/07/31 14576.71 14587.74
1994/08/31 14564.29 14633.35
1994/09/30 14482.05 14498.71
1994/10/31 14458.50 14496.73
1994/11/30 14490.41 14430.95
1994/12/31 14524.52 14482.04
1995/01/31 14672.93 14726.11
1995/02/28 14846.18 15031.58
1995/03/31 14926.54 15117.54
1995/04/30 15050.02 15304.15
1995/05/31 15422.98 15766.85
1995/06/30 15519.04 15872.55
1995/07/31 15487.18 15874.74
1995/08/31 15602.99 16019.25
1995/09/30 15704.55 16135.26
1995/10/31 15853.54 16315.07
1995/11/30 16029.31 16529.54
1995/12/31 16196.40 16702.78
1996/01/31 16307.38 16846.85
1996/02/29 16112.92 16649.05
1996/03/31 16026.14 16563.31
1996/04/30 15950.86 16504.76
1996/05/31 15906.06 16492.26
1996/06/30 16058.75 16667.47
1996/07/31 16075.68 16717.03
1996/08/31 16092.98 16730.19
1996/09/30 16276.63 16963.29
1996/10/31 16540.20 17263.06
1996/11/30 16721.18 17490.68
1996/12/31 16622.05 17378.62
1997/01/31 16682.65 17446.16
1997/02/28 16687.46 17479.50
1997/03/31 16572.04 17358.89
1997/04/30 16728.34 17562.83
1997/05/31 16838.71 17708.65
1997/06/30 16978.65 17870.27
1997/07/31 17279.38 18233.85
1997/08/31 17202.61 18142.19
1997/09/30 17369.93 18353.14
1997/10/31 17524.05 18556.42
1997/11/30 17529.32 18597.43
1997/12/31 17669.48 18746.11
1998/01/31 17890.24 18991.71
1998/02/28 17871.95 18977.24
1998/03/31 17928.22 19038.20
1998/04/30 17981.99 19133.59
1998/05/31 18088.30 19273.94
1998/06/30 18193.99 19396.96
1998/07/31 18215.53 19465.37
1998/08/31 18408.07 19771.28
1998/09/30 18736.42 20267.97
1998/10/31 18686.06 20248.02
1998/11/30 18723.95 20246.48
1998/12/31 18796.79 20327.84
1999/01/31 18905.31 20439.45
1999/02/28 18688.90 20139.03
1999/03/31 18797.87 20289.31
1999/04/30 18854.54 20351.61
1999/05/31 18681.67 20194.95
1999/06/30 18664.89 20209.04
1999/07/31 18615.96 20191.22
1999/08/31 18602.65 20206.55
1999/09/30 18748.68 20395.06
1999/10/29 18754.43 20447.00
IMATRL PRASUN SHR__CHT 19991031 19991112 091957 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class B on
October 31, 1989. As the chart shows, by October 31, 1999 the value of
the investment would have been $18,754 - a 87.54% 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 $20,447 - a 104.47% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.65% 4.93% 5.38% 5.83% 5.66%
Capital returns -4.28% 1.70% 0.57% -1.50% 3.99%
Total returns 0.37% 6.63% 5.95% 4.33% 9.65%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.32(cents) 25.27(cents) 49.89(cents)
Annualized dividend rate 4.95% 4.83% 4.74%
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 $10.28 over the past one
month, $10.38 over the past six months and $10.53 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 one year, past
five years and past 10 years total return figures are 1%, 0% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the five year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 0.19% 29.09% 86.64%
FIDELITY ADV INT BOND - CL C -0.77% 29.09% 86.64%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 41.05% 104.47%
Short-Intermediate Investment 1.44% 35.05% 90.73%
Grade Debt Funds Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to those of the Lehman
Brothers Intermediate Government/Corporate Bond Index - a market
value-weighted 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 one year average represents
a peer group of 93 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 0.19% 5.24% 6.44%
FIDELITY ADV INT BOND - CL C -0.77% 5.24% 6.44%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 0.99% 7.12% 7.41%
Short-Intermediate Investment 1.44% 6.19% 6.67%
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
1989/10/31 10000.00 10000.00
1989/11/30 10082.25 10095.61
1989/12/31 10098.87 10123.24
1990/01/31 9998.43 10058.33
1990/02/28 10031.32 10094.95
1990/03/31 10017.29 10108.11
1990/04/30 9952.53 10073.02
1990/05/31 10188.91 9943.64
1990/06/30 10325.14 10432.22
1990/07/31 10462.99 10576.95
1990/08/31 10375.64 10533.53
1990/09/30 10452.34 10614.89
1990/10/31 10550.84 10738.13
1990/11/30 10733.48 10524.10
1990/12/31 10897.94 11050.17
1991/01/31 10978.96 11162.23
1991/02/28 11067.01 11251.48
1991/03/31 11137.12 11328.01
1991/04/30 11261.34 11451.47
1991/05/31 11321.41 11521.86
1991/06/30 11324.82 11529.98
1991/07/31 11452.18 11658.48
1991/08/31 11692.61 11881.06
1991/09/30 11909.79 12085.43
1991/10/31 12050.71 12223.37
1991/11/30 12166.01 12363.71
1991/12/31 12549.81 12665.67
1992/01/31 12389.22 12550.98
1992/02/29 12421.36 12600.54
1992/03/31 12376.65 12550.98
1992/04/30 12446.20 12661.29
1992/05/31 12673.66 12857.55
1992/06/30 12852.37 13047.89
1992/07/31 13154.87 13307.31
1992/08/31 13276.50 13440.42
1992/09/30 13430.94 13622.87
1992/10/31 13232.72 13446.12
1992/11/30 13266.50 13395.03
1992/12/31 13444.26 13574.40
1993/01/31 13712.23 13838.43
1993/02/28 13985.82 14056.62
1993/03/31 14077.69 14112.54
1993/04/30 14164.13 14226.13
1993/05/31 14174.08 14194.55
1993/06/30 14455.09 14417.35
1993/07/31 14567.05 14452.66
1993/08/31 14887.49 14681.81
1993/09/30 14930.13 14742.77
1993/10/31 15010.52 14782.25
1993/11/30 14924.57 14699.79
1993/12/31 14989.45 14767.12
1994/01/31 15147.75 14931.14
1994/02/28 14854.98 14710.32
1994/03/31 14567.23 14467.57
1994/04/30 14509.32 14369.11
1994/05/31 14459.25 14378.76
1994/06/30 14455.24 14380.73
1994/07/31 14576.71 14587.74
1994/08/31 14564.29 14633.35
1994/09/30 14482.05 14498.71
1994/10/31 14458.50 14496.73
1994/11/30 14490.41 14430.95
1994/12/31 14524.52 14482.04
1995/01/31 14672.93 14726.11
1995/02/28 14846.18 15031.58
1995/03/31 14926.54 15117.54
1995/04/30 15050.02 15304.15
1995/05/31 15422.98 15766.85
1995/06/30 15519.04 15872.55
1995/07/31 15487.18 15874.74
1995/08/31 15602.99 16019.25
1995/09/30 15704.55 16135.26
1995/10/31 15853.54 16315.07
1995/11/30 16029.31 16529.54
1995/12/31 16196.40 16702.78
1996/01/31 16307.38 16846.85
1996/02/29 16112.92 16649.05
1996/03/31 16026.14 16563.31
1996/04/30 15950.86 16504.76
1996/05/31 15906.06 16492.26
1996/06/30 16058.75 16667.47
1996/07/31 16075.68 16717.03
1996/08/31 16092.98 16730.19
1996/09/30 16276.63 16963.29
1996/10/31 16540.20 17263.06
1996/11/30 16721.18 17490.68
1996/12/31 16622.05 17378.62
1997/01/31 16682.65 17446.16
1997/02/28 16687.46 17479.50
1997/03/31 16572.04 17358.89
1997/04/30 16728.34 17562.83
1997/05/31 16838.71 17708.65
1997/06/30 16978.65 17870.27
1997/07/31 17279.38 18233.85
1997/08/31 17202.61 18142.19
1997/09/30 17369.93 18353.14
1997/10/31 17524.05 18556.42
1997/11/30 17524.84 18597.43
1997/12/31 17661.74 18746.11
1998/01/31 17863.79 18991.71
1998/02/28 17829.43 18977.24
1998/03/31 17884.15 19038.20
1998/04/30 17936.29 19133.59
1998/05/31 18040.66 19273.94
1998/06/30 18144.67 19396.96
1998/07/31 18164.69 19465.37
1998/08/31 18354.93 19771.28
1998/09/30 18698.27 20267.97
1998/10/31 18629.33 20248.02
1998/11/30 18666.76 20246.48
1998/12/31 18738.22 20327.84
1999/01/31 18863.37 20439.45
1999/02/28 18628.41 20139.03
1999/03/31 18735.63 20289.31
1999/04/30 18790.26 20351.61
1999/05/31 18616.60 20194.95
1999/06/30 18598.38 20209.04
1999/07/31 18548.39 20191.22
1999/08/31 18533.73 20206.55
1999/09/30 18677.80 20395.06
1999/10/29 18664.38 20447.00
IMATRL PRASUN SHR__CHT 19991031 19991112 092141 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class C on
October 31, 1989. As the chart shows, by October 31, 1999 the value of
the investment would have been $18,664 - a 86.64% 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 $20,447 - a 104.47% 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
YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 4.56% 4.77%
Capital returns -4.37% 1.80%
Total returns 0.19% 6.57%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIOD ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.26(cents) 24.81(cents) 49.04(cents)
Annualized dividend rate 4.88% 4.74% 4.66%
30-day annualized yield 5.29% - -
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 $10.27 over the past one
month, $10.38 over the past six months and $10.53 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Class A, Class T, Class B and Class C shares returned 1.00%, 0.98%,
0.37% and 0.19%, respectively. By comparison, the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 0.99%, and the
short-intermediate investment grade debt funds average tracked by
Lipper Inc. returned 1.44%
Q. WHAT FACTORS SHAPED PERFORMANCE DURING THE PERIOD?
A. All things considered, the fund fared well relative to the market.
Typically, it's extremely difficult to get any bond fund to post a
positive total return in a deteriorating interest-rate environment, as
rising bond yields cause their prices to drop by more than the
interest earned. This fund, however, relied on sector allocation to
help pave an alternate path, one that led to positive performance
during the period. The fund benefited from its overweighting in spread
sectors - namely, corporates, mortgages and asset-backed securities -
relative to the benchmark, and these securities outperformed
Treasuries during the 12-month period. Timing was equally as
important, as we added spread sector exposure at historically
attractive price levels during the period. Additionally, within
corporates, we were in the right sectors. Our stake in communications
- - cable, media and telecommunications companies - along with various
energy firms was particularly beneficial to the fund. Consolidation in
the world of telecommunications was a positive event for credit
quality, which was a big win for us. Conversely, having an average
duration - a measure of how sensitive the fund's share price is to
changing interest rates - generally longer than its peers amid a
rising interest-rate environment detracted from relative performance.
Q. WHAT ELSE INFLUENCED PERFORMANCE?
A. Within mortgages - a sector that is not represented in the
benchmark - we had two things going for us during the period. First,
refinancing activity slowed considerably as a result of the rise in
interest rates. Yet, housing turnover remained high, as homeowners
continued to trade up to bigger homes, fueled in large part by the
strong economy. Thus, prepayments on discount mortgage securities -
those priced below face value, or par - were faster than normal, which
was a big positive since the bonds get prepaid at par. So, the fund
benefited simply by owning discount mortgages through the passage of
time. Second, the market began to recognize that mortgage securities
were cheap, which drove prices up and led to spread tightening.
Declining interest-rate volatility late in the period further
benefited mortgage security valuations.
Q. HOW DID THE FUND'S HOLDINGS IN CORPORATE BONDS AFFECT PERFORMANCE?
A. Following two quarters of strong performance, corporate spreads
widened considerably in the summer due to concerns of oversupply
related to the Year 2000 - or Y2K - changeover. Those fears ultimately
proved unfounded, with rising interest rates having a lot to do with
keeping supply contained. Corporates rebounded, however, with spreads
narrowing late in the period due to the surprising supply picture. We
really didn't believe the supply scare at all to begin with, so, when
spreads did widen out earlier, we viewed it simply as an opportunity
to add securities that we liked at more attractive prices.
Q. WHAT WERE SOME OF YOUR OTHER STRATEGIES DURING THE PERIOD?
A. We stayed with many of the telecom names that performed well for
us, although we shifted some telecom assets to energy holdings. Also,
positions in government agencies took on a more meaningful role in the
fund, as I began to substitute them for high-grade corporates.
Agencies over the past year cheapened considerably, due in large part
to supply reasons. Although agencies weren't expected to be huge wins
for us, they did have some value just the same, as they offered
returns that were competitive with high-quality corporate bonds, but
with less risk.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains positive for the spread sectors. In general,
mortgages are still relatively cheap and, given that interest rates
have risen, supply pressures and concerns over prepayments have eased
considerably, even with the strong housing market. With respect to
corporates, earnings and cash flows are still quite good, so companies
should continue to do well from a bondholder's perspective. There's
also growing sentiment shared among corporate treasurers these days to
carry less debt on their balance sheets. Together, these factors paint
a pretty good picture going forward. Admittedly, the interest-rate
move over the past 12 months was a big one. Since it's unlikely that
we would experience a move of similar magnitude any time soon, today's
higher level of interest rates offers investors a much better cushion
against future volatility.
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 October 31, 1999,
more than $576 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in
1993
KEVIN GRANT ON THE ROLE
OF MORTGAGE SECURITIES IN
THE FUND:
"Two years ago, the mortgage
market accounted for about 30%
of the investment-grade world. By
the end of this year, that share will
grow to around 35% of this universe.
What's happening, in essence, is
that the U.S. Treasury is issuing
fewer bonds, so that the pool of
available government securities
is shrinking relative to other
components of the market, like
the mortgage sector.
"Much of the rise in mortgages was
due to a strong refinancing wave
resulting in larger, lower-coupon
issues, as well as the sustained
robustness of the housing market
providing a steady stream of new
mortgages into the market.
Mortgages have become an
increasingly growing part of the
investment equation for this fund
and others like it, and I expect this
trend to continue going forward.
Through its pursuit of attractive
investment alternatives within such
asset classes as mortgages, the fund
stands well poised to challenge the
Treasury-heavy Lehman index,
which excludes them altogether."
NOTE TO SHAREHOLDERS:
Effective December 29, 1999,
Andrew Dudley became portfolio
manager of Fidelity Advisor
Intermediate Bond Fund.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 58.2 56.8
Aa 1.8 2.8
A 18.9 18.4
Baa 12.9 13.6
Ba and Below 3.0 1.2
</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 OCTOBER 31, 1999
6 MONTHS AGO
Years 6.1 5.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 3.4 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 30.4% Corporate Bonds 30.3%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 50.0% Obligations 47.0%
Asset-Backed Securities 7.2% Asset-Backed Securities 10.5%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 2.2% Related Securities 2.2%
Other Investments 3.8% Other Investments 4.5%
Short-Term Investments and Short-Term Investments and
Net Other Assets 6.4% Net Other Assets 5.5%
* FOREIGN INVESTMENTS 8.8% ** FOREIGN INVESTMENTS 10.7%
Row: 1, Col: 1, Value: 30.4 Row: 1, Col: 1, Value: 30.3
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 3, Value: 47.0
Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 4, Value: 10.5
Row: 1, Col: 5, Value: 2.2 Row: 1, Col: 5, Value: 2.2
Row: 1, Col: 6, Value: 3.8 Row: 1, Col: 6, Value: 4.5
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.4 Row: 1, Col: 8, Value: 5.5
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 30.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 1.4%
Monsanto Co. 6% 12/1/05 (c) A2 $ 5,000,000 $ 4,672,050
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,514,347
8,186,397
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 6.625% Baa2 255,000 247,919
9/15/04
TOTAL BASIC INDUSTRIES 8,434,316
CONSTRUCTION & REAL ESTATE -
1.9%
REAL ESTATE - 1.0%
Duke Realty LP 7.3% 6/30/03 Baa1 6,000,000 5,954,820
REAL ESTATE INVESTMENT TRUSTS
- - 0.9%
CenterPoint Properties Trust Baa2 640,000 598,989
6.75% 4/1/05
Equity Office Properties Baa1 4,000,000 3,859,400
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 395,288
4,853,677
TOTAL CONSTRUCTION & REAL 10,808,497
ESTATE
ENERGY - 0.4%
OIL & GAS - 0.4%
Apache Finance Property Ltd. Baa1 700,000 659,750
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 600,000 579,540
Petro-Canada 7% 11/15/28 A3 1,440,000 1,290,413
2,529,703
FINANCE - 13.4%
BANKS - 7.8%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,739,550
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,533,825
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 228,711
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,134,784
BanPonce Financial Corp. A3 3,850,000 3,828,440
6.75% 8/9/01
Barclays Bank PLC yankee A1 3,050,000 3,009,618
5.95% 7/15/01
Capital One Bank 7.35% 6/20/00 Baa2 5,000,000 5,016,100
Capital One Financial Corp. Baa3 1,390,000 1,276,229
7.125% 8/1/08
Chase Manhattan Corp. 5.5% Aa3 600,000 593,112
2/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Kansallis-Osake-Pankki (NY A2 $ 650,000 $ 693,446
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 1,165,000 1,114,660
7.125% 9/17/01 Baa3 170,000 168,196
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 433,080
NationsBank Corp. 8.125% Aa3 3,000,000 3,094,800
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 4,957,800
Sanwa Finance Aruba AEC 8.35% Baa1 3,800,000 3,844,042
7/15/09
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 2,029,960
Union Planters National Bank A3 1,500,000 1,503,225
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 4,904,200
45,103,778
CREDIT & OTHER FINANCE - 5.3%
Associates Corp. of North Aa3 1,350,000 1,321,448
America 6% 4/15/03
AT&T Capital Corp. 7.5% A1 2,380,000 2,401,277
11/15/00
ERP Operating LP:
6.55% 11/15/01 A3 470,000 464,703
7.1% 6/23/04 A3 5,000,000 4,927,950
Ford Motor Credit Co. 7.75% A1 100,000 102,587
11/15/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 3,350,000 3,007,396
Popular North America, Inc. A3 2,250,000 2,243,925
7.375% 9/15/01
RBSG Capital Corp. 10.125% A2 1,500,000 1,650,420
3/1/04
Sears Roebuck Acceptance A2 5,000,000 4,984,450
Corp. 6.15% 11/15/05
Spieker Properties LP:
6.8% 5/1/04 Baa2 535,000 516,200
6.875% 2/1/05 Baa2 5,000,000 4,804,900
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,107,440
5.875% 5/1/04 Baa1 2,265,000 2,173,154
6.875% 11/15/28 Baa1 595,000 544,907
Trizec Finance Ltd. yankee Baa3 590,000 628,350
10.875% 10/15/05
30,879,107
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 888,570
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 $ 669,879
5/15/05
TOTAL FINANCE 77,541,334
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 4,000,000 3,949,640
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.9%
WMX Technologies, Inc. 7.1% Ba1 6,000,000 5,410,740
8/1/26
TOTAL INDUSTRIAL MACHINERY & 9,360,380
EQUIPMENT
MEDIA & LEISURE - 1.1%
BROADCASTING - 1.1%
Continental Cablevision, Inc. Baa2 875,000 914,165
8.3% 5/15/06
Cox Communications, Inc. Baa2 1,295,000 1,319,048
7.75% 8/15/06
TCI Communications, Inc. A2 3,470,000 3,876,545
8.75% 8/1/15
6,109,758
NONDURABLES - 2.2%
BEVERAGES - 1.0%
Seagram Co. Ltd. yankee Baa3 270,000 236,250
6.875% 9/1/23
Seagram JE & Sons, Inc. Baa3 5,635,000 5,401,148
6.625% 12/15/05
5,637,398
TOBACCO - 1.2%
Philip Morris Companies, Inc. A2 6,000,000 5,761,800
6.95% 6/1/06
RJR Nabisco, Inc. 7.375% Baa2 1,300,000 1,248,494
5/15/03 (c)
7,010,294
TOTAL NONDURABLES 12,647,692
RETAIL & WHOLESALE - 1.8%
DRUG STORES - 0.7%
Rite Aid Corp.:
6% 12/15/00 (c) Ba2 380,000 307,800
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - CONTINUED
Rite Aid Corp.: - continued
6.5% 12/15/05 (c) Ba2 $ 5,175,000 $ 3,363,750
7.125% 1/15/07 Ba2 650,000 442,000
4,113,550
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,480,000 1,469,625
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.8%
USA Networks, Inc./USANI LLC Ba1 5,000,000 4,777,500
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 10,360,675
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 4,948,550
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,935,460
TOTAL TECHNOLOGY 6,884,010
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 435,000 425,735
7.73% 9/15/12 Baa1 280,000 273,280
699,015
UTILITIES - 5.2%
CELLULAR - 0.7%
Cable & Wireless Baa1 3,760,000 3,747,517
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.6%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 1,827,660
7.05% 12/11/07 (c) Baa2 5,000,000 4,757,800
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DR Investments UK PLC yankee A2 $ 5,000,000 $ 5,013,150
7.1% 5/15/02 (c)
Israel Electric Corp. Ltd. A3 3,840,000 3,316,800
7.75% 12/15/27 (c)
14,915,410
GAS - 0.3%
Cms Panhandle Holding Co.:
6.125% 3/15/04 Baa3 1,000,000 957,000
7% 7/15/29 Baa3 750,000 677,700
1,634,700
TELEPHONE SERVICES - 1.6%
MCI WorldCom, Inc. 6.4% A3 5,000,000 4,859,900
8/15/05
Telecomunicaciones de Puerto Baa2 1,330,000 1,265,828
Rico, Inc. 6.65% 5/15/06 (c)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 2,545,000 2,389,119
7.7% 7/20/29 Baa1 1,000,000 905,520
9,420,367
TOTAL UTILITIES 29,717,994
TOTAL NONCONVERTIBLE BONDS 175,093,374
(Cost $182,270,582)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 26.5%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 6.9%
Fannie Mae:
6.15% 1/13/00 Aaa 1,100,000 1,100,341
6.5% 4/29/09 Aaa 23,900,000 22,753,517
Farm Credit Systems Financial Aaa 1,800,000 1,968,750
Assistance Corp. 9.375%
7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 3,938,925
7.38% 8/5/04 Aaa 1,930,000 1,994,829
7.7% 9/20/04 Aaa 1,250,000 1,307,225
Freddie Mac 8.115% 1/31/05 Aaa 5,460,000 5,815,774
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates Aaa $ 546,095 $ 561,118
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E 9.4%
5/15/02
Guaranteed Export Trust Aaa 257,631 259,049
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 A, 7.12% 4/15/06
39,699,528
U.S. TREASURY OBLIGATIONS -
19.6%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 3,050,000 3,036,641
12% 8/15/13 Aaa 1,790,000 2,453,983
14% 11/15/11 Aaa 1,510,000 2,155,767
U.S. Treasury Notes:
4% 10/31/00 Aaa 48,000,000 47,242,560
6.375% 9/30/01 Aaa 8,500,000 8,582,365
6.5% 5/31/02 Aaa 5,165,000 5,240,047
7% 7/15/06 Aaa 17,882,000 18,681,147
7.25% 8/15/04 Aaa 4,890,000 5,133,718
7.5% 11/15/01 Aaa 20,090,000 20,724,040
113,250,268
TOTAL U.S. GOVERNMENT AND 152,949,796
GOVERNMENT AGENCY OBLIGATIONS
(Cost $154,628,476)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 23.5%
FANNIE MAE - 19.6%
5.5% 9/1/10 to 5/1/11 Aaa 1,464,087 1,390,711
6% 3/1/11 to 3/1/14 Aaa 35,413,342 34,084,365
6.5% 10/1/27 to 7/1/29 Aaa 10,965,419 10,507,553
7% 12/1/23 to 12/1/28 Aaa 3,162,212 3,113,236
7.5% 9/1/25 to 9/1/29 Aaa 56,715,812 56,841,361
8.5% 6/1/11 to 4/1/27 Aaa 3,031,661 3,135,172
9.5% 2/1/25 Aaa 1,750,555 1,858,319
10% 1/1/20 Aaa 47,727 51,710
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
10.5% 7/1/11 to 8/1/20 Aaa $ 250,045 $ 274,312
11% 8/1/15 Aaa 1,330,200 1,450,676
12.5% 2/1/11 to 4/1/15 Aaa 57,539 65,117
112,772,532
FREDDIE MAC - 0.4%
8.5% 9/1/24 to 8/1/27 Aaa 1,398,818 1,449,078
9.5% 1/1/17 Aaa 14,335 15,098
10% 4/1/05 to 8/1/10 Aaa 149,923 155,876
10.25% 12/1/09 Aaa 27,860 29,463
10.5% 5/1/21 Aaa 446,684 485,118
11% 12/1/11 Aaa 17,018 18,309
11.5% 10/1/15 Aaa 61,535 67,326
11.75% 10/1/10 Aaa 35,418 38,471
2,258,739
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.5%
6.5% 2/15/29 Aaa 9,816,579 9,380,920
7% 11/15/22 to 7/15/28 Aaa 3,463,714 3,408,723
7.5% 2/15/28 to 10/15/28 Aaa 346,627 347,520
8% 2/15/02 to 6/15/25 Aaa 2,050,673 2,092,544
8.5% 4/15/17 to 12/15/21 Aaa 389,463 405,636
10% 11/15/09 to 1/15/26 Aaa 2,047,797 2,238,555
11% 12/15/09 to 10/15/20 Aaa 461,015 506,649
11.5% 3/15/10 to 2/15/19 Aaa 1,881,011 2,106,808
20,487,355
TOTAL U.S. GOVERNMENT AGENCY 135,518,626
- - MORTGAGE SECURITIES
(Cost $137,754,050)
ASSET-BACKED SECURITIES - 7.2%
Aesop Funding II LLC 6.22% Aaa 8,000,000 7,990,000
10/20/01 (c)
American Express Credit A1 1,100,000 1,054,453
Account Master Trust 6.1%
12/15/06
Arcadia Automobile Aaa 4,907,201 4,906,435
Receivables Trust 6.5%
6/17/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa $ 677,731 $ 680,273
6.76% 9/15/02 A3 254,149 254,785
Chevy Chase Auto Receivables
Trust:
5.9% 7/15/03 Aaa 734,583 730,553
5.91% 12/15/04 Aaa 504,122 499,333
6.6% 12/15/02 Aaa 215,756 215,957
Citibank Credit Card Master A1 10,000,000 9,995,313
Trust I 6.45% 8/15/02
Contimortgage Home Equity Aaa 2,197,036 2,187,413
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,950,000
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 12/15/02 Baa2 590,000 582,625
6.87% 11/15/04 A2 1,100,000 1,095,531
Key Auto Finance Trust 6.3% A2 787,582 784,630
10/15/03
PNC Student Loan Trust I Aaa 3,645,000 3,646,139
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 5,000,000 4,885,900
2/9/04
Sears Credit Account Master Aaa 283,333 283,333
Trust II 6.5% 10/15/03
TOTAL ASSET-BACKED SECURITIES 41,742,673
(Cost $41,963,599)
COMMERCIAL MORTGAGE
SECURITIES - 2.2%
CS First Boston Mortgage
Securities Corp.:
Series 1995-WF1 Class A-2, AAA 3,359,096 3,330,754
6.648% 12/21/27
Series 1998-FL1:
Class D, 5.9% 12/10/00 (c)(d) A2 1,600,000 1,584,000
Class E, 6.25% 1/10/13 (c)(d) Baa2 2,970,000 2,910,600
Equitable Life Assurance A2 1,000,000 985,300
Society of the United
States Series 174 Class C-1,
7.52% 5/15/06 (c)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Thirteen Affiliates of Aaa $ 2,500,000 $ 2,396,700
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (c)
Wells Fargo Capital Markets Aaa 1,496,719 1,479,492
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE 12,686,846
SECURITIES
(Cost $12,893,718)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 2.1%
Canadian Government 6.125% Aa2 5,000,000 4,975,500
7/15/02
Korean Republic yankee:
8.75% 4/15/03 Baa3 1,225,000 1,264,310
8.875% 4/15/08 Baa3 858,000 888,390
Quebec Province yankee:
6.86% 4/15/26 (b) A2 5,000,000 4,894,400
7.125% 2/9/24 A2 190,000 182,704
7.5% 7/15/23 A2 190,000 190,568
TOTAL FOREIGN GOVERNMENT AND 12,395,872
GOVERNMENT AGENCY OBLIGATIONS
(Cost $12,402,174)
SUPRANATIONAL OBLIGATIONS -
1.7%
Inter American Development Aaa 10,000,000 9,743,500
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
</TABLE>
CASH EQUIVALENTS - 5.1%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 29,199,965 $ 29,187,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $29,187,000)
TOTAL INVESTMENT PORTFOLIO - 569,317,687
98.7% (Cost $581,036,699)
NET OTHER ASSETS - 1.3% 7,422,548
NET ASSETS - 100% $ 576,740,235
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 $43,119,424 or 7.5% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) 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 78.3% AAA, AA, A 71.9%
Baa 12.9% BBB 15.8%
Ba 3.0% BB 1.6%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $581,211,516. Net unrealized depreciation
aggregated $11,893,829, of which $924,846 related to appreciated
investment securities and $12,818,675 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $14,756,000 of which $9,361,000, $1,410,000 and
$3,985,000 will expire on October 31, 2004, 2005 and 2007,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 569,317,687
value (including repurchase
agreements of $29,187,000)
(cost $581,036,699) - See
accompanying schedule
Cash 16,609
Receivable for investments 170,105
sold
Receivable for fund shares 1,411,950
sold
Interest receivable 8,231,754
TOTAL ASSETS 579,148,105
LIABILITIES
Payable for fund shares $ 1,307,434
redeemed
Distributions payable 596,478
Accrued management fee 204,225
Distribution fees payable 129,257
Other payables and accrued 170,476
expenses
TOTAL LIABILITIES 2,407,870
NET ASSETS $ 576,740,235
Net Assets consist of:
Paid in capital $ 604,755,708
Distributions in excess of (1,366,046)
net investment income
Accumulated undistributed net (14,930,415)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (11,719,012)
(depreciation) on investments
NET ASSETS $ 576,740,235
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.30
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($22,627,798 (divided by)
2,196,298 shares)
Maximum offering price per $10.70
share (100/96.25 of $10.30)
CLASS T: NET ASSET VALUE and $10.31
redemption price per share
($315,350,636 (divided by)
30,592,712 shares)
Maximum offering price per $10.60
share (100/97.25 of $10.31)
CLASS B: NET ASSET VALUE and $10.30
offering price per share
($64,531,767 (divided by)
6,268,026 shares) A
CLASS C: NET ASSET VALUE and $10.29
offering price per share
($17,099,265 (divided by)
1,661,007 shares) A
INSTITUTIONAL CLASS: NET $10.31
ASSET VALUE, offering price
and redemption price per
share ($157,130,769 (divided
by) 15,234,260 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 35,342,946
Interest
EXPENSES
Management fee $ 2,359,875
Transfer agent fees 1,105,508
Distribution fees 1,372,973
Accounting fees and expenses 164,670
Non-interested trustees' 1,702
compensation
Custodian fees and expenses 42,911
Registration fees 124,072
Audit 33,915
Legal 11,991
Total expenses before 5,217,617
reductions
Expense reductions (7,787) 5,209,830
NET INVESTMENT INCOME 30,133,116
REALIZED AND UNREALIZED GAIN (4,437,550)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (20,803,048)
Delayed delivery commitments 182,878 (20,620,170)
NET GAIN (LOSS) (25,057,720)
NET INCREASE (DECREASE) IN $ 5,075,396
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
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STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,133,116 $ 24,787,296 $ 28,868,748
income
Net realized gain (loss) (4,437,550) 4,353,759 (1,459,900)
Change in net unrealized (20,620,170) 4,740,098 (1,414,423)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,075,396 33,881,153 25,994,425
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (29,409,259) (24,380,390) (28,478,083)
from net investment income
Share transactions - net 91,347,340 17,749,456 (8,667,273)
increase (decrease)
TOTAL INCREASE (DECREASE) 67,013,477 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 $ 576,740,235 $ 509,726,758 $ 482,476,539
distributions in excess of
net investment income of
$1,366,046, $1,805,499 and
$1,999,021, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 H 1997 I 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 .580 .537 .615 .159
Net realized and unrealized (.474) .207 (.023) .235
gain (loss)
Total from investment .106 .744 .592 .394
operations
Less Distributions
From net investment income (.576) (.534) (.622) (.154)
Net asset value, end of period $ 10.300 $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 1.00% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 22,628 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .87% .90% A, F .90% F .90% A, F
net assets
Ratio of expenses to average .86% G .90% A .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.58% 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200%
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 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
I YEAR ENDED NOVEMBER 30
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FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
period
Income from Invest- ment
Operations
Net investment income .576 D .537 D .625 D .671 D .649 .609
Net realized and unrealized (.473) .201 (.058) (.147) .491 (.876)
gain (loss)
Total from investment .103 .738 .567 .524 1.140 (.267)
operations
Less Distributions
From net investment income (.563) (.528) (.617) (.674) (.640) (.555)
In excess of net investment - - - - - (.058)
income
Total distributions (.563) (.528) (.617) (.674) (.640) (.613)
Net asset value, end of period $ 10.310 $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260
TOTAL RETURN B, C .98% 7.15% 5.56% 5.10% 11.43% (2.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 315,350 $ 287,734 $ 278,869 $ 262,103 $ 228,439 $ 141,866
(000 omitted)
Ratio of expenses to average .97% .98% A .96% .97% .94% E 1.02% E
net assets
Ratio of expenses to average .97% .98% A .96% .96% F .94% 1.02%
net assets after expense
reductions
Ratio of net investment 5.48% 5.48% A 5.97% 6.38% 6.20% 6.04%
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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
H YEAR ENDED NOVEMBER 30
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FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
period
Income from Investment
Operations
Net investment income .506 D .468 D .551 D .597 D .579 .204
Net realized and unrealized (.467) .214 (.057) (.153) .483 (.178)
gain (loss)
Total from investment .039 .682 .494 .444 1.062 .026
operations
Less Distributions
From net investment income (.499) (.462) (.544) (.604) (.562) (.187)
In excess of net investment - - - - - (.019)
income
Total distributions (.499) (.462) (.544) (.604) (.562) (.206)
Net asset value, end of $ 10.300 $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
period
TOTAL RETURN B, C .37% 6.60% 4.83% 4.32% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 64,532 $ 39,657 $ 22,201 $ 18,972 $ 15,830 $ 3,156
(000 omitted)
Ratio of expenses to average 1.61% 1.65% A, F 1.65% F 1.66% F 1.70% F 1.65% A, F
net assets
Ratio of net investment 4.83% 4.79% A 5.27% 5.69% 5.44% 5.42% A
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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
H YEAR ENDED NOVEMBER 30
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 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 .492 .453 .031
Net realized and unrealized (.472) .199 (.005)
gain (loss)
Total from investment .020 .652 .026
operations
Less Distributions
From net investment income (.490) (.452) (.036)
Net asset value, end of period $ 10.290 $ 10.760 $ 10.560
TOTAL RETURN B, C .19% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,099 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.71% 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.71% 1.75% A 1.73% A, G
net assets after expense
reductions
Ratio of net investment 4.73% 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 138% 176% A 138%
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>
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FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEAR ENDED OCTOBER 31, 1999 1998 F 1997 G 1996 G 1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
period
Income from Invest- ment
Operations
Net investment income .610 D .566 D .658 D .705 D .671 .602
Net realized and unrealized (.485) .201 (.060) (.151) .499 (.833)
gain (loss)
Total from investment .125 .767 .598 .554 1.170 (.231)
operations
Less Distributions
From net investment income (.595) (.557) (.648) (.704) (.670) (.597)
In excess of net investment - - - - - (.062)
income
Total distributions (.595) (.557) (.648) (.704) (.670) (.659)
Net asset value, end of $ 10.310 $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270
period
TOTAL RETURN B, C 1.19% 7.44% 5.86% 5.40% 11.73% (2.10)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 157,131 $ 168,019 $ 177,427 $ 211,866 $ 208,861 $ 172,122
(000 omitted)
Ratio of expenses to average .66% .68% A .67% .66% .67% E .61%
net assets
Ratio of net investment 5.78% 5.78% A 6.27% 6.69% 6.47% 6.45%
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</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
G YEAR ENDED NOVEMBER 30
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) (formerly a fund of Fidelity
Advisor Series IV 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 four 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, 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 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 after the customary settlement period for that security. 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 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
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $770,157,646 and $679,985,048, respectively, of which U.S.
government and government agency obligations aggregated $580,350,701
and $541,024,971, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 $ 23,701 $ -
CLASS T 760,397 23,314
CLASS B 475,824 343,749
CLASS C 113,051 88,135
$ 1,372,973 $ 455,198
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 is 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 $ 139,199 $ 63,030
CLASS T 187,551 66,841
CLASS B 126,253 126,253*
CLASS C 15,221 15,221*
$ 468,224 $ 271,345
* 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 $ 34,391 .22
CLASS T 665,075 .22
CLASS B 112,584 .21
CLASS C 24,308 .21
INSTITUTIONAL CLASS 269,150 .16
$ 1,105,508
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian, credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's custodian fees were
reduced by $7,787 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ELEVEN MONTHS YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, NOVEMBER 30,
1999 1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 868,429 $ 299,762 $ 122,899
CLASS T 16,224,315 13,762,990 15,434,281
CLASS B 2,508,941 1,166,769 1,017,603
CLASS C 528,467 106,569 312
INSTITUTIONAL CLASS 9,279,107 9,044,300 11,902,988
TOTAL $ 29,409,259 $ 24,380,390 $ 28,478,083
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SHARES YEAR DOLLARS
YEAR ELEVEN ENDED YEAR ELEVEN MONTHS ENDED
ENDED OCTOBER 31, MONTHS ENDED OCTOBER 31, NOVEMBER 30, ENDED OCTOBER 31,
1999 1998 1997 A 1999 1998
CLASS A Shares sold 3,357,531 826,066 455,670 $ 35,356,066 $ 8,801,326
Reinvestment of
distributions 72,714 24,233 10,671 761,419 258,506
Shares redeemed (1,997,004) (448,992) (169,434) (20,973,090) (4,782,656)
Net increase (decrease) 1,433,241 401,307 296,907 $ 15,144,395 $ 4,277,176
CLASS T Shares sold 17,948,549 13,142,016 13,128,368 $ 189,451,401 $ 140,268,143
Reinvestment of
distributions 1,383,474 1,173,166 1,340,839 14,555,972 12,511,199
Shares redeemed (15,455,120) (14,007,864) (12,764,354) (162,894,381) (149,280,620)
Net increase (decrease) 3,876,903 307,318 1,704,853 $ 41,112,992 $ 3,498,722
CLASS B Shares sold 4,797,807 3,469,510 1,113,298 $ 50,576,586 $ 37,025,976
Reinvestment of
distributions 191,805 85,515 76,151 2,011,162 911,937
Shares redeemed (2,406,744) (1,975,435) (874,566) (25,318,778) (21,073,447)
Net increase (decrease) 2,582,868 1,579,590 314,883 $ 27,268,970 $ 16,864,466
CLASS C Shares sold 1,681,953 639,302 15,175 $ 17,687,270 $ 6,829,640
Reinvestment of
distributions 38,404 8,679 16 402,151 92,773
Shares redeemed (626,095) (96,427) - (6,595,292) (1,036,670)
Net increase (decrease) 1,094,262 551,554 15,191 $ 11,494,129 $ 5,885,743
INSTITUTIONAL CLASS
Shares sold 5,199,325 5,436,279 5,646,676 $ 54,855,022 $ 57,943,429
Reinvestment of
distributions 401,855 349,249 477,520 4,235,018 3,726,467
Shares redeemed (5,956,114) (6,987,186) (9,287,961) (62,763,186) (74,446,547)
Net increase (decrease) (354,934) (1,201,658) (3,163,765) $ (3,673,146) $ (12,776,651)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
YEAR
ENDED
NOVEMBER 30,
1997 A
CLASS A Shares sold $ 4,761,173
Reinvestment of distributions 111,981
Shares redeemed (1,767,583)
Net increase (decrease) $ 3,105,571
CLASS T Shares sold $ 137,559,201
Reinvestment of distributions 14,043,998
Shares redeemed (133,637,535)
Net increase (decrease) $ 17,965,664
CLASS B Shares sold $ 11,661,677
Reinvestment of distributions 796,683
Shares redeemed (9,166,397)
Net increase (decrease) $ 3,291,963
CLASS C Shares sold $ 160,441
Reinvestment of distributions 167
Shares redeemed -
Net increase (decrease) $ 160,608
INSTITUTIONAL CLASS Shares $ 59,206,035
sold
Reinvestment of distributions 5,003,755
Shares redeemed (97,400,869)
Net increase (decrease) $ (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
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Intermediate Bond Fund (formerly a fund of Fidelity
Advisor Series IV):
In our opinion, the accompanying statements of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Advisor Series IV) at October
31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Intermediate Bond Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1999
DISTRIBUTIONS
A total of 13.28% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.)
Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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
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 High Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 37 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 38
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.
Other 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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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
would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 1.19% 35.95% 99.52%
LB Int Govt/Corp Bond 0.99% 41.05% 104.47%
Short-Intermediate Investment 1.44% 35.05% 90.73%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Institutional Class' returns to
those of the Lehman Brothers Intermediate Government/Corporate Bond
Index - a market value-weighted 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 one year average represents a peer group of 93
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 1.19% 6.33% 7.15%
LB Int Govt/Corp Bond 0.99% 7.12% 7.41%
Short-Intermediate Investment 1.44% 6.19% 6.67%
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
1989/10/31 10000.00 10000.00
1989/11/30 10082.25 10095.61
1989/12/31 10098.87 10123.24
1990/01/31 9998.43 10058.33
1990/02/28 10031.32 10094.95
1990/03/31 10017.29 10108.11
1990/04/30 9952.53 10073.02
1990/05/31 10188.91 9943.64
1990/06/30 10325.14 10432.22
1990/07/31 10462.99 10576.95
1990/08/31 10375.64 10533.53
1990/09/30 10452.34 10614.89
1990/10/31 10550.84 10738.13
1990/11/30 10733.48 10524.10
1990/12/31 10897.94 11050.17
1991/01/31 10978.96 11162.23
1991/02/28 11067.01 11251.48
1991/03/31 11137.12 11328.01
1991/04/30 11261.34 11451.47
1991/05/31 11321.41 11521.86
1991/06/30 11324.82 11529.98
1991/07/31 11452.18 11658.48
1991/08/31 11692.61 11881.06
1991/09/30 11909.79 12085.43
1991/10/31 12050.71 12223.37
1991/11/30 12166.01 12363.71
1991/12/31 12549.81 12665.67
1992/01/31 12389.22 12550.98
1992/02/29 12421.36 12600.54
1992/03/31 12376.65 12550.98
1992/04/30 12446.20 12661.29
1992/05/31 12673.66 12857.55
1992/06/30 12852.37 13047.89
1992/07/31 13154.87 13307.31
1992/08/31 13276.50 13440.42
1992/09/30 13445.62 13622.87
1992/10/31 13250.34 13446.12
1992/11/30 13287.05 13395.03
1992/12/31 13467.91 13574.40
1993/01/31 13751.81 13838.43
1993/02/28 14016.26 14056.62
1993/03/31 14111.34 14112.54
1993/04/30 14202.71 14226.13
1993/05/31 14219.55 14194.55
1993/06/30 14506.67 14417.35
1993/07/31 14640.26 14452.66
1993/08/31 14969.75 14681.81
1993/09/30 15018.28 14742.77
1993/10/31 15104.35 14782.25
1993/11/30 15037.15 14699.79
1993/12/31 15095.18 14767.12
1994/01/31 15260.17 14931.14
1994/02/28 14955.28 14710.32
1994/03/31 14670.57 14467.57
1994/04/30 14634.20 14369.11
1994/05/31 14595.89 14378.76
1994/06/30 14597.68 14380.73
1994/07/31 14739.50 14587.74
1994/08/31 14741.19 14633.35
1994/09/30 14672.91 14498.71
1994/10/31 14676.13 14496.73
1994/11/30 14721.48 14430.95
1994/12/31 14784.48 14482.04
1995/01/31 14947.87 14726.11
1995/02/28 15120.97 15031.58
1995/03/31 15216.04 15117.54
1995/04/30 15354.55 15304.15
1995/05/31 15747.67 15766.85
1995/06/30 15844.08 15872.55
1995/07/31 15839.99 15874.74
1995/08/31 15971.51 16019.25
1995/09/30 16073.14 16135.26
1995/10/31 16254.00 16315.07
1995/11/30 16448.67 16529.54
1995/12/31 16633.22 16702.78
1996/01/31 16759.17 16846.85
1996/02/29 16571.95 16649.05
1996/03/31 16495.87 16563.31
1996/04/30 16431.69 16504.76
1996/05/31 16399.07 16492.26
1996/06/30 16568.65 16667.47
1996/07/31 16616.06 16717.03
1996/08/31 16632.13 16730.19
1996/09/30 16850.81 16963.29
1996/10/31 17120.18 17263.06
1996/11/30 17337.13 17490.68
1996/12/31 17248.99 17378.62
1997/01/31 17308.53 17446.16
1997/02/28 17327.23 17479.50
1997/03/31 17223.36 17358.89
1997/04/30 17416.07 17562.83
1997/05/31 17528.55 17708.65
1997/06/30 17687.99 17870.27
1997/07/31 18015.90 18233.85
1997/08/31 17951.08 18142.19
1997/09/30 18156.88 18353.14
1997/10/31 18315.48 18556.42
1997/11/30 18353.18 18597.43
1997/12/31 18496.81 18746.11
1998/01/31 18725.79 18991.71
1998/02/28 18720.82 18977.24
1998/03/31 18794.98 19038.20
1998/04/30 18866.25 19133.59
1998/05/31 19011.35 19273.94
1998/06/30 19119.86 19396.96
1998/07/31 19176.60 19465.37
1998/08/31 19394.79 19771.28
1998/09/30 19755.26 20267.97
1998/10/31 19717.90 20248.02
1998/11/30 19771.09 20246.48
1998/12/31 19862.84 20327.84
1999/01/31 19992.28 20439.45
1999/02/28 19780.00 20139.03
1999/03/31 19910.01 20289.31
1999/04/30 19983.24 20351.61
1999/05/31 19815.46 20194.95
1999/06/30 19813.28 20209.04
1999/07/31 19777.16 20191.22
1999/08/31 19759.69 20206.55
1999/09/30 19949.58 20395.06
1999/10/29 19952.14 20447.00
IMATRL PRASUN SHR__CHT 19991031 19991112 092435 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Institutional
Class on October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have grown to $19,952 - a 99.52%
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 $20,447 - a 104.47%
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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.55% 5.96% 6.41% 6.83% 6.77%
Capital returns -4.36% 1.70% 0.57% -1.50% 3.98%
Total returns 1.19% 7.66% 6.98% 5.33% 10.75%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.13(cents) 30.18(cents) 59.54(cents)
Annualized dividend rate 5.87% 5.76% 5.64%
30-day annualized yield 6.32% - -
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 $10.29 over the past one
month, $10.40 over the past six months and $10.55 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares returned 1.19%. That topped the 0.99%
return for the Lehman Brothers Intermediate Government/Corporate Bond
Index. During the same period, the short-intermediate investment grade
debt funds average tracked by Lipper Inc. returned 1.44%.
Q. WHAT FACTORS SHAPED PERFORMANCE DURING THE PERIOD?
A. All things considered, the fund fared well relative to the market.
Typically, it's extremely difficult to get any bond fund to post a
positive total return in a deteriorating interest-rate environment, as
rising bond yields cause their prices to drop by more than the
interest earned. This fund, however, relied on sector allocation to
help pave an alternate path, one that led to positive performance
during the period. The fund benefited from its overweighting in spread
sectors - namely, corporates, mortgages and asset-backed securities -
relative to the benchmark, and these securities outperformed
Treasuries during the 12-month period. Timing was equally as
important, as we added spread sector exposure at historically
attractive price levels during the period. Additionally, within
corporates, we were in the right sectors. Our stake in communications
- - cable, media and telecommunications companies - along with various
energy firms was particularly beneficial to the fund. Consolidation in
the world of telecommunications was a positive event for credit
quality, which was a big win for us. Conversely, having an average
duration - a measure of how sensitive the fund's share price is to
changing interest rates - generally longer than its peers amid a
rising interest-rate environment detracted from relative performance.
Q. WHAT ELSE INFLUENCED PERFORMANCE?
A. Within mortgages - a sector that is not represented in the
benchmark - we had two things going for us during the period. First,
refinancing activity slowed considerably as a result of the rise in
interest rates. Yet, housing turnover remained high, as homeowners
continued to trade up to bigger homes, fueled in large part by the
strong economy. Thus, prepayments on discount mortgage securities -
those priced below face value, or par - were faster than normal, which
was a big positive since the bonds get prepaid at par. So, the fund
benefited simply by owning discount mortgages through the passage of
time. Second, the market began to recognize that mortgage securities
were cheap, which drove prices up and led to spread tightening.
Declining interest-rate volatility late in the period further
benefited mortgage security valuations.
Q. HOW DID THE FUND'S HOLDINGS IN CORPORATE BONDS AFFECT PERFORMANCE?
A. Following two quarters of strong performance, corporate spreads
widened considerably in the summer due to concerns of oversupply
related to the Year 2000 - or Y2K - changeover. Those fears ultimately
proved unfounded, with rising interest rates having a lot to do with
keeping supply contained. Corporates rebounded, however, with spreads
narrowing late in the period due to the surprising supply picture. We
really didn't believe the supply scare at all to begin with, so, when
spreads did widen out earlier, we viewed it simply as an opportunity
to add securities that we liked at more attractive prices.
Q. WHAT WERE SOME OF YOUR OTHER STRATEGIES DURING THE PERIOD?
A. We stayed with many of the telecom names that performed well for
us, although we shifted some telecom assets to energy holdings. Also,
positions in government agencies took on a more meaningful role in the
fund, as I began to substitute them for high-grade corporates.
Agencies over the past year cheapened considerably, due in large part
to supply reasons. Although agencies weren't expected to be huge wins
for us, they did have some value just the same, as they offered
returns that were competitive with high-quality corporate bonds, but
with less risk.
Q. WHAT'S YOUR OUTLOOK?
A. My outlook remains positive for the spread sectors. In general,
mortgages are still relatively cheap and, given that interest rates
have risen, supply pressures and concerns over prepayments have eased
considerably, even with the strong housing market. With respect to
corporates, earnings and cash flows are still quite good, so companies
should continue to do well from a bondholder's perspective. There's
also growing sentiment shared among corporate treasurers these days to
carry less debt on their balance sheets. Together, these factors paint
a pretty good picture going forward. Admittedly, the interest-rate
move over the past 12 months was a big one. Since it's unlikely that
we would experience a move of similar magnitude any time soon, today's
higher level of interest rates offers investors a much better cushion
against future volatility.
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 October 31, 1999,
more than $576 million
MANAGER: Kevin Grant, since
1995; joined Fidelity in
1993
KEVIN GRANT ON THE ROLE
OF MORTGAGE SECURITIES IN
THE FUND:
"Two years ago, the mortgage
market accounted for about 30%
of the investment-grade world. By
the end of this year, that share will
grow to around 35% of this universe.
What's happening, in essence, is
that the U.S. Treasury is issuing
fewer bonds, so that the pool of
available government securities
is shrinking relative to other
components of the market, like
the mortgage sector.
"Much of the rise in mortgages was
due to a strong refinancing wave
resulting in larger, lower-coupon
issues, as well as the sustained
robustness of the housing market
providing a steady stream of new
mortgages into the market.
Mortgages have become an
increasingly growing part of the
investment equation for this fund
and others like it, and I expect this
trend to continue going forward.
Through its pursuit of attractive
investment alternatives within such
asset classes as mortgages, the fund
stands well poised to challenge the
Treasury-heavy Lehman index,
which excludes them altogether."
NOTE TO SHAREHOLDERS:
Effective December 29, 1999,
Andrew Dudley became portfolio
manager of Fidelity Advisor
Intermediate Bond Fund.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 58.2 56.8
Aa 1.8 2.8
A 18.9 18.4
Baa 12.9 13.6
Ba and Below 3.0 1.2
</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 OCTOBER 31, 1999
6 MONTHS AGO
Years 6.1 5.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 3.4 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 30.4% Corporate Bonds 30.3%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 50.0% Obligations 47.0%
Asset-Backed Securities 7.2% Asset-Backed Securities 10.5%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 2.2% Related Securities 2.2%
Other Investments 3.8% Other Investments 4.5%
Short-Term Investments and Short-Term Investments and
Net Other Assets 6.4% Net Other Assets 5.5%
* FOREIGN INVESTMENTS 8.8% ** FOREIGN INVESTMENTS 10.7%
Row: 1, Col: 1, Value: 30.4 Row: 1, Col: 1, Value: 30.3
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 50.0 Row: 1, Col: 3, Value: 47.0
Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 4, Value: 10.5
Row: 1, Col: 5, Value: 2.2 Row: 1, Col: 5, Value: 2.2
Row: 1, Col: 6, Value: 3.8 Row: 1, Col: 6, Value: 4.5
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.4 Row: 1, Col: 8, Value: 5.5
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 30.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 1.4%
Monsanto Co. 6% 12/1/05 (c) A2 $ 5,000,000 $ 4,672,050
Praxair, Inc. 6.15% 4/15/03 A3 3,640,000 3,514,347
8,186,397
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 6.625% Baa2 255,000 247,919
9/15/04
TOTAL BASIC INDUSTRIES 8,434,316
CONSTRUCTION & REAL ESTATE -
1.9%
REAL ESTATE - 1.0%
Duke Realty LP 7.3% 6/30/03 Baa1 6,000,000 5,954,820
REAL ESTATE INVESTMENT TRUSTS
- - 0.9%
CenterPoint Properties Trust Baa2 640,000 598,989
6.75% 4/1/05
Equity Office Properties Baa1 4,000,000 3,859,400
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 395,288
4,853,677
TOTAL CONSTRUCTION & REAL 10,808,497
ESTATE
ENERGY - 0.4%
OIL & GAS - 0.4%
Apache Finance Property Ltd. Baa1 700,000 659,750
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 600,000 579,540
Petro-Canada 7% 11/15/28 A3 1,440,000 1,290,413
2,529,703
FINANCE - 13.4%
BANKS - 7.8%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,739,550
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,533,825
BankAmerica Corp. 10% 2/1/03 Aa3 210,000 228,711
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,134,784
BanPonce Financial Corp. A3 3,850,000 3,828,440
6.75% 8/9/01
Barclays Bank PLC yankee A1 3,050,000 3,009,618
5.95% 7/15/01
Capital One Bank 7.35% 6/20/00 Baa2 5,000,000 5,016,100
Capital One Financial Corp. Baa3 1,390,000 1,276,229
7.125% 8/1/08
Chase Manhattan Corp. 5.5% Aa3 600,000 593,112
2/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Kansallis-Osake-Pankki (NY A2 $ 650,000 $ 693,446
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa3 1,165,000 1,114,660
7.125% 9/17/01 Baa3 170,000 168,196
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 433,080
NationsBank Corp. 8.125% Aa3 3,000,000 3,094,800
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 4,957,800
Sanwa Finance Aruba AEC 8.35% Baa1 3,800,000 3,844,042
7/15/09
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 2,029,960
Union Planters National Bank A3 1,500,000 1,503,225
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 4,904,200
45,103,778
CREDIT & OTHER FINANCE - 5.3%
Associates Corp. of North Aa3 1,350,000 1,321,448
America 6% 4/15/03
AT&T Capital Corp. 7.5% A1 2,380,000 2,401,277
11/15/00
ERP Operating LP:
6.55% 11/15/01 A3 470,000 464,703
7.1% 6/23/04 A3 5,000,000 4,927,950
Ford Motor Credit Co. 7.75% A1 100,000 102,587
11/15/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 3,350,000 3,007,396
Popular North America, Inc. A3 2,250,000 2,243,925
7.375% 9/15/01
RBSG Capital Corp. 10.125% A2 1,500,000 1,650,420
3/1/04
Sears Roebuck Acceptance A2 5,000,000 4,984,450
Corp. 6.15% 11/15/05
Spieker Properties LP:
6.8% 5/1/04 Baa2 535,000 516,200
6.875% 2/1/05 Baa2 5,000,000 4,804,900
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,107,440
5.875% 5/1/04 Baa1 2,265,000 2,173,154
6.875% 11/15/28 Baa1 595,000 544,907
Trizec Finance Ltd. yankee Baa3 590,000 628,350
10.875% 10/15/05
30,879,107
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 888,570
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 $ 669,879
5/15/05
TOTAL FINANCE 77,541,334
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA Baa1 4,000,000 3,949,640
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.9%
WMX Technologies, Inc. 7.1% Ba1 6,000,000 5,410,740
8/1/26
TOTAL INDUSTRIAL MACHINERY & 9,360,380
EQUIPMENT
MEDIA & LEISURE - 1.1%
BROADCASTING - 1.1%
Continental Cablevision, Inc. Baa2 875,000 914,165
8.3% 5/15/06
Cox Communications, Inc. Baa2 1,295,000 1,319,048
7.75% 8/15/06
TCI Communications, Inc. A2 3,470,000 3,876,545
8.75% 8/1/15
6,109,758
NONDURABLES - 2.2%
BEVERAGES - 1.0%
Seagram Co. Ltd. yankee Baa3 270,000 236,250
6.875% 9/1/23
Seagram JE & Sons, Inc. Baa3 5,635,000 5,401,148
6.625% 12/15/05
5,637,398
TOBACCO - 1.2%
Philip Morris Companies, Inc. A2 6,000,000 5,761,800
6.95% 6/1/06
RJR Nabisco, Inc. 7.375% Baa2 1,300,000 1,248,494
5/15/03 (c)
7,010,294
TOTAL NONDURABLES 12,647,692
RETAIL & WHOLESALE - 1.8%
DRUG STORES - 0.7%
Rite Aid Corp.:
6% 12/15/00 (c) Ba2 380,000 307,800
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - CONTINUED
Rite Aid Corp.: - continued
6.5% 12/15/05 (c) Ba2 $ 5,175,000 $ 3,363,750
7.125% 1/15/07 Ba2 650,000 442,000
4,113,550
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,480,000 1,469,625
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.8%
USA Networks, Inc./USANI LLC Ba1 5,000,000 4,777,500
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 10,360,675
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
First Data Corp. 6.625% 4/1/03 A2 5,000,000 4,948,550
COMPUTERS & OFFICE EQUIPMENT
- - 0.3%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,935,460
TOTAL TECHNOLOGY 6,884,010
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 435,000 425,735
7.73% 9/15/12 Baa1 280,000 273,280
699,015
UTILITIES - 5.2%
CELLULAR - 0.7%
Cable & Wireless Baa1 3,760,000 3,747,517
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 2.6%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 2,000,000 1,827,660
7.05% 12/11/07 (c) Baa2 5,000,000 4,757,800
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
DR Investments UK PLC yankee A2 $ 5,000,000 $ 5,013,150
7.1% 5/15/02 (c)
Israel Electric Corp. Ltd. A3 3,840,000 3,316,800
7.75% 12/15/27 (c)
14,915,410
GAS - 0.3%
Cms Panhandle Holding Co.:
6.125% 3/15/04 Baa3 1,000,000 957,000
7% 7/15/29 Baa3 750,000 677,700
1,634,700
TELEPHONE SERVICES - 1.6%
MCI WorldCom, Inc. 6.4% A3 5,000,000 4,859,900
8/15/05
Telecomunicaciones de Puerto Baa2 1,330,000 1,265,828
Rico, Inc. 6.65% 5/15/06 (c)
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 2,545,000 2,389,119
7.7% 7/20/29 Baa1 1,000,000 905,520
9,420,367
TOTAL UTILITIES 29,717,994
TOTAL NONCONVERTIBLE BONDS 175,093,374
(Cost $182,270,582)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 26.5%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 6.9%
Fannie Mae:
6.15% 1/13/00 Aaa 1,100,000 1,100,341
6.5% 4/29/09 Aaa 23,900,000 22,753,517
Farm Credit Systems Financial Aaa 1,800,000 1,968,750
Assistance Corp. 9.375%
7/21/03
Federal Home Loan Bank:
7.31% 6/16/04 Aaa 3,830,000 3,938,925
7.38% 8/5/04 Aaa 1,930,000 1,994,829
7.7% 9/20/04 Aaa 1,250,000 1,307,225
Freddie Mac 8.115% 1/31/05 Aaa 5,460,000 5,815,774
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates Aaa $ 546,095 $ 561,118
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E 9.4%
5/15/02
Guaranteed Export Trust Aaa 257,631 259,049
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994 A, 7.12% 4/15/06
39,699,528
U.S. TREASURY OBLIGATIONS -
19.6%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 3,050,000 3,036,641
12% 8/15/13 Aaa 1,790,000 2,453,983
14% 11/15/11 Aaa 1,510,000 2,155,767
U.S. Treasury Notes:
4% 10/31/00 Aaa 48,000,000 47,242,560
6.375% 9/30/01 Aaa 8,500,000 8,582,365
6.5% 5/31/02 Aaa 5,165,000 5,240,047
7% 7/15/06 Aaa 17,882,000 18,681,147
7.25% 8/15/04 Aaa 4,890,000 5,133,718
7.5% 11/15/01 Aaa 20,090,000 20,724,040
113,250,268
TOTAL U.S. GOVERNMENT AND 152,949,796
GOVERNMENT AGENCY OBLIGATIONS
(Cost $154,628,476)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 23.5%
FANNIE MAE - 19.6%
5.5% 9/1/10 to 5/1/11 Aaa 1,464,087 1,390,711
6% 3/1/11 to 3/1/14 Aaa 35,413,342 34,084,365
6.5% 10/1/27 to 7/1/29 Aaa 10,965,419 10,507,553
7% 12/1/23 to 12/1/28 Aaa 3,162,212 3,113,236
7.5% 9/1/25 to 9/1/29 Aaa 56,715,812 56,841,361
8.5% 6/1/11 to 4/1/27 Aaa 3,031,661 3,135,172
9.5% 2/1/25 Aaa 1,750,555 1,858,319
10% 1/1/20 Aaa 47,727 51,710
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
10.5% 7/1/11 to 8/1/20 Aaa $ 250,045 $ 274,312
11% 8/1/15 Aaa 1,330,200 1,450,676
12.5% 2/1/11 to 4/1/15 Aaa 57,539 65,117
112,772,532
FREDDIE MAC - 0.4%
8.5% 9/1/24 to 8/1/27 Aaa 1,398,818 1,449,078
9.5% 1/1/17 Aaa 14,335 15,098
10% 4/1/05 to 8/1/10 Aaa 149,923 155,876
10.25% 12/1/09 Aaa 27,860 29,463
10.5% 5/1/21 Aaa 446,684 485,118
11% 12/1/11 Aaa 17,018 18,309
11.5% 10/1/15 Aaa 61,535 67,326
11.75% 10/1/10 Aaa 35,418 38,471
2,258,739
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.5%
6.5% 2/15/29 Aaa 9,816,579 9,380,920
7% 11/15/22 to 7/15/28 Aaa 3,463,714 3,408,723
7.5% 2/15/28 to 10/15/28 Aaa 346,627 347,520
8% 2/15/02 to 6/15/25 Aaa 2,050,673 2,092,544
8.5% 4/15/17 to 12/15/21 Aaa 389,463 405,636
10% 11/15/09 to 1/15/26 Aaa 2,047,797 2,238,555
11% 12/15/09 to 10/15/20 Aaa 461,015 506,649
11.5% 3/15/10 to 2/15/19 Aaa 1,881,011 2,106,808
20,487,355
TOTAL U.S. GOVERNMENT AGENCY 135,518,626
- - MORTGAGE SECURITIES
(Cost $137,754,050)
ASSET-BACKED SECURITIES - 7.2%
Aesop Funding II LLC 6.22% Aaa 8,000,000 7,990,000
10/20/01 (c)
American Express Credit A1 1,100,000 1,054,453
Account Master Trust 6.1%
12/15/06
Arcadia Automobile Aaa 4,907,201 4,906,435
Receivables Trust 6.5%
6/17/02
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Chase Manhattan Grantor Trust:
6.61% 9/15/02 Aaa $ 677,731 $ 680,273
6.76% 9/15/02 A3 254,149 254,785
Chevy Chase Auto Receivables
Trust:
5.9% 7/15/03 Aaa 734,583 730,553
5.91% 12/15/04 Aaa 504,122 499,333
6.6% 12/15/02 Aaa 215,756 215,957
Citibank Credit Card Master A1 10,000,000 9,995,313
Trust I 6.45% 8/15/02
Contimortgage Home Equity Aaa 2,197,036 2,187,413
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,950,000
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 12/15/02 Baa2 590,000 582,625
6.87% 11/15/04 A2 1,100,000 1,095,531
Key Auto Finance Trust 6.3% A2 787,582 784,630
10/15/03
PNC Student Loan Trust I Aaa 3,645,000 3,646,139
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 5,000,000 4,885,900
2/9/04
Sears Credit Account Master Aaa 283,333 283,333
Trust II 6.5% 10/15/03
TOTAL ASSET-BACKED SECURITIES 41,742,673
(Cost $41,963,599)
COMMERCIAL MORTGAGE
SECURITIES - 2.2%
CS First Boston Mortgage
Securities Corp.:
Series 1995-WF1 Class A-2, AAA 3,359,096 3,330,754
6.648% 12/21/27
Series 1998-FL1:
Class D, 5.9% 12/10/00 (c)(d) A2 1,600,000 1,584,000
Class E, 6.25% 1/10/13 (c)(d) Baa2 2,970,000 2,910,600
Equitable Life Assurance A2 1,000,000 985,300
Society of the United
States Series 174 Class C-1,
7.52% 5/15/06 (c)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Thirteen Affiliates of Aaa $ 2,500,000 $ 2,396,700
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (c)
Wells Fargo Capital Markets Aaa 1,496,719 1,479,492
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (c)
TOTAL COMMERCIAL MORTGAGE 12,686,846
SECURITIES
(Cost $12,893,718)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 2.1%
Canadian Government 6.125% Aa2 5,000,000 4,975,500
7/15/02
Korean Republic yankee:
8.75% 4/15/03 Baa3 1,225,000 1,264,310
8.875% 4/15/08 Baa3 858,000 888,390
Quebec Province yankee:
6.86% 4/15/26 (b) A2 5,000,000 4,894,400
7.125% 2/9/24 A2 190,000 182,704
7.5% 7/15/23 A2 190,000 190,568
TOTAL FOREIGN GOVERNMENT AND 12,395,872
GOVERNMENT AGENCY OBLIGATIONS
(Cost $12,402,174)
SUPRANATIONAL OBLIGATIONS -
1.7%
Inter American Development Aaa 10,000,000 9,743,500
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
</TABLE>
CASH EQUIVALENTS - 5.1%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 29,199,965 $ 29,187,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $29,187,000)
TOTAL INVESTMENT PORTFOLIO - 569,317,687
98.7% (Cost $581,036,699)
NET OTHER ASSETS - 1.3% 7,422,548
NET ASSETS - 100% $ 576,740,235
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 $43,119,424 or 7.5% of net assets.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) 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 78.3% AAA, AA, A 71.9%
Baa 12.9% BBB 15.8%
Ba 3.0% BB 1.6%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $581,211,516. Net unrealized depreciation
aggregated $11,893,829, of which $924,846 related to appreciated
investment securities and $12,818,675 related to depreciated
investment securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $14,756,000 of which $9,361,000, $1,410,000 and
$3,985,000 will expire on October 31, 2004, 2005 and 2007,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 569,317,687
value (including repurchase
agreements of $29,187,000)
(cost $581,036,699) - See
accompanying schedule
Cash 16,609
Receivable for investments 170,105
sold
Receivable for fund shares 1,411,950
sold
Interest receivable 8,231,754
TOTAL ASSETS 579,148,105
LIABILITIES
Payable for fund shares $ 1,307,434
redeemed
Distributions payable 596,478
Accrued management fee 204,225
Distribution fees payable 129,257
Other payables and accrued 170,476
expenses
TOTAL LIABILITIES 2,407,870
NET ASSETS $ 576,740,235
Net Assets consist of:
Paid in capital $ 604,755,708
Distributions in excess of (1,366,046)
net investment income
Accumulated undistributed net (14,930,415)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (11,719,012)
(depreciation) on investments
NET ASSETS $ 576,740,235
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.30
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($22,627,798 (divided by)
2,196,298 shares)
Maximum offering price per $10.70
share (100/96.25 of $10.30)
CLASS T: NET ASSET VALUE and $10.31
redemption price per share
($315,350,636 (divided by)
30,592,712 shares)
Maximum offering price per $10.60
share (100/97.25 of $10.31)
CLASS B: NET ASSET VALUE and $10.30
offering price per share
($64,531,767 (divided by)
6,268,026 shares) A
CLASS C: NET ASSET VALUE and $10.29
offering price per share
($17,099,265 (divided by)
1,661,007 shares) A
INSTITUTIONAL CLASS: NET $10.31
ASSET VALUE, offering price
and redemption price per
share ($157,130,769 (divided
by) 15,234,260 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 35,342,946
Interest
EXPENSES
Management fee $ 2,359,875
Transfer agent fees 1,105,508
Distribution fees 1,372,973
Accounting fees and expenses 164,670
Non-interested trustees' 1,702
compensation
Custodian fees and expenses 42,911
Registration fees 124,072
Audit 33,915
Legal 11,991
Total expenses before 5,217,617
reductions
Expense reductions (7,787) 5,209,830
NET INVESTMENT INCOME 30,133,116
REALIZED AND UNREALIZED GAIN (4,437,550)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (20,803,048)
Delayed delivery commitments 182,878 (20,620,170)
NET GAIN (LOSS) (25,057,720)
NET INCREASE (DECREASE) IN $ 5,075,396
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,133,116 $ 24,787,296 $ 28,868,748
income
Net realized gain (loss) (4,437,550) 4,353,759 (1,459,900)
Change in net unrealized (20,620,170) 4,740,098 (1,414,423)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,075,396 33,881,153 25,994,425
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (29,409,259) (24,380,390) (28,478,083)
from net investment income
Share transactions - net 91,347,340 17,749,456 (8,667,273)
increase (decrease)
TOTAL INCREASE (DECREASE) 67,013,477 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 $ 576,740,235 $ 509,726,758 $ 482,476,539
distributions in excess of
net investment income of
$1,366,046, $1,805,499 and
$1,999,021, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 H 1997 I 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 .580 .537 .615 .159
Net realized and unrealized (.474) .207 (.023) .235
gain (loss)
Total from investment .106 .744 .592 .394
operations
Less Distributions
From net investment income (.576) (.534) (.622) (.154)
Net asset value, end of period $ 10.300 $ 10.770 $ 10.560 $ 10.590
TOTAL RETURN B, C 1.00% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 22,628 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .87% .90% A, F .90% F .90% A, F
net assets
Ratio of expenses to average .86% G .90% A .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.58% 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200%
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 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
I YEAR ENDED NOVEMBER 30
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260 $ 11.140
period
Income from Invest- ment
Operations
Net investment income .576 D .537 D .625 D .671 D .649 .609
Net realized and unrealized (.473) .201 (.058) (.147) .491 (.876)
gain (loss)
Total from investment .103 .738 .567 .524 1.140 (.267)
operations
Less Distributions
From net investment income (.563) (.528) (.617) (.674) (.640) (.555)
In excess of net investment - - - - - (.058)
income
Total distributions (.563) (.528) (.617) (.674) (.640) (.613)
Net asset value, end of period $ 10.310 $ 10.770 $ 10.560 $ 10.610 $ 10.760 $ 10.260
TOTAL RETURN B, C .98% 7.15% 5.56% 5.10% 11.43% (2.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 315,350 $ 287,734 $ 278,869 $ 262,103 $ 228,439 $ 141,866
(000 omitted)
Ratio of expenses to average .97% .98% A .96% .97% .94% E 1.02% E
net assets
Ratio of expenses to average .97% .98% A .96% .96% F .94% 1.02%
net assets after expense
reductions
Ratio of net investment 5.48% 5.48% A 5.97% 6.38% 6.20% 6.04%
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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
H YEAR ENDED NOVEMBER 30
<TABLE>
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FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250 $ 10.430
period
Income from Investment
Operations
Net investment income .506 D .468 D .551 D .597 D .579 .204
Net realized and unrealized (.467) .214 (.057) (.153) .483 (.178)
gain (loss)
Total from investment .039 .682 .494 .444 1.062 .026
operations
Less Distributions
From net investment income (.499) (.462) (.544) (.604) (.562) (.187)
In excess of net investment - - - - - (.019)
income
Total distributions (.499) (.462) (.544) (.604) (.562) (.206)
Net asset value, end of $ 10.300 $ 10.760 $ 10.540 $ 10.590 $ 10.750 $ 10.250
period
TOTAL RETURN B, C .37% 6.60% 4.83% 4.32% 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 64,532 $ 39,657 $ 22,201 $ 18,972 $ 15,830 $ 3,156
(000 omitted)
Ratio of expenses to average 1.61% 1.65% A, F 1.65% F 1.66% F 1.70% F 1.65% A, F
net assets
Ratio of net investment 4.83% 4.79% A 5.27% 5.69% 5.44% 5.42% A
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
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
H YEAR ENDED NOVEMBER 30
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 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 .492 .453 .031
Net realized and unrealized (.472) .199 (.005)
gain (loss)
Total from investment .020 .652 .026
operations
Less Distributions
From net investment income (.490) (.452) (.036)
Net asset value, end of period $ 10.290 $ 10.760 $ 10.560
TOTAL RETURN B, C .19% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,099 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.71% 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.71% 1.75% A 1.73% A, G
net assets after expense
reductions
Ratio of net investment 4.73% 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 138% 176% A 138%
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> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEAR ENDED OCTOBER 31, 1999 1998 F 1997 G 1996 G 1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270 $ 11.160
period
Income from Invest- ment
Operations
Net investment income .610 D .566 D .658 D .705 D .671 .602
Net realized and unrealized (.485) .201 (.060) (.151) .499 (.833)
gain (loss)
Total from investment .125 .767 .598 .554 1.170 (.231)
operations
Less Distributions
From net investment income (.595) (.557) (.648) (.704) (.670) (.597)
In excess of net investment - - - - - (.062)
income
Total distributions (.595) (.557) (.648) (.704) (.670) (.659)
Net asset value, end of $ 10.310 $ 10.780 $ 10.570 $ 10.620 $ 10.770 $ 10.270
period
TOTAL RETURN B, C 1.19% 7.44% 5.86% 5.40% 11.73% (2.10)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 157,131 $ 168,019 $ 177,427 $ 211,866 $ 208,861 $ 172,122
(000 omitted)
Ratio of expenses to average .66% .68% A .67% .66% .67% E .61%
net assets
Ratio of net investment 5.78% 5.78% A 6.27% 6.69% 6.47% 6.45%
income to average net assets
Portfolio turnover rate 138% 176% A 138% 200% 189% 68%
</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
G YEAR ENDED NOVEMBER 30
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) (formerly a fund of Fidelity
Advisor Series IV 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 four 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, 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 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 after the customary settlement period for that security. 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 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
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $770,157,646 and $679,985,048, respectively, of which U.S.
government and government agency obligations aggregated $580,350,701
and $541,024,971, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 $ 23,701 $ -
CLASS T 760,397 23,314
CLASS B 475,824 343,749
CLASS C 113,051 88,135
$ 1,372,973 $ 455,198
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 is 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 $ 139,199 $ 63,030
CLASS T 187,551 66,841
CLASS B 126,253 126,253*
CLASS C 15,221 15,221*
$ 468,224 $ 271,345
* 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 $ 34,391 .22
CLASS T 665,075 .22
CLASS B 112,584 .21
CLASS C 24,308 .21
INSTITUTIONAL CLASS 269,150 .16
$ 1,105,508
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian, credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. During the period, the fund's custodian fees were
reduced by $7,787 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ELEVEN MONTHS YEAR
ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, NOVEMBER 30,
1999 1998 1997 A
FROM NET INVESTMENT INCOME
CLASS A $ 868,429 $ 299,762 $ 122,899
CLASS T 16,224,315 13,762,990 15,434,281
CLASS B 2,508,941 1,166,769 1,017,603
CLASS C 528,467 106,569 312
INSTITUTIONAL CLASS 9,279,107 9,044,300 11,902,988
TOTAL $ 29,409,259 $ 24,380,390 $ 28,478,083
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1997.
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SHARES YEAR DOLLARS
YEAR ELEVEN ENDED YEAR ELEVEN MONTHS ENDED
ENDED OCTOBER 31, MONTHS ENDED OCTOBER 31, NOVEMBER 30, ENDED OCTOBER 31,
OCTOBER 31,
1999 1998 1997 A 1999 1998
CLASS A Shares sold 3,357,531 826,066 455,670 $ 35,356,066 $ 8,801,326
Reinvestment of
distributions 72,714 24,233 10,671 761,419 258,506
Shares redeemed (1,997,004) (448,992) (169,434) (20,973,090) (4,782,656)
Net increase (decrease) 1,433,241 401,307 296,907 $ 15,144,395 $ 4,277,176
CLASS T Shares sold 17,948,549 13,142,016 13,128,368 $ 189,451,401 $ 140,268,143
Reinvestment of
distributions 1,383,474 1,173,166 1,340,839 14,555,972 12,511,199
Shares redeemed (15,455,120) (14,007,864) (12,764,354) (162,894,381) (149,280,620)
Net increase (decrease) 3,876,903 307,318 1,704,853 $ 41,112,992 $ 3,498,722
CLASS B Shares sold 4,797,807 3,469,510 1,113,298 $ 50,576,586 $ 37,025,976
Reinvestment of
distributions 191,805 85,515 76,151 2,011,162 911,937
Shares redeemed (2,406,744) (1,975,435) (874,566) (25,318,778) (21,073,447)
Net increase (decrease) 2,582,868 1,579,590 314,883 $ 27,268,970 $ 16,864,466
CLASS C Shares sold 1,681,953 639,302 15,175 $ 17,687,270 $ 6,829,640
Reinvestment of
distributions 38,404 8,679 16 402,151 92,773
Shares redeemed (626,095) (96,427) - (6,595,292) (1,036,670)
Net increase (decrease) 1,094,262 551,554 15,191 $ 11,494,129 $ 5,885,743
INSTITUTIONAL CLASS
Shares sold 5,199,325 5,436,279 5,646,676 $ 54,855,022 $ 57,943,429
Reinvestment of
distributions 401,855 349,249 477,520 4,235,018 3,726,467
Shares redeemed (5,956,114) (6,987,186) (9,287,961) (62,763,186) (74,446,547)
Net increase (decrease) (354,934) (1,201,658) (3,163,765) $ (3,673,146) $ (12,776,651)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
YEAR
ENDED
NOVEMBER 30,
1997 A
CLASS A Shares sold $ 4,761,173
Reinvestment of distributions 111,981
Shares redeemed (1,767,583)
Net increase (decrease) $ 3,105,571
CLASS T Shares sold $ 137,559,201
Reinvestment of distributions 14,043,998
Shares redeemed (133,637,535)
Net increase (decrease) $ 17,965,664
CLASS B Shares sold $ 11,661,677
Reinvestment of distributions 796,683
Shares redeemed (9,166,397)
Net increase (decrease) $ 3,291,963
CLASS C Shares sold $ 160,441
Reinvestment of distributions 167
Shares redeemed -
Net increase (decrease) $ 160,608
INSTITUTIONAL CLASS Shares $ 59,206,035
sold
Reinvestment of distributions 5,003,755
Shares redeemed (97,400,869)
Net increase (decrease) $ (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
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Intermediate Bond Fund (formerly a fund of Fidelity
Advisor Series IV):
In our opinion, the accompanying statements of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Advisor Series IV) at October
31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Intermediate Bond Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1999
DISTRIBUTIONS
A total of 13.28% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.)
Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
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
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
Ned C. Lautenbach
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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
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 High Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 49 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 50
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.07% 32.11% 74.81%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL -4.78% 27.16% 68.26%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond -0.07% 37.20% n/a
Intermediate Municipal Debt -1.47% 30.78% 80.53%
Funds Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the Lehman
Brothers 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 one year average represents
a peer group of 132 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.07% 5.73% 5.74%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL -4.78% 4.92% 5.34%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond -0.07% 6.53% n/a
Intermediate Municipal Debt -1.47% 5.51% 6.08%
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
1989/10/31 9625.00 10000.00
1989/11/30 9730.31 10175.00
1989/12/31 9818.02 10258.23
1990/01/31 9785.99 10209.71
1990/02/28 9872.89 10300.58
1990/03/31 9889.71 10303.67
1990/04/30 9788.01 10229.07
1990/05/31 9966.47 10452.37
1990/06/30 10048.98 10544.24
1990/07/31 10170.25 10699.25
1990/08/31 10111.12 10543.89
1990/09/30 10138.20 10549.90
1990/10/31 10251.58 10741.28
1990/11/30 10415.14 10957.28
1990/12/31 10443.25 11004.95
1991/01/31 10559.86 11152.64
1991/02/28 10656.00 11249.66
1991/03/31 10663.16 11253.71
1991/04/30 10759.83 11403.39
1991/05/31 10846.02 11504.76
1991/06/30 10852.61 11493.37
1991/07/31 10961.32 11633.36
1991/08/31 11048.90 11786.57
1991/09/30 11116.62 11940.04
1991/10/31 11236.00 12047.50
1991/11/30 11264.32 12081.11
1991/12/31 11450.46 12340.37
1992/01/31 11530.45 12368.51
1992/02/29 11543.67 12372.46
1992/03/31 11499.53 12377.04
1992/04/30 11579.97 12487.20
1992/05/31 11706.98 12634.17
1992/06/30 11860.62 12846.17
1992/07/31 12116.05 13231.30
1992/08/31 12026.47 13102.30
1992/09/30 12140.16 13187.98
1992/10/31 12053.78 13058.35
1992/11/30 12274.03 13292.22
1992/12/31 12288.86 13427.94
1993/01/31 12428.59 13584.10
1993/02/28 12773.66 14075.44
1993/03/31 12646.95 13926.66
1993/04/30 12735.90 14067.18
1993/05/31 12789.51 14146.24
1993/06/30 12924.31 14382.34
1993/07/31 12938.99 14401.18
1993/08/31 13177.05 14701.01
1993/09/30 13313.37 14868.46
1993/10/31 13325.87 14897.15
1993/11/30 13221.99 14765.91
1993/12/31 13447.90 15077.62
1994/01/31 13572.67 15249.80
1994/02/28 13233.77 14854.83
1994/03/31 12716.72 14249.95
1994/04/30 12829.28 14370.79
1994/05/31 12944.10 14495.38
1994/06/30 12851.08 14406.81
1994/07/31 13030.13 14670.89
1994/08/31 13079.40 14721.65
1994/09/30 12932.92 14505.54
1994/10/31 12736.26 14247.92
1994/11/30 12457.95 13990.32
1994/12/31 12683.46 14298.24
1995/01/31 13002.64 14706.89
1995/02/28 13332.58 15134.56
1995/03/31 13478.42 15308.46
1995/04/30 13474.55 15326.52
1995/05/31 13782.30 15815.59
1995/06/30 13708.25 15678.00
1995/07/31 13797.49 15826.63
1995/08/31 13983.98 16027.31
1995/09/30 14073.32 16128.76
1995/10/31 14223.43 16363.27
1995/11/30 14387.32 16634.74
1995/12/31 14484.01 16794.60
1996/01/31 14580.65 16921.40
1996/02/29 14533.02 16807.18
1996/03/31 14389.99 16592.38
1996/04/30 14344.05 16545.43
1996/05/31 14342.50 16538.81
1996/06/30 14453.20 16718.92
1996/07/31 14565.98 16871.06
1996/08/31 14564.94 16867.01
1996/09/30 14692.85 17103.15
1996/10/31 14836.60 17296.58
1996/11/30 15093.91 17613.11
1996/12/31 15036.96 17539.14
1997/01/31 15080.36 17572.28
1997/02/28 15206.23 17733.60
1997/03/31 15027.77 17497.21
1997/04/30 15141.99 17643.66
1997/05/31 15302.84 17909.02
1997/06/30 15462.77 18099.75
1997/07/31 15847.96 18601.12
1997/08/31 15711.50 18426.82
1997/09/30 15887.91 18645.55
1997/10/31 15976.78 18765.44
1997/11/30 16062.80 18875.78
1997/12/31 16242.79 19151.18
1998/01/31 16377.19 19348.82
1998/02/28 16368.53 19354.62
1998/03/31 16380.88 19371.66
1998/04/30 16315.63 19284.29
1998/05/31 16529.53 19589.56
1998/06/30 16586.91 19666.74
1998/07/31 16600.50 19716.11
1998/08/31 16831.13 20020.72
1998/09/30 17013.60 20270.18
1998/10/31 17008.52 20269.77
1998/11/30 17048.55 20340.92
1998/12/31 17075.26 20392.18
1999/01/31 17278.42 20634.64
1999/02/28 17187.18 20544.47
1999/03/31 17183.51 20573.03
1999/04/30 17225.81 20624.25
1999/05/31 17137.98 20504.84
1999/06/30 16901.82 20209.57
1999/07/31 16960.21 20283.13
1999/08/31 16887.91 20120.87
1999/09/30 16929.73 20129.12
1999/10/29 16825.79 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 090431 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 October 31, 1989, and the current 3.75% sales charge was
paid. As the chart shows, by October 31, 1999, the value of the
investment would have grown to $16,826 - a 68.26% 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 $19,911 -
a 99.11% 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 3.98% 4.37% 4.65% 0.75%
Capital returns -5.05% 2.09% 3.03% 1.08%
Total returns -1.07% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.71(cents) 21.51(cents) 43.12(cents)
Annualized dividend rate 4.30% 4.13% 4.11%
30-day annualized yield 4.19% - -
30-day annualized 6.55% - -
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 $10.17 over the past one month, $10.33 over the past six months and
$10.50 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 4.11% and 6.42%, 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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.11% 31.83% 74.44%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL -3.83% 28.20% 69.64%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond -0.07% 37.20% n/a
Intermediate Municipal Debt -1.47% 30.78% 80.53%
Funds Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the Lehman
Brothers 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 one year average represents
a peer group of 132 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.11% 5.68% 5.72%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL -3.83% 5.09% 5.43%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond -0.07% 6.53% n/a
Intermediate Municipal Debt -1.47% 5.51% 6.08%
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
1989/10/31 9725.00 10000.00
1989/11/30 9831.40 10175.00
1989/12/31 9920.02 10258.23
1990/01/31 9887.66 10209.71
1990/02/28 9975.47 10300.58
1990/03/31 9992.46 10303.67
1990/04/30 9889.70 10229.07
1990/05/31 10070.01 10452.37
1990/06/30 10153.39 10544.24
1990/07/31 10275.92 10699.25
1990/08/31 10216.17 10543.89
1990/09/30 10243.53 10549.90
1990/10/31 10358.09 10741.28
1990/11/30 10523.35 10957.28
1990/12/31 10551.75 11004.95
1991/01/31 10669.57 11152.64
1991/02/28 10766.72 11249.66
1991/03/31 10773.95 11253.71
1991/04/30 10871.62 11403.39
1991/05/31 10958.71 11504.76
1991/06/30 10965.37 11493.37
1991/07/31 11075.20 11633.36
1991/08/31 11163.70 11786.57
1991/09/30 11232.12 11940.04
1991/10/31 11352.74 12047.50
1991/11/30 11381.35 12081.11
1991/12/31 11569.42 12340.37
1992/01/31 11650.24 12368.51
1992/02/29 11663.61 12372.46
1992/03/31 11619.01 12377.04
1992/04/30 11700.28 12487.20
1992/05/31 11828.61 12634.17
1992/06/30 11983.85 12846.17
1992/07/31 12241.94 13231.30
1992/08/31 12151.42 13102.30
1992/09/30 12266.29 13187.98
1992/10/31 12179.02 13058.35
1992/11/30 12401.55 13292.22
1992/12/31 12416.53 13427.94
1993/01/31 12557.72 13584.10
1993/02/28 12906.37 14075.44
1993/03/31 12778.35 13926.66
1993/04/30 12868.22 14067.18
1993/05/31 12922.38 14146.24
1993/06/30 13058.58 14382.34
1993/07/31 13073.42 14401.18
1993/08/31 13313.96 14701.01
1993/09/30 13451.69 14868.46
1993/10/31 13464.32 14897.15
1993/11/30 13359.36 14765.91
1993/12/31 13587.62 15077.62
1994/01/31 13713.69 15249.80
1994/02/28 13371.27 14854.83
1994/03/31 12848.84 14249.95
1994/04/30 12962.57 14370.79
1994/05/31 13078.59 14495.38
1994/06/30 12984.60 14406.81
1994/07/31 13165.51 14670.89
1994/08/31 13215.29 14721.65
1994/09/30 13067.28 14505.54
1994/10/31 12868.59 14247.92
1994/11/30 12587.39 13990.32
1994/12/31 12815.23 14298.24
1995/01/31 13137.73 14706.89
1995/02/28 13471.10 15134.56
1995/03/31 13618.45 15308.46
1995/04/30 13614.55 15326.52
1995/05/31 13925.49 15815.59
1995/06/30 13850.68 15678.00
1995/07/31 13940.84 15826.63
1995/08/31 14129.27 16027.31
1995/09/30 14219.53 16128.76
1995/10/31 14371.20 16363.27
1995/11/30 14536.80 16634.74
1995/12/31 14634.49 16794.60
1996/01/31 14732.14 16921.40
1996/02/29 14684.01 16807.18
1996/03/31 14539.50 16592.38
1996/04/30 14493.08 16545.43
1996/05/31 14491.51 16538.81
1996/06/30 14603.36 16718.92
1996/07/31 14717.31 16871.06
1996/08/31 14716.26 16867.01
1996/09/30 14844.44 17103.15
1996/10/31 15002.96 17296.58
1996/11/30 15247.05 17613.11
1996/12/31 15203.54 17539.14
1997/01/31 15231.32 17572.28
1997/02/28 15356.26 17733.60
1997/03/31 15174.63 17497.21
1997/04/30 15288.72 17643.66
1997/05/31 15464.75 17909.02
1997/06/30 15609.93 18099.75
1997/07/31 15997.40 18601.12
1997/08/31 15858.24 18426.82
1997/09/30 16035.04 18645.55
1997/10/31 16108.16 18765.44
1997/11/30 16193.72 18875.78
1997/12/31 16389.36 19151.18
1998/01/31 16523.57 19348.82
1998/02/28 16513.65 19354.62
1998/03/31 16524.81 19371.66
1998/04/30 16473.29 19284.29
1998/05/31 16672.29 19589.56
1998/06/30 16730.15 19666.74
1998/07/31 16759.58 19716.11
1998/08/31 16976.57 20020.72
1998/09/30 17160.65 20270.18
1998/10/31 17155.59 20269.77
1998/11/30 17196.02 20340.92
1998/12/31 17222.33 20392.18
1999/01/31 17427.10 20634.64
1999/02/28 17318.25 20544.47
1999/03/31 17330.00 20573.03
1999/04/30 17372.01 20624.25
1999/05/31 17282.72 20504.84
1999/06/30 17043.87 20209.57
1999/07/31 17102.14 20283.13
1999/08/31 17028.50 20120.87
1999/09/30 17069.99 20129.12
1999/10/29 16964.45 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 090448 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 October 31, 1989, and the current 2.75% sales charge was
paid. As the chart shows, by October 31, 1999, the value of the
investment would have grown to $16,964 - a 69.64% 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 $19,911 -
a 99.11% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 3.94% 4.32% 4.54% 4.59% 4.94%
Capital returns -5.05% 2.18% 2.83% -0.19% 6.74%
Total returns -1.11% 6.50% 7.37% 4.40% 11.68%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.66(cents) 21.26(cents) 42.70(cents)
Annualized dividend rate 4.24% 4.08% 4.07%
30-day annualized yield 4.18% - -
30-day annualized 6.53% - -
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 $10.17 over the past one month, $10.33 over the past six months and
$10.50 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 4.06% and 6.34%, 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 one year, past five year and past 10 year total
return figures are 3%, 0% and 0%, respectively. If Fidelity had not
reimbursed certain class expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.81% 27.22% 67.80%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL -4.64% 27.22% 67.80%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond -0.07% 37.20% n/a
Intermediate Municipal Debt -1.47% 30.78% 80.53%
Funds Average
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the Lehman
Brothers 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 one year average represents
a peer group of 132 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY ADV INT MUNICIPAL -1.81% 4.93% 5.31%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL -4.64% 4.93% 5.31%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond -0.07% 6.53% n/a
Intermediate Municipal Debt -1.47% 5.51% 6.08%
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
1989/10/31 10000.00 10000.00
1989/11/30 10109.41 10175.00
1989/12/31 10200.54 10258.23
1990/01/31 10167.26 10209.71
1990/02/28 10257.55 10300.58
1990/03/31 10275.02 10303.67
1990/04/30 10169.36 10229.07
1990/05/31 10354.77 10452.37
1990/06/30 10440.50 10544.24
1990/07/31 10566.50 10699.25
1990/08/31 10505.06 10543.89
1990/09/30 10533.20 10549.90
1990/10/31 10650.99 10741.28
1990/11/30 10820.93 10957.28
1990/12/31 10850.13 11004.95
1991/01/31 10971.29 11152.64
1991/02/28 11071.17 11249.66
1991/03/31 11078.61 11253.71
1991/04/30 11179.04 11403.39
1991/05/31 11268.60 11504.76
1991/06/30 11275.44 11493.37
1991/07/31 11388.38 11633.36
1991/08/31 11479.38 11786.57
1991/09/30 11549.74 11940.04
1991/10/31 11673.77 12047.50
1991/11/30 11703.19 12081.11
1991/12/31 11896.58 12340.37
1992/01/31 11979.68 12368.51
1992/02/29 11993.42 12372.46
1992/03/31 11947.57 12377.04
1992/04/30 12031.13 12487.20
1992/05/31 12163.09 12634.17
1992/06/30 12322.72 12846.17
1992/07/31 12588.11 13231.30
1992/08/31 12495.04 13102.30
1992/09/30 12613.15 13187.98
1992/10/31 12523.41 13058.35
1992/11/30 12752.24 13292.22
1992/12/31 12767.64 13427.94
1993/01/31 12912.82 13584.10
1993/02/28 13271.34 14075.44
1993/03/31 13139.69 13926.66
1993/04/30 13232.11 14067.18
1993/05/31 13287.80 14146.24
1993/06/30 13427.85 14382.34
1993/07/31 13443.10 14401.18
1993/08/31 13690.44 14701.01
1993/09/30 13832.07 14868.46
1993/10/31 13845.06 14897.15
1993/11/30 13737.13 14765.91
1993/12/31 13971.85 15077.62
1994/01/31 14101.48 15249.80
1994/02/28 13749.37 14854.83
1994/03/31 13212.18 14249.95
1994/04/30 13329.12 14370.79
1994/05/31 13448.42 14495.38
1994/06/30 13351.77 14406.81
1994/07/31 13524.48 14670.89
1994/08/31 13563.69 14721.65
1994/09/30 13388.81 14505.54
1994/10/31 13189.77 14247.92
1994/11/30 12892.56 13990.32
1994/12/31 13117.45 14298.24
1995/01/31 13437.64 14706.89
1995/02/28 13770.48 15134.56
1995/03/31 13912.16 15308.46
1995/04/30 13899.21 15326.52
1995/05/31 14207.41 15815.59
1995/06/30 14122.00 15678.00
1995/07/31 14218.65 15826.63
1995/08/31 14387.63 16027.31
1995/09/30 14471.07 16128.76
1995/10/31 14616.24 16363.27
1995/11/30 14774.80 16634.74
1995/12/31 14851.05 16794.60
1996/01/31 14957.08 16921.40
1996/02/29 14900.28 16807.18
1996/03/31 14731.36 16592.38
1996/04/30 14691.14 16545.43
1996/05/31 14667.13 16538.81
1996/06/30 14787.12 16718.92
1996/07/31 14894.14 16871.06
1996/08/31 14884.49 16867.01
1996/09/30 15006.18 17103.15
1996/10/31 15143.47 17296.58
1996/11/30 15396.72 17613.11
1996/12/31 15330.23 17539.14
1997/01/31 15365.45 17572.28
1997/02/28 15483.91 17733.60
1997/03/31 15292.32 17497.21
1997/04/30 15399.15 17643.66
1997/05/31 15552.89 17909.02
1997/06/30 15705.72 18099.75
1997/07/31 16071.68 18601.12
1997/08/31 15938.16 18426.82
1997/09/30 16107.32 18645.55
1997/10/31 16171.88 18765.44
1997/11/30 16249.13 18875.78
1997/12/31 16436.71 19151.18
1998/01/31 16562.63 19348.82
1998/02/28 16543.72 19354.62
1998/03/31 16545.80 19371.66
1998/04/30 16469.86 19284.29
1998/05/31 16675.37 19589.56
1998/06/30 16722.96 19666.74
1998/07/31 16726.02 19716.11
1998/08/31 16947.87 20020.72
1998/09/30 17121.22 20270.18
1998/10/31 17089.48 20269.77
1998/11/30 17119.07 20340.92
1998/12/31 17151.13 20392.18
1999/01/31 17344.85 20634.64
1999/02/28 17227.20 20544.47
1999/03/31 17228.69 20573.03
1999/04/30 17244.30 20624.25
1999/05/31 17145.30 20504.84
1999/06/30 16898.37 20209.57
1999/07/31 16946.17 20283.13
1999/08/31 16879.54 20120.87
1999/09/30 16894.48 20129.12
1999/10/29 16780.00 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 090439 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 October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have been $16,780 - a 67.80%
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 $19,911 - a
99.11% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 3.24% 3.58% 3.86% 3.90% 4.07%
Capital returns -5.05% 2.09% 2.93% -0.29% 6.74%
Total returns -1.81% 5.67% 6.79% 3.61% 10.81%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.06(cents) 17.62(cents) 35.29(cents)
Annualized dividend rate 3.55% 3.39% 3.36%
30-day annualized yield 3.61% - -
30-day annualized 5.64% - -
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 $10.16 over the past one month, $10.32 over the past six months and
$10.50 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 3.55% and 5.55%, 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 Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been
reflected, returns between November 3, 1997 and January 1, 1996 and
prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past one year, past
five year and past 10 year total return figures are 1%, 0% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.91% 27.07% 67.60%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL -2.85% 27.07% 67.60%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond -0.07% 37.20% n/a
Intermediate Municipal Debt -1.47% 30.78% 80.53%
Funds Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to those of the Lehman
Brothers 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 one year average represents
a peer group of 132 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.91% 4.91% 5.30%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL -2.85% 4.91% 5.30%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond -0.07% 6.53% n/a
Intermediate Municipal Debt -1.47% 5.51% 6.08%
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
1989/10/31 10000.00 10000.00
1989/11/30 10109.41 10175.00
1989/12/31 10200.54 10258.23
1990/01/31 10167.26 10209.71
1990/02/28 10257.55 10300.58
1990/03/31 10275.02 10303.67
1990/04/30 10169.36 10229.07
1990/05/31 10354.77 10452.37
1990/06/30 10440.50 10544.24
1990/07/31 10566.50 10699.25
1990/08/31 10505.06 10543.89
1990/09/30 10533.20 10549.90
1990/10/31 10650.99 10741.28
1990/11/30 10820.93 10957.28
1990/12/31 10850.13 11004.95
1991/01/31 10971.29 11152.64
1991/02/28 11071.17 11249.66
1991/03/31 11078.61 11253.71
1991/04/30 11179.04 11403.39
1991/05/31 11268.60 11504.76
1991/06/30 11275.44 11493.37
1991/07/31 11388.38 11633.36
1991/08/31 11479.38 11786.57
1991/09/30 11549.74 11940.04
1991/10/31 11673.77 12047.50
1991/11/30 11703.19 12081.11
1991/12/31 11896.58 12340.37
1992/01/31 11979.68 12368.51
1992/02/29 11993.42 12372.46
1992/03/31 11947.57 12377.04
1992/04/30 12031.13 12487.20
1992/05/31 12163.09 12634.17
1992/06/30 12322.72 12846.17
1992/07/31 12588.11 13231.30
1992/08/31 12495.04 13102.30
1992/09/30 12613.15 13187.98
1992/10/31 12523.41 13058.35
1992/11/30 12752.24 13292.22
1992/12/31 12767.64 13427.94
1993/01/31 12912.82 13584.10
1993/02/28 13271.34 14075.44
1993/03/31 13139.69 13926.66
1993/04/30 13232.11 14067.18
1993/05/31 13287.80 14146.24
1993/06/30 13427.85 14382.34
1993/07/31 13443.10 14401.18
1993/08/31 13690.44 14701.01
1993/09/30 13832.07 14868.46
1993/10/31 13845.06 14897.15
1993/11/30 13737.13 14765.91
1993/12/31 13971.85 15077.62
1994/01/31 14101.48 15249.80
1994/02/28 13749.37 14854.83
1994/03/31 13212.18 14249.95
1994/04/30 13329.12 14370.79
1994/05/31 13448.42 14495.38
1994/06/30 13351.77 14406.81
1994/07/31 13524.48 14670.89
1994/08/31 13563.69 14721.65
1994/09/30 13388.81 14505.54
1994/10/31 13189.77 14247.92
1994/11/30 12892.56 13990.32
1994/12/31 13117.45 14298.24
1995/01/31 13437.64 14706.89
1995/02/28 13770.48 15134.56
1995/03/31 13912.16 15308.46
1995/04/30 13899.21 15326.52
1995/05/31 14207.41 15815.59
1995/06/30 14122.00 15678.00
1995/07/31 14218.65 15826.63
1995/08/31 14387.63 16027.31
1995/09/30 14471.07 16128.76
1995/10/31 14616.24 16363.27
1995/11/30 14774.80 16634.74
1995/12/31 14851.05 16794.60
1996/01/31 14957.08 16921.40
1996/02/29 14900.28 16807.18
1996/03/31 14731.36 16592.38
1996/04/30 14691.14 16545.43
1996/05/31 14667.13 16538.81
1996/06/30 14787.12 16718.92
1996/07/31 14894.14 16871.06
1996/08/31 14884.49 16867.01
1996/09/30 15006.18 17103.15
1996/10/31 15143.47 17296.58
1996/11/30 15396.72 17613.11
1996/12/31 15330.23 17539.14
1997/01/31 15365.45 17572.28
1997/02/28 15483.91 17733.60
1997/03/31 15292.32 17497.21
1997/04/30 15399.15 17643.66
1997/05/31 15552.89 17909.02
1997/06/30 15705.72 18099.75
1997/07/31 16071.68 18601.12
1997/08/31 15938.16 18426.82
1997/09/30 16107.32 18645.55
1997/10/31 16171.88 18765.44
1997/11/30 16247.98 18875.78
1997/12/31 16434.45 19151.18
1998/01/31 16558.37 19348.82
1998/02/28 16538.64 19354.62
1998/03/31 16553.61 19371.66
1998/04/30 16476.23 19284.29
1998/05/31 16680.04 19589.56
1998/06/30 16709.84 19666.74
1998/07/31 16727.32 19716.11
1998/08/31 16931.75 20020.72
1998/09/30 17103.63 20270.18
1998/10/31 17086.22 20269.77
1998/11/30 17114.55 20340.92
1998/12/31 17145.18 20392.18
1999/01/31 17320.97 20634.64
1999/02/28 17218.29 20544.47
1999/03/31 17202.14 20573.03
1999/04/30 17232.37 20624.25
1999/05/31 17131.99 20504.84
1999/06/30 16884.00 20209.57
1999/07/31 16930.05 20283.13
1999/08/31 16861.98 20120.87
1999/09/30 16875.44 20129.12
1999/10/29 16759.60 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 090441 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 October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have been $16,760 - a 67.60%
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 $19,911 - a
99.11% 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
YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER
31,
1999 1998
Dividend returns 3.14% 3.44%
Capital returns -5.05% 2.38%
Total returns -1.91% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 2.96(cents) 17.03(cents) 34.18(cents)
Annualized dividend rate 3.43% 3.27% 3.26%
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 $10.17 over the past one month, $10.33 over the past six
months and $10.50 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
Despite a municipal bond market
rally late in the period spurred by
attractively priced issues and yields
higher than they've been since
1997, munis produced lackluster
results during the 12-month period
ending October 31, 1999.
Following the global financial crisis
in the fall of 1998 and interest rate
jitters through most of 1999, the
Lehman Brothers Municipal Bond
Index - an index of approximately
50,000 investment-grade, fixed-rate,
tax-
exempt bonds - declined 1.77%
during the period. In comparison,
the Lehman Brothers Aggregate
Bond Index - a broad measure of
the taxable bond market - posted a
marginally positive return of
0.53%. In general, the negative
environment of increasing interest
rates and investors' persistent
concerns about inflation hit the
Lehman Brothers Long-Term
Government Bond Index the hardest,
as it fell 6.10% during the period.
While the supply of municipals was
relatively light during the period -
particularly compared to 1998's
near-record levels of issuance -
demand was similarly muted,
especially among institutional
investors. Muni bonds came under
further downward pressure in the
second half of the period following
two interest-rate hikes by the
Federal Reserve Board and
widespread belief among investors
that there would be a third hike in
November.
(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 12-month period ended October 31, 1999, the fund's Class A,
Class T, Class B and Class C shares had total returns of -1.07%,
- -1.11%, -1.81% and -1.91%, respectively. To get a sense of how the
fund did relative to its competitors, the intermediate municipal debt
funds average returned -1.47% for the same 12-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 -0.07% for the same 12-month period.
Q. RISING INTEREST RATES MADE THE PAST YEAR PRETTY DIFFICULT FOR ALL
BONDS, INCLUDING MUNICIPAL BONDS. WERE THERE ANY TYPES OF MUNICIPALS
THAT HELD UP WELL AGAINST THE UNFAVORABLE BACKDROP?
A. Yes, the fund benefited from its relatively large position in
premium coupon bonds, which pay interest rates above prevailing
markets rates and trade at prices that are above their face - or par -
value. The primary reason why I favored them is because their premium
gives them DE MINIMIS protection. This protects the bonds' gains from
unfavorable tax treatment that can occur during particular market
environments. In addition, individual investors tend to shy away from
premiums, so I'm often able to purchase them at attractive prices
compared to similarly rated, comparable maturity bonds with coupons at
or below prevailing rates. Separately, the fund was helped by its
emphasis on high-quality bonds, since certain lower-quality securities
- - namely hospital and industrial development bonds - came under
increased pressure as interest rates rose.
Q. WHICH BOND MATURITIES DID YOU EMPHASIZE DURING THE YEAR AND WHAT
EFFECT DID YOUR CHOICES HAVE ON PERFORMANCE?
A. My "barbell" strategy had a mixed effect on performance. Throughout
much of the past year, the fund benefited from its barbelled
positioning, meaning it was heavily weighted toward short- and
longer-term bonds, with a smaller weighting in intermediate-maturity
securities. Early on, longer-term bond yields rose less in response to
rising interest rates, and their prices - which move in the opposite
direction of their yields - fell less. But from August through the end
of October of this year, the reverse was true and the fund's barbell
positioning detracted from its performance.
Q. HOW DID THAT BARBELL STRATEGY AFFECT THE FUND'S DURATION - WHICH
MEASURES ITS INTEREST-RATE SENSITIVITY?
A. Since I offset the fund's longer-term holdings with shorter-term
holdings, I kept the fund's duration in line with the intermediate
municipal market as a whole, as measured by the Lehman Brothers 1-17
Year Municipal Bond Index. More recently, however, I sold some
shorter- and longer-term holdings in favor of intermediate-term
securities, which I viewed as being priced more attractively and
offering the best potential for total return. At the end of the
period, the fund's duration was five years, which remained in line
with the Lehman Brothers index.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. The main factor affecting the future of municipals will probably be
- - as it has been over the past year - the direction of interest rates.
But since I don't spend time on interest-rate forecasting, I'll look
for attractively priced bonds that I believe can perform well in
relation to other bonds, no matter what the interest-rate backdrop.
From a technical standpoint, the municipal market is in reasonably
good shape. Rising interest rates have curtailed the supply of new
issuance and refundings - or refinancings - of existing debt have
slowed. Given that municipal bonds currently offer attractive values
relative to U.S. Treasury securities, I think we could see better
demand in the months to come.
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 October 31,
1999, more than $71 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON SUPPLY AND
DEMAND CHARACTERISTICS OF THE
MUNICIPAL MARKET:
"After the direction of interest rates,
supply and demand are probably the
most important factors determining
municipal bond performance. As a
portfolio manager, I try to take
advantage of seasonal shifts, selling
bonds when supply is light and prices
are fairly advantageous, and buying
when supply is heavy and prices are
relatively cheap. For example,
municipal supply generally slows
down during the summer when
market participants - such as
investment bankers, dealers,
investors and others - go on
vacation, although supply generally
picks up again in the remaining
months of the year. What's more
interesting, in my view, are demand
patterns. With the help of Fidelity's
research team, I look for
opportunities to exploit changes in
investor activity, buying after certain
types of investors have unloaded
municipal bonds and prices are
attractive, and selling when there is
strong demand."
NOTE TO SHAREHOLDERS:
On October 14, 1999, the Board of
Trustees of Fidelity Advisor
Intermediate Municipal Income
Fund voted to present a proposal to
shareholders to merge the fund into
Fidelity Advisor Municipal Income
Fund. A shareholder meeting is
scheduled for April 19, 2000. As of
December 29, 1999, the fund will be
closed to new investments in
anticipation of the proposed
merger. On or about February 23,
2000, shareholders will be sent
proxy materials asking them to vote
on this proposal.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF OCTOBER
31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Texas 15.4 11.4
Washington 10.4 7.6
California 10.0 12.7
New York 8.4 8.8
North Carolina 4.9 4.7
TOP FIVE SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Obligations 27.1 25.3
Education 22.6 21.8
Electric Utilities 19.9 18.2
Health Care 13.5 14.3
Transportation 4.4 4.2
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 7.2 7.6
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 5.0 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Aaa 53.5% Aaa 48.3%
Aa, A 34.2% Aa, A 38.3%
Baa 10.8% Baa 11.0%
Short-term Investments 1.5% Short-term Investments 2.4%
Row: 1, Col: 1, Value: 53.5 Row: 1, Col: 1, Value: 48.3
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 34.2 Row: 1, Col: 3, Value: 38.3
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.8 Row: 1, Col: 5, Value: 11.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.5 Row: 1, Col: 8, Value: 2.4
</TABLE>
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 OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.4%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 301,773
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARIZONA - 1.4%
Maricopa County Cmnty. Aa1 1,000,000 1,001,800
College District Series B,
5.25% 7/1/10
ARKANSAS - 1.2%
Arkansas Gen. Oblig. (Cap. Aa3 1,000,000 892,970
Appreciation) (College
Savings Proj.) Series A, 0%
6/1/02
CALIFORNIA - 10.0%
California Ed. Facilities AAA 225,000 217,310
Auth. Rev. Rfdg. (Chapman
Univ.) 5.375% 10/1/16 (AMBAC
Insured)
California Health Facilities A+ 2,275,000 2,282,189
Fin. Auth. Rev. (Casa de Las
Campanas) Series A, 5.375%
8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,000,560
Rev. (Home Mtg.) Series R,
5.35% 8/1/07 (MBIA Insured)
(e)
California Poll. Cont. Fing. Baa2 500,000 512,615
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc.) Series
A, 7.15% 2/1/11 (e)
Los Angeles County Ctfs. of A3 970,000 759,432
Prtn. (Disney Parking Proj.)
0% 9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,031,370
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,037,920
6.5% 7/1/08 BBB- 300,000 321,714
7,163,110
COLORADO - 1.3%
Arapaho County Cap. Impt. Aaa 3,620,000 562,512
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities Baa2 400,000 385,116
Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.25%
2/1/04
947,628
DISTRICT OF COLUMBIA - 0.7%
District of Columbia Redev. Baa 500,000 504,035
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.4% 11/1/00
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FLORIDA - 2.1%
Broward County Resource A3 $ 460,000 $ 474,798
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 500,000 507,690
Rfdg. (Miami Int'l Arpt.)
Series A, 5.25% 10/1/01
(FSA Insured) (e)
Jacksonville Port Auth. Rev. Aaa 500,000 511,710
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
1,494,198
GEORGIA - 0.4%
Atlanta Wtr. & Wastewtr. Rev. Aaa 100,000 101,026
Rfdg. Series A, 5.5% 11/1/10
(FGIC Insured)
Georgia Gen. Oblig. Series B, Aaa 150,000 156,903
5.75% 8/1/10
257,929
ILLINOIS - 2.2%
Chicago Midway Arpt. Rev. Aaa 300,000 312,039
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 435,000 258,342
0% 6/15/09 (FGIC Insured) Aaa 65,000 38,793
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 976,400
1,585,574
IOWA - 2.1%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,532,925
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 4.3%
Kansas Dev. Fin. Auth. Rev.:
(Sisters of Charity - Aaa 1,385,000 1,383,213
Leavenworth Health Svc.
Co.) 5.25% 12/1/09 (MBIA
Insured)
(Sisters of Charity Aaa 1,750,000 1,723,138
Leavenworth Health Svc.
Co.) 5.25% 12/1/11 (MBIA
Insured)
3,106,351
LOUISIANA - 2.6%
Louisiana Pub. Facilities Aaa 1,825,000 1,862,759
Auth. Rev. Rfdg. (Student
Ln.) Series A1, 6.2% 3/1/01
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MAINE - 1.4%
Maine Edl. Ln. Marketing Aaa $ 1,000,000 $ 1,000,000
Corp. Student Ln. Rev.
Series A 4, 5.45% 11/1/99 (e)
MASSACHUSETTS - 4.5%
Boston Gen. Oblig. Rev. Aaa 250,000 260,140
(Boston City Hosp.) Series
A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
101.66) (f)
Massachusetts Gen. Oblig. Aa3 250,000 251,588
Rfdg. Series A, 5.5% 2/1/11
Massachusetts Health & Edl. Aaa 700,000 695,226
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care)
Series B, 4.55% 1/1/21 (MBIA
Insured)
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,407,344
Rev. (Cap. Appreciation)
(Massachusetts Biomedical)
Series A 1, 0% 8/1/02
Massachusetts Tpk. Auth. Aaa 550,000 551,227
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)
Massachusetts Wtr. Poll. Aa1 100,000 95,035
Abatement Trust Rev. (MWRA
Ln. Prog.) Series A, 5.25%
8/1/14
3,260,560
MICHIGAN - 2.6%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp.) A1 2,000,000 1,661,980
Series A, 5% 6/1/19
(Mercy Health Svcs.) Series Aa3 200,000 205,568
S, 5.75% 8/15/05
1,867,548
MINNESOTA - 0.5%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 174,506
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 200,558
Facilities Auth. Rev.
(MacAlester College) Series
4 C, 5.5% 3/1/12
375,064
MONTANA - 1.7%
Montana Higher Ed. Student A 1,210,000 1,212,069
Assistance Corp. Student Ln.
Rev. Series B, 6.6% 12/1/99
(e)
NEVADA - 0.8%
Clark County School District Aaa 500,000 539,915
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW JERSEY - 0.7%
New Jersey Gen. Oblig. Series Aa1 500,000 511,065
F, 5.5% 8/1/11
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW MEXICO - 4.5%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa $ 250,000 $ 253,765
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 498,236
(e)
New Mexico Edl. Assistance Aaa 1,900,000 1,955,043
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 565,810
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,272,854
NEW YORK - 8.4%
Buffalo Gen. Oblig. Rfdg. Aaa 1,025,000 985,189
Series C, 5.25% 12/1/13
(FGIC Insured)
New York City Gen. Oblig. A3 1,000,000 984,270
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Rev.:
(City Univ. Sys. Baa1 500,000 501,210
Consolidated) Series A,
5.75% 7/1/13
(City Univ. Sys.) Series C, Baa1 500,000 562,470
7.5% 7/1/10
Rfdg. (State Univ. Edl. A3 500,000 533,625
Facilities) Series A, 6.5%
5/15/04
New York State Envir. Aa1 500,000 430,240
Facilities Corp. Clean Wtr.
& Drinking Rev. (Revolving
Funds) Series F, 4.875%
6/15/18
New York State Local Govt.
Assistance Corp.:
(Cap. Appreciation) Series A, A3 1,000,000 645,970
0% 4/1/08
Rfdg. Series A, 5.5% 4/1/04 Aaa 100,000 103,105
(AMBAC Insured)
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge):
5.4% 4/1/03 Baa1 250,000 255,208
6% 4/1/03 Baa1 200,000 207,906
New York State Urban Dev.
Corp. Rev.:
(Sports Facilities Assistance Aaa 500,000 507,420
Prog.) Series A, 5.5% 4/1/10
(MBIA Insured)
Rfdg. (Correctional Aaa 300,000 308,313
Facilities) 5.625% 1/1/07
(AMBAC Insured)
6,024,926
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - 4.9%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B, 6% 1/1/06 Baa3 $ 1,315,000 $ 1,328,729
Series C, 5.5% 1/1/07 Baa1 700,000 684,096
Series A, 5.625% 1/1/03 Baa3 500,000 501,175
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 Baa1 750,000 755,835
5.9% 1/1/03 Baa1 250,000 252,555
3,522,390
OHIO - 1.1%
Ohio Bldg. Auth. (Adult Aaa 500,000 513,295
Correctional) Series A,
5.95% 10/1/14 (MBIA Insured)
Ohio Tpk. Commission Series Aaa 250,000 252,968
A, 5.6% 2/15/12 (MBIA
Insured)
766,263
OREGON - 1.4%
Clackamas County School Aaa 1,000,000 971,280
District #12 5.25% 6/1/13
(FGIC Insured)
PENNSYLVANIA - 3.3%
Pennsylvania Higher Edl. AA- 1,270,000 1,335,380
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 1,033,670
Rfdg. (Residential Dev.
Section 8) Series A, 7%
7/1/01
2,369,050
RHODE ISLAND - 1.4%
Rhode Island Student Ln. A 1,000,000 1,017,070
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
SOUTH CAROLINA - 3.2%
South Carolina Ed. Assistance
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Proj.):
Sr. Lien Series A2, 5.4% AAA 1,250,000 1,264,250
9/1/02
Sub Lien Series B, 5.7% A 1,000,000 1,018,500
9/1/05 (e)
2,282,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TENNESSEE - 0.5%
Memphis-Shelby County Arpt. Aaa $ 275,000 $ 277,626
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
Tennessee Gen. Oblig. Rfdg. Aaa 100,000 106,641
Series A, 6% 5/1/07
384,267
TEXAS - 15.4%
Austin Independent School Aaa 500,000 532,455
District 8.125% 8/1/01
(Escrowed to Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 447,084
Student Ln. Rev. Rfdg.
Series A 1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 171,596
District Rfdg. 0% 2/15/03
Fort Bend Independent School AAA 1,000,000 1,000,470
District Rfdg. 5.375% 2/15/11
Harris County Gen. Oblig. Aaa 3,000,000 2,644,016
(Cap. Appreciation) (Toll
Road Proj.) Sub Lien Series
A, 0% 8/15/02 (MBIA Insured)
Hurst Euless Bedford Aaa 1,000,000 522,180
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Irving Independent School Aaa 250,000 247,213
District (Cap.
Appreciation) 0% 2/15/00
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 960,120
5.125% 8/15/12 (FGIC Insured)
Northside Independent School Aaa 500,000 505,280
District (School Bldg.)
8.375% 2/1/00
San Antonio Gen. Oblig. Aa2 1,255,000 1,237,807
Series 2000, 5% 2/1/09 (b)
Texas Pub. Fin. Auth. Bldg. Aaa 1,000,000 1,071,800
Rev. Rfdg. (Texas Technical
College) 6.25% 8/1/09 (MBIA
Insured)
Univ. of Texas Permanent
Univ. Fund:
5% 7/1/10 Aaa 250,000 245,015
5.25% 7/1/06 Aaa 1,495,000 1,528,428
11,113,464
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTAH - 3.5%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
(Cap. Appreciation) Series A, Aaa $ 2,860,000 $ 2,057,370
0% 7/1/06 (MBIA Insured)
Rfdg. (Cap. Appreciation) Aaa 500,000 487,360
Series B, 0% 7/1/00 (MBIA
Insured)
2,544,730
WASHINGTON - 10.4%
Grant County Pub. Util. Aaa 1,715,000 1,602,770
District No. 2 (Priest
Rapids Hydro Elec. Proj.)
Second Series B, 5.375%
1/1/16 (MBIA Insured) (e)
King County Gen. Oblig. Aa1 1,000,000 1,013,100
Series B, 5.9% 12/1/14
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg.:
Series A, 0% 7/1/06 (MBIA Aaa 2,700,000 1,927,152
Insured)
Series C, 7.5% 7/1/03 Aa1 525,000 554,274
(Pre-Refunded to 1/1/01 @
102) (f)
5.4% 7/1/12 Aa1 2,000,000 1,907,300
Washington Pub. Pwr. Supply Aa1 500,000 496,215
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
7,500,811
TOTAL MUNICIPAL BONDS 71,187,128
(Cost $72,033,544)
</TABLE>
CASH EQUIVALENTS - 1.5%
SHARES
Municipal Central Cash Fund, 1,083,452 1,083,452
3.56% (c)(d) (Cost
$1,083,452)
TOTAL INVESTMENT PORTFOLIO - 72,270,580
100.4% (Cost $73,116,996)
NET OTHER ASSETS - (0.4)% (320,581)
NET ASSETS - 100% $ 71,949,999
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) The rate quoted is the annualized seven-day yield of the fund at
period end.
(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 77.8% AAA, AA, A 69.7%
Baa 8.9% BBB 11.9%
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 net assets, is as follows:
General Obligations 27.1%
Education 22.6
Electric Utilities 19.9
Health Care 13.5
Others (individually less 17.3
than 5%)
Net Other Assets (0.4)
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $73,116,996. Net unrealized depreciation
aggregated $846,416, of which $548,216 related to appreciated
investment securities and $1,394,632 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 72,270,580
value (cost $73,116,996) -
See accompanying schedule
Cash 34,990
Receivable for fund shares 376,953
sold
Interest receivable 1,035,548
Other receivables 911
TOTAL ASSETS 73,718,982
LIABILITIES
Payable for investments $ 1,286,864
purchased on a delayed
delivery basis
Payable for fund shares 280,543
redeemed
Distributions payable 124,885
Accrued management fee 10,539
Distribution fees payable 20,573
Other payables and accrued 45,579
expenses
TOTAL LIABILITIES 1,768,983
NET ASSETS $ 71,949,999
Net Assets consist of:
Paid in capital $ 72,801,661
Accumulated undistributed net (5,246)
realized gain (loss) on
investments
Net unrealized appreciation (846,416)
(depreciation) on investments
NET ASSETS $ 71,949,999
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.15
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,572,343 (divided by)
253,436 shares)
Maximum offering price per $10.55
share (100/96.25 of $10.15)
CLASS T: NET ASSET VALUE and $10.15
redemption price per share
($50,431,715 (divided by)
4,968,378 shares)
Maximum offering price per $10.44
share (100/97.25 of $10.15)
CLASS B: NET ASSET VALUE and $10.14
offering price per share
($10,387,389 (divided by)
1,024,065 shares) A
CLASS C: NET ASSET VALUE and $10.15
offering price per share
($2,561,719 (divided by)
252,268 shares) A
INSTITUTIONAL CLASS: NET $10.15
ASSET VALUE, offering price
and redemption price per
share ($5,996,833 (divided
by) 590,849 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INTEREST INCOME $ 3,879,149
EXPENSES
Management fee $ 293,995
Transfer agent fees 103,028
Distribution fees 255,689
Accounting fees and expenses 64,808
Non-interested trustees' 238
compensation
Custodian fees and expenses 5,121
Registration fees 95,132
Audit 51,521
Legal 11,903
Reports to shareholders 6,711
Miscellaneous 133
Total expenses before 888,279
reductions
Expense reductions (119,127) 769,152
NET INTEREST INCOME 3,109,997
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 25,014
Futures contracts (46,201) (21,187)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (3,986,395)
Futures contracts 38,839 (3,947,556)
NET GAIN (LOSS) (3,968,743)
NET INCREASE (DECREASE) IN $ (858,746)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 3,109,997 $ 2,576,544 $ 2,794,353
Net realized gain (loss) (21,187) 831,999 875,029
Change in net unrealized (3,947,556) 795,349 192,183
appreciation (depreciation)
NET INCREASE (DECREASE) IN (858,746) 4,203,892 3,861,565
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (3,109,997) (2,576,544) (2,794,353)
From net interest income
From net realized gain (587,640) (172,795) (6,721)
TOTAL DISTRIBUTIONS (3,697,637) (2,749,339) (2,801,074)
Share transactions - net (3,244,402) 14,997,838 (8,495,226)
increase (decrease)
TOTAL INCREASE (DECREASE) (7,800,785) 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 $ 71,949,999 $ 79,750,784 $ 63,298,393
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .431 .411 .459 .113
Net realized and unrealized (.540) .200 .191 .250
gain (loss)
Total from investment (.109) .611 .650 .363
operations
Less Distributions
From net interest income (.431) (.411) (.459) (.113)
From net realized gain (.080) (.030) (.001) -
Total distributions (.511) (.441) (.460) (.113)
Net asset value, end of period $ 10.150 $ 10.770 $ 10.600 $ 10.410
TOTAL RETURN B, C (1.07)% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,572 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .85% E .90% A, E .90% E .90% A, E
net assets
Ratio of net interest income 4.17% 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 19% 26% A, F 18% 35%
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>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 F 1997 G 1996 G 1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460
period
Income from Invest- ment
Operations
Net interest income .427 .407 .449 .461 .451 .455
Net realized and unrealized (.540) .210 .181 .030 .980 (1.040)
gain (loss)
Total from investment (.113) .617 .630 .491 1.431 (.585)
operations
Less Distributions
From net interest income (.427) (.407) (.449) (.461) (.451) (.455)
From net realized gain (.080) (.030) (.001) - - -
In excess of net realized - - - - - (.020)
gain
Total distributions (.507) (.437) (.450) (.461) (.451) (.475)
Net asset value, end of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400
period
TOTAL RETURN B, C (1.11)% 5.94% 6.21% 4.89% 15.49% (5.78)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 50,432 $ 60,070 $ 48,830 $ 56,729 $ 62,852 $ 57,382
(000 omitted)
Ratio of expenses to average .90% D .95% A, D 1.00% D 1.00% D .94% D .90% D
net assets
Ratio of net interest income 4.12% 4.15% A 4.32% 4.42% 4.56% 4.49%
to aver- age net assets
Portfolio turnover rate 19% 26% A, E 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 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 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 .353 .339 .382 .394 .373 .155
Net realized and unrealized (.540) .200 .181 .030 .980 (.490)
gain (loss)
Total from investment (.187) .539 .563 .424 1.353 (.335)
operations
Less Distributions
From net interest income (.353) (.339) (.382) (.394) (.373) (.155)
From net realized gain (.080) (.030) (.001) - - -
Total distributions (.433) (.369) (.383) (.394) (.373) (.155)
Net asset value, end of $ 10.140 $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400
period
TOTAL RETURN B, C (1.81)% 5.17% 5.54% 4.21% 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,387 $ 11,134 $ 7,917 $ 7,445 $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.60% 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 3.43% 3.45% A 3.67% 3.76% 3.71% 3.74% A
to average net assets
Portfolio turnover rate 19% 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
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 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 .342 .328 .027
Net realized and unrealized (.540) .210 .040
gain (loss)
Total from investment (.198) .538 .067
operations
Less Distributions
From net interest income (.342) (.328) (.027)
From net realized gain (.080) (.030) -
Total distributions (.422) (.358) (.027)
Net asset value, end of period $ 10.150 $ 10.770 $ 10.590
TOTAL RETURN B, C (1.91)% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,562 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.70% E 1.75% A, E 1.75% A, E
net assets
Ratio of net interest income 3.34% 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 19% 26% A, F 18%
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>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460
period
Income from Investment
Operations
Net interest income .448 .427 .475 .487 .477 .481
Net realized and unrealized (.540) .210 .181 .050 .950 (1.030)
gain (loss)
Total from investment (.092) .637 .656 .537 1.427 (.549)
operations
Less Distributions
From net interest income (.448) (.427) (.475) (.487) (.477) (.481)
From net realized gain (.080) (.030) (.001) - - -
In excess of net realized - - - - - (.020)
gain
Total distributions (.528) (.457) (.476) (.487) (.477) (.501)
Net asset value, end of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410
period
TOTAL RETURN B, C (.92)% 6.14% 6.48% 5.36% 15.44% (5.43)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,997 $ 6,328 $ 6,098 $ 6,455 $ 11,085 $ 11,702
(000 omitted)
Ratio of expenses to average .70% D .75% A, D .75% D .75% D .70% D .65% D
net assets
Ratio of expenses to average .70% .75% A .75% .74% E .70% .65%
net assets after expense
reductions
Ratio of net interest income 4.32% 4.36% A 4.57% 4.68% 4.96% 4.75%
to average net assets
Portfolio turnover rate 19% 26% A, F 18% 35% 53% 53%
</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
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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
Fidelity 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. Class B shares will automatically
convert to Class A shares after a holding period of four 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 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
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
transactions. 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 SEC), 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 after the
customary settlement period for that security. 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
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
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.
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 $16,576,179 and $14,786,415, 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 .0920% 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 annual rate of .38% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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.
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 has 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 $ 3,322 $ 311
CLASS T 140,713 2,587
CLASS B 93,961 67,917
CLASS C 17,693 14,383
$ 255,689 $ 85,198
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 is 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 $ 8,353 $ 2,999
CLASS T 22,401 9,014
CLASS B 30,967 30,967*
CLASS C 946 946*
$ 62,667 $ 43,926
* 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. Effective June 14, 1999, Citibank,
N.A.(Citibank) replaced UMB Bank, n.a. as the custodian, transfer
agent, and shareholder servicing agent for the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares. Citibank 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 Citibank, 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 $ 3,662 .17
CLASS T 73,465 .13
CLASS B 12,947 .12
CLASS C 3,001 .17
INSTITUTIONAL CLASS 9,953 .15
$ 103,028
Citibank 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, if
any) 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% $ 3,290
CLASS T .90% 93,455
CLASS B 1.60% 10,988
CLASS C 1.70% 2,659
INSTITUTIONAL CLASS .70% 8,735
$ 119,127
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>
YEAR ENDED ELEVEN MONTHS ENDED OCTOBER 31, YEAR ENDED NOVEMBER 30,
OCTOBER 31,
1999 1998 1997 A
FROM NET INTEREST INCOME
Class A $ 92,550 $ 31,705 $ 15,189
Class T 2,315,888 2,019,325 2,195,690
Class B 358,623 267,333 274,703
Class C 59,144 15,339 26
Institutional Class 283,792 242,842 308,745
Total $ 3,109,997 $ 2,576,544 $ 2,794,353
FROM NET REALIZED GAIN
Class A $ 8,027 $ 1,246 $ 24
Class T 448,244 136,882 5,310
Class B 74,885 22,913 767
Class C 9,946 35 -
Institutional Class 46,538 11,719 620
Total $ 587,640 $ 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
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
31, 1998
CLASS A Shares sold 213,824 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 7,447 2,327 1,437
Shares redeemed (68,308) (68,581) (7,082)
Net increase (decrease) 152,963 58,794 31,756
CLASS T Shares sold 2,607,737 833,212 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 195,749 146,958 150,942
Shares redeemed (3,412,827) (1,651,570) (2,228,549)
Net increase (decrease) (609,341) 968,275 (839,673)
CLASS B Shares sold 436,062 412,030 162,293
Reinvestment of distributions 24,808 17,176 17,600
Shares redeemed (471,198) (142,402) (147,606)
Net increase (decrease) (10,328) 286,804 32,287
CLASS C Shares sold 258,235 123,360 1,185
Reinvestment of distributions 4,045 1,212 2
Shares redeemed (115,591) (20,180) -
Net increase (decrease) 146,689 104,392 1,187
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
31, 1998
CLASS A Shares sold $ 2,273,361 $ 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 77,827 24,853 14,999
Shares redeemed (711,636) (732,634) (74,532)
Net increase (decrease) $ 1,639,552 $ 621,978 $ 328,953
CLASS T Shares sold $ 27,740,166 $ 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 2,061,872 1,569,314 1,571,556
Shares redeemed (36,164,059) (17,602,042) (23,132,793)
Net increase (decrease) $ (6,362,021) $ 10,098,072 $ (8,692,694)
CLASS B Shares sold $ 4,584,924 $ 4,400,752 $ 1,686,065
Reinvestment of distributions 260,754 183,295 183,295
Shares redeemed (4,962,734) (1,517,988) (1,530,078)
Net increase (decrease) $ (117,056) $ 3,066,059 $ 339,282
CLASS C Shares sold $ 2,695,857 $ 1,314,301 $ 12,505
Reinvestment of distributions 42,439 12,987 25
Shares redeemed (1,199,769) (217,401) -
Net increase (decrease) $ 1,538,527 $ 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
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INSTITUTIONAL CLASS Shares 161,716 344,786 221,521
sold
Issue in exchange for the - 41,426 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 7,244 3,754 5,385
Shares redeemed (165,729) (378,091) (271,323)
Net increase (decrease) 3,231 11,875 (44,417)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INSTITUTIONAL CLASS Shares $ 1,718,233 $ 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 76,239 40,053 55,968
Shares redeemed (1,737,876) (4,030,847) (2,832,902)
Net increase (decrease) $ 56,596 $ 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.
9. PROPOSED REORGANIZATION
The Board of Trustees of Fidelity Advisor Intermediate Municipal
Income Fund (the fund) has approved an Agreement and Plan of
Reorganization ("Agreement") between the fund and Fidelity Advisor
Municipal Income Fund ("Reorganization"). The Agreement provides for
the transfer of all of the assets of the fund to Fidelity Advisor
Municipal Income Fund in exchange solely for the number of shares of
Class A, Class T, Class B, Class C and Institutional Class of Fidelity
Advisor Municipal Income Fund having the same relative net asset value
as the outstanding shares of Class A, Class T, Class B, Class C and
Institutional Class of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Fidelity Advisor Municipal Income Fund of all of
the liabilities of the fund. The Reorganization can be consummated
only if, among other things, it is approved by the vote of a majority
(as defined by the 1940 Act) of outstanding voting securities of the
fund. A Special Meeting of Shareholders ("Meeting") of the fund will
be held on April 19, 2000 to vote on the Agreement. A detailed
description of the proposed transactions and voting information will
be sent to shareholders of the fund in February, 2000. If the
Agreement is approved at the Meeting, the Reorganization is expected
to become effective on or about May 25, 2000.
Effective at the close of business on December 29, 1999, Class A,
Class T, Class B, Class C and Institutional Class shares of Fidelity
Advisor Intermediate Municipal Income Fund are no longer available for
purchase or exchange to all accounts pending the proposed
Reorganization.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Intermediate Municipal Income Fund (formerly a fund
of Fidelity Advisor Series VI):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Municipal Income Fund (a fund of
Fidelity Advisor Series II, formerly a fund of Fidelity Advisor Series
VI) at October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Intermediate Municipal Income
Fund's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor Intermediate Municipal
Income Fund voted to pay to shareholders of record at the opening of
business on record date, the following distributions derived from
capital gains realized from sales of portfolio securities, and
dividends derived from net investment income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Class A 12/7/1998 12/4/1998 $- $.08
Class T 12/7/1998 12/4/1998 $- $.08
Class B 12/7/1998 12/4/1998 $- $.08
Class C 12/7/1998 12/4/1998 $- $.08
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
During fiscal year ended 1999, 100% of the fund's income dividends was
free from federal income tax, and 12.14% of the fund's income
dividends was subject to the federal alternative minimum tax.
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
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
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Citibank, N.A.
New York ,NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Citibank, N.A.
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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
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 High Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 37 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 38
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -0.92% 33.38% 77.46%
INCOME - INST CL
LB 1-17 Year Municipal Bond -0.07% 37.20% n/a
Intermediate Municipal Debt -1.47% 30.78% 80.53%
Funds Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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 one year average represents a peer group of 132 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -0.92% 5.93% 5.90%
INCOME - INST CL
LB 1-17 Year Municipal Bond -0.07% 6.53% n/a
Intermediate Municipal Debt -1.47% 5.51% 6.08%
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
1989/10/31 10000.00 10000.00
1989/11/30 10109.41 10175.00
1989/12/31 10200.54 10258.23
1990/01/31 10167.26 10209.71
1990/02/28 10257.55 10300.58
1990/03/31 10275.02 10303.67
1990/04/30 10169.36 10229.07
1990/05/31 10354.77 10452.37
1990/06/30 10440.50 10544.24
1990/07/31 10566.50 10699.25
1990/08/31 10505.06 10543.89
1990/09/30 10533.20 10549.90
1990/10/31 10650.99 10741.28
1990/11/30 10820.93 10957.28
1990/12/31 10850.13 11004.95
1991/01/31 10971.29 11152.64
1991/02/28 11071.17 11249.66
1991/03/31 11078.61 11253.71
1991/04/30 11179.04 11403.39
1991/05/31 11268.60 11504.76
1991/06/30 11275.44 11493.37
1991/07/31 11388.38 11633.36
1991/08/31 11479.38 11786.57
1991/09/30 11549.74 11940.04
1991/10/31 11673.77 12047.50
1991/11/30 11703.19 12081.11
1991/12/31 11896.58 12340.37
1992/01/31 11979.68 12368.51
1992/02/29 11993.42 12372.46
1992/03/31 11947.57 12377.04
1992/04/30 12031.13 12487.20
1992/05/31 12163.09 12634.17
1992/06/30 12322.72 12846.17
1992/07/31 12588.11 13231.30
1992/08/31 12495.04 13102.30
1992/09/30 12611.74 13187.98
1992/10/31 12525.61 13058.35
1992/11/30 12757.10 13292.22
1992/12/31 12762.90 13427.94
1993/01/31 12923.60 13584.10
1993/02/28 13272.27 14075.44
1993/03/31 13143.47 13926.66
1993/04/30 13238.39 14067.18
1993/05/31 13296.72 14146.24
1993/06/30 13440.07 14382.34
1993/07/31 13471.34 14401.18
1993/08/31 13709.83 14701.01
1993/09/30 13855.03 14868.46
1993/10/31 13884.33 14897.15
1993/11/30 13779.35 14765.91
1993/12/31 14031.13 15077.62
1994/01/31 14164.45 15249.80
1994/02/28 13800.76 14854.83
1994/03/31 13264.78 14249.95
1994/04/30 13384.95 14370.79
1994/05/31 13507.60 14495.38
1994/06/30 13413.40 14406.81
1994/07/31 13603.21 14670.89
1994/08/31 13657.48 14721.65
1994/09/30 13493.74 14505.54
1994/10/31 13304.90 14247.92
1994/11/30 13030.65 13990.32
1994/12/31 13269.12 14298.24
1995/01/31 13591.57 14706.89
1995/02/28 13939.09 15134.56
1995/03/31 14094.63 15308.46
1995/04/30 14093.65 15326.52
1995/05/31 14418.66 15815.59
1995/06/30 14344.17 15678.00
1995/07/31 14454.81 15826.63
1995/08/31 14638.96 16027.31
1995/09/30 14735.89 16128.76
1995/10/31 14896.28 16363.27
1995/11/30 15042.28 16634.74
1995/12/31 15176.09 16794.60
1996/01/31 15280.95 16921.40
1996/02/29 15234.51 16807.18
1996/03/31 15087.81 16592.38
1996/04/30 15043.09 16545.43
1996/05/31 15029.73 16538.81
1996/06/30 15163.76 16718.92
1996/07/31 15285.12 16871.06
1996/08/31 15287.00 16867.01
1996/09/30 15438.23 17103.15
1996/10/31 15591.09 17296.58
1996/11/30 15847.95 17613.11
1996/12/31 15806.02 17539.14
1997/01/31 15838.31 17572.28
1997/02/28 15972.19 17733.60
1997/03/31 15786.76 17497.21
1997/04/30 15908.69 17643.66
1997/05/31 16095.23 17909.02
1997/06/30 16249.64 18099.75
1997/07/31 16656.44 18601.12
1997/08/31 16515.03 18426.82
1997/09/30 16702.54 18645.55
1997/10/31 16782.23 18765.44
1997/11/30 16874.81 18875.78
1997/12/31 17082.16 19151.18
1998/01/31 17225.79 19348.82
1998/02/28 17218.79 19354.62
1998/03/31 17234.15 19371.66
1998/04/30 17167.78 19284.29
1998/05/31 17395.21 19589.56
1998/06/30 17457.90 19666.74
1998/07/31 17474.44 19716.11
1998/08/31 17719.59 20020.72
1998/09/30 17913.90 20270.18
1998/10/31 17910.89 20269.77
1998/11/30 17955.29 20340.92
1998/12/31 17985.85 20392.18
1999/01/31 18202.85 20634.64
1999/02/28 18108.90 20544.47
1999/03/31 18107.26 20573.03
1999/04/30 18154.11 20624.25
1999/05/31 18063.85 20504.84
1999/06/30 17799.98 20209.57
1999/07/31 17881.15 20283.13
1999/08/31 17807.17 20120.87
1999/09/30 17853.45 20129.12
1999/10/29 17746.12 19910.92
IMATRL PRASUN SHR__CHT 19991031 19991115 090457 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 October 31, 1989. As the chart shows, by
October 31, 1999, the value of the investment would have grown to
$17,746 - a 77.46% 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 $19,911 - a 99.11% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 4.13% 4.55% 4.81% 4.85% 5.22%
Capital returns -5.05% 2.18% 2.83% -0.19% 6.74%
Total returns -0.92% 6.73% 7.64% 4.66% 11.96%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.84(cents) 22.30(cents) 44.76(cents)
Annualized dividend rate 4.45% 4.28% 4.26%
30-day annualized yield 4.50% - -
30-day annualized 7.03% - -
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 $10.17 over the past one month, $10.33 over the past six months and
$10.50 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 4.41% and 6.89%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Despite a municipal bond market
rally late in the period spurred by
attractively priced issues and yields
higher than they've been since
1997, munis produced lackluster
results during the 12-month period
ending October 31, 1999.
Following the global financial crisis
in the fall of 1998 and interest rate
jitters through most of 1999, the
Lehman Brothers Municipal Bond
Index - an index of approximately
50,000 investment-grade, fixed-rate,
tax-
exempt bonds - declined 1.77%
during the period. In comparison,
the Lehman Brothers Aggregate
Bond Index - a broad measure of
the taxable bond market - posted a
marginally positive return of
0.53%. In general, the negative
environment of increasing interest
rates and investors' persistent
concerns about inflation hit the
Lehman Brothers Long-Term
Government Bond Index the hardest,
as it fell 6.10% during the period.
While the supply of municipals was
relatively light during the period -
particularly compared to 1998's
near-record levels of issuance -
demand was similarly muted,
especially among institutional
investors. Muni bonds came under
further downward pressure in the
second half of the period following
two interest-rate hikes by the
Federal Reserve Board and
widespread belief among investors
that there would be a third hike in
November.
(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 12-month period ended October 31, 1999, the fund's
Institutional Class shares had a total return of -0.92%. To get a
sense of how the fund did relative to its competitors, the
intermediate municipal debt funds average returned -1.47% for the same
12-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 -0.07% for the same
12-month period.
Q. RISING INTEREST RATES MADE THE PAST YEAR PRETTY DIFFICULT FOR ALL
BONDS, INCLUDING MUNICIPAL BONDS. WERE THERE ANY TYPES OF MUNICIPALS
THAT HELD UP WELL AGAINST THE UNFAVORABLE BACKDROP?
A. Yes, the fund benefited from its relatively large position in
premium coupon bonds, which pay interest rates above prevailing
markets rates and trade at prices that are above their face - or par -
value. The primary reason why I favored them is because their premium
gives them DE MINIMIS protection. This protects the bonds' gains from
unfavorable tax treatment that can occur during particular market
environments. In addition, individual investors tend to shy away from
premiums, so I'm often able to purchase them at attractive prices
compared to similarly rated, comparable maturity bonds with coupons at
or below prevailing rates. Separately, the fund was helped by its
emphasis on high-quality bonds, since certain lower-quality securities
- - namely hospital and industrial development bonds - came under
increased pressure as interest rates rose.
Q. WHICH BOND MATURITIES DID YOU EMPHASIZE DURING THE YEAR AND WHAT
EFFECT DID YOUR CHOICES HAVE ON PERFORMANCE?
A. My "barbell" strategy had a mixed effect on performance. Throughout
much of the past year, the fund benefited from its barbelled
positioning, meaning it was heavily weighted toward short- and
longer-term bonds, with a smaller weighting in intermediate-maturity
securities. Early on, longer-term bond yields rose less in response to
rising interest rates, and their prices - which move in the opposite
direction of their yields - fell less. But from August through the end
of October of this year, the reverse was true and the fund's barbell
positioning detracted from its performance.
Q. HOW DID THAT BARBELL STRATEGY AFFECT THE FUND'S DURATION - WHICH
MEASURES ITS INTEREST-RATE SENSITIVITY?
A. Since I offset the fund's longer-term holdings with shorter-term
holdings, I kept the fund's duration in line with the intermediate
municipal market as a whole, as measured by the Lehman Brothers 1-17
Year Municipal Bond Index. More recently, however, I sold some
shorter- and longer-term holdings in favor of intermediate-term
securities, which I viewed as being priced more attractively and
offering the best potential for total return. At the end of the
period, the fund's duration was five years, which remained in line
with the Lehman Brothers index.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. The main factor affecting the future of municipals will probably be
- - as it has been over the past year - the direction of interest rates.
But since I don't spend time on interest-rate forecasting, I'll look
for attractively priced bonds that I believe can perform well in
relation to other bonds, no matter what the interest-rate backdrop.
From a technical standpoint, the municipal market is in reasonably
good shape. Rising interest rates have curtailed the supply of new
issuance and refundings - or refinancings - of existing debt have
slowed. Given that municipal bonds currently offer attractive values
relative to U.S. Treasury securities, I think we could see better
demand in the months to come.
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 October 31,
1999, more than $71 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON SUPPLY AND
DEMAND CHARACTERISTICS OF THE
MUNICIPAL MARKET:
"After the direction of interest rates,
supply and demand are probably the
most important factors determining
municipal bond performance. As a
portfolio manager, I try to take
advantage of seasonal shifts, selling
bonds when supply is light and prices
are fairly advantageous, and buying
when supply is heavy and prices are
relatively cheap. For example,
municipal supply generally slows
down during the summer when
market participants - such as
investment bankers, dealers,
investors and others - go on
vacation, although supply generally
picks up again in the remaining
months of the year. What's more
interesting, in my view, are demand
patterns. With the help of Fidelity's
research team, I look for
opportunities to exploit changes in
investor activity, buying after certain
types of investors have unloaded
municipal bonds and prices are
attractive, and selling when there is
strong demand."
NOTE TO SHAREHOLDERS:
On October 14, 1999, the Board of
Trustees of Fidelity Advisor
Intermediate Municipal Income
Fund voted to present a proposal to
shareholders to merge the fund into
Fidelity Advisor Municipal Income
Fund. A shareholder meeting is
scheduled for April 19, 2000. As of
December 29, 1999, the fund will be
closed to new investments in
anticipation of the proposed
merger. On or about February 23,
2000, shareholders will be sent
proxy materials asking them to vote
on this proposal.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE STATES AS OF OCTOBER
31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Texas 15.4 11.4
Washington 10.4 7.6
California 10.0 12.7
New York 8.4 8.8
North Carolina 4.9 4.7
TOP FIVE SECTORS AS OF
OCTOBER 31, 1999
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
General Obligations 27.1 25.3
Education 22.6 21.8
Electric Utilities 19.9 18.2
Health Care 13.5 14.3
Transportation 4.4 4.2
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 7.2 7.6
</TABLE>
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 5.0 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Aaa 53.5% Aaa 48.3%
Aa, A 34.2% Aa, A 38.3%
Baa 10.8% Baa 11.0%
Short-term Investments 1.5% Short-term Investments 2.4%
Row: 1, Col: 1, Value: 53.5 Row: 1, Col: 1, Value: 48.3
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 34.2 Row: 1, Col: 3, Value: 38.3
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.8 Row: 1, Col: 5, Value: 11.0
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.5 Row: 1, Col: 8, Value: 2.4
</TABLE>
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 OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.4%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 301,773
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARIZONA - 1.4%
Maricopa County Cmnty. Aa1 1,000,000 1,001,800
College District Series B,
5.25% 7/1/10
ARKANSAS - 1.2%
Arkansas Gen. Oblig. (Cap. Aa3 1,000,000 892,970
Appreciation) (College
Savings Proj.) Series A, 0%
6/1/02
CALIFORNIA - 10.0%
California Ed. Facilities AAA 225,000 217,310
Auth. Rev. Rfdg. (Chapman
Univ.) 5.375% 10/1/16 (AMBAC
Insured)
California Health Facilities A+ 2,275,000 2,282,189
Fin. Auth. Rev. (Casa de Las
Campanas) Series A, 5.375%
8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,000,560
Rev. (Home Mtg.) Series R,
5.35% 8/1/07 (MBIA Insured)
(e)
California Poll. Cont. Fing. Baa2 500,000 512,615
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc.) Series
A, 7.15% 2/1/11 (e)
Los Angeles County Ctfs. of A3 970,000 759,432
Prtn. (Disney Parking Proj.)
0% 9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,031,370
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,037,920
6.5% 7/1/08 BBB- 300,000 321,714
7,163,110
COLORADO - 1.3%
Arapaho County Cap. Impt. Aaa 3,620,000 562,512
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities Baa2 400,000 385,116
Auth. Rev. Rfdg. (Rocky
Mountain Adventist) 6.25%
2/1/04
947,628
DISTRICT OF COLUMBIA - 0.7%
District of Columbia Redev. Baa 500,000 504,035
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.4% 11/1/00
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FLORIDA - 2.1%
Broward County Resource A3 $ 460,000 $ 474,798
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 500,000 507,690
Rfdg. (Miami Int'l Arpt.)
Series A, 5.25% 10/1/01
(FSA Insured) (e)
Jacksonville Port Auth. Rev. Aaa 500,000 511,710
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
1,494,198
GEORGIA - 0.4%
Atlanta Wtr. & Wastewtr. Rev. Aaa 100,000 101,026
Rfdg. Series A, 5.5% 11/1/10
(FGIC Insured)
Georgia Gen. Oblig. Series B, Aaa 150,000 156,903
5.75% 8/1/10
257,929
ILLINOIS - 2.2%
Chicago Midway Arpt. Rev. Aaa 300,000 312,039
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 435,000 258,342
0% 6/15/09 (FGIC Insured) Aaa 65,000 38,793
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 976,400
1,585,574
IOWA - 2.1%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,532,925
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 4.3%
Kansas Dev. Fin. Auth. Rev.:
(Sisters of Charity - Aaa 1,385,000 1,383,213
Leavenworth Health Svc.
Co.) 5.25% 12/1/09 (MBIA
Insured)
(Sisters of Charity Aaa 1,750,000 1,723,138
Leavenworth Health Svc.
Co.) 5.25% 12/1/11 (MBIA
Insured)
3,106,351
LOUISIANA - 2.6%
Louisiana Pub. Facilities Aaa 1,825,000 1,862,759
Auth. Rev. Rfdg. (Student
Ln.) Series A1, 6.2% 3/1/01
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MAINE - 1.4%
Maine Edl. Ln. Marketing Aaa $ 1,000,000 $ 1,000,000
Corp. Student Ln. Rev.
Series A 4, 5.45% 11/1/99 (e)
MASSACHUSETTS - 4.5%
Boston Gen. Oblig. Rev. Aaa 250,000 260,140
(Boston City Hosp.) Series
A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
101.66) (f)
Massachusetts Gen. Oblig. Aa3 250,000 251,588
Rfdg. Series A, 5.5% 2/1/11
Massachusetts Health & Edl. Aaa 700,000 695,226
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care)
Series B, 4.55% 1/1/21 (MBIA
Insured)
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,407,344
Rev. (Cap. Appreciation)
(Massachusetts Biomedical)
Series A 1, 0% 8/1/02
Massachusetts Tpk. Auth. Aaa 550,000 551,227
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)
Massachusetts Wtr. Poll. Aa1 100,000 95,035
Abatement Trust Rev. (MWRA
Ln. Prog.) Series A, 5.25%
8/1/14
3,260,560
MICHIGAN - 2.6%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp.) A1 2,000,000 1,661,980
Series A, 5% 6/1/19
(Mercy Health Svcs.) Series Aa3 200,000 205,568
S, 5.75% 8/15/05
1,867,548
MINNESOTA - 0.5%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 174,506
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 200,558
Facilities Auth. Rev.
(MacAlester College) Series
4 C, 5.5% 3/1/12
375,064
MONTANA - 1.7%
Montana Higher Ed. Student A 1,210,000 1,212,069
Assistance Corp. Student Ln.
Rev. Series B, 6.6% 12/1/99
(e)
NEVADA - 0.8%
Clark County School District Aaa 500,000 539,915
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW JERSEY - 0.7%
New Jersey Gen. Oblig. Series Aa1 500,000 511,065
F, 5.5% 8/1/11
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW MEXICO - 4.5%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa $ 250,000 $ 253,765
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 498,236
(e)
New Mexico Edl. Assistance Aaa 1,900,000 1,955,043
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 565,810
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,272,854
NEW YORK - 8.4%
Buffalo Gen. Oblig. Rfdg. Aaa 1,025,000 985,189
Series C, 5.25% 12/1/13
(FGIC Insured)
New York City Gen. Oblig. A3 1,000,000 984,270
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Rev.:
(City Univ. Sys. Baa1 500,000 501,210
Consolidated) Series A,
5.75% 7/1/13
(City Univ. Sys.) Series C, Baa1 500,000 562,470
7.5% 7/1/10
Rfdg. (State Univ. Edl. A3 500,000 533,625
Facilities) Series A, 6.5%
5/15/04
New York State Envir. Aa1 500,000 430,240
Facilities Corp. Clean Wtr.
& Drinking Rev. (Revolving
Funds) Series F, 4.875%
6/15/18
New York State Local Govt.
Assistance Corp.:
(Cap. Appreciation) Series A, A3 1,000,000 645,970
0% 4/1/08
Rfdg. Series A, 5.5% 4/1/04 Aaa 100,000 103,105
(AMBAC Insured)
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge):
5.4% 4/1/03 Baa1 250,000 255,208
6% 4/1/03 Baa1 200,000 207,906
New York State Urban Dev.
Corp. Rev.:
(Sports Facilities Assistance Aaa 500,000 507,420
Prog.) Series A, 5.5% 4/1/10
(MBIA Insured)
Rfdg. (Correctional Aaa 300,000 308,313
Facilities) 5.625% 1/1/07
(AMBAC Insured)
6,024,926
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - 4.9%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B, 6% 1/1/06 Baa3 $ 1,315,000 $ 1,328,729
Series C, 5.5% 1/1/07 Baa1 700,000 684,096
Series A, 5.625% 1/1/03 Baa3 500,000 501,175
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 Baa1 750,000 755,835
5.9% 1/1/03 Baa1 250,000 252,555
3,522,390
OHIO - 1.1%
Ohio Bldg. Auth. (Adult Aaa 500,000 513,295
Correctional) Series A,
5.95% 10/1/14 (MBIA Insured)
Ohio Tpk. Commission Series Aaa 250,000 252,968
A, 5.6% 2/15/12 (MBIA
Insured)
766,263
OREGON - 1.4%
Clackamas County School Aaa 1,000,000 971,280
District #12 5.25% 6/1/13
(FGIC Insured)
PENNSYLVANIA - 3.3%
Pennsylvania Higher Edl. AA- 1,270,000 1,335,380
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 1,033,670
Rfdg. (Residential Dev.
Section 8) Series A, 7%
7/1/01
2,369,050
RHODE ISLAND - 1.4%
Rhode Island Student Ln. A 1,000,000 1,017,070
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
SOUTH CAROLINA - 3.2%
South Carolina Ed. Assistance
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Proj.):
Sr. Lien Series A2, 5.4% AAA 1,250,000 1,264,250
9/1/02
Sub Lien Series B, 5.7% A 1,000,000 1,018,500
9/1/05 (e)
2,282,750
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TENNESSEE - 0.5%
Memphis-Shelby County Arpt. Aaa $ 275,000 $ 277,626
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
Tennessee Gen. Oblig. Rfdg. Aaa 100,000 106,641
Series A, 6% 5/1/07
384,267
TEXAS - 15.4%
Austin Independent School Aaa 500,000 532,455
District 8.125% 8/1/01
(Escrowed to Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 447,084
Student Ln. Rev. Rfdg.
Series A 1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 171,596
District Rfdg. 0% 2/15/03
Fort Bend Independent School AAA 1,000,000 1,000,470
District Rfdg. 5.375% 2/15/11
Harris County Gen. Oblig. Aaa 3,000,000 2,644,016
(Cap. Appreciation) (Toll
Road Proj.) Sub Lien Series
A, 0% 8/15/02 (MBIA Insured)
Hurst Euless Bedford Aaa 1,000,000 522,180
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Irving Independent School Aaa 250,000 247,213
District (Cap.
Appreciation) 0% 2/15/00
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 960,120
5.125% 8/15/12 (FGIC Insured)
Northside Independent School Aaa 500,000 505,280
District (School Bldg.)
8.375% 2/1/00
San Antonio Gen. Oblig. Aa2 1,255,000 1,237,807
Series 2000, 5% 2/1/09 (b)
Texas Pub. Fin. Auth. Bldg. Aaa 1,000,000 1,071,800
Rev. Rfdg. (Texas Technical
College) 6.25% 8/1/09 (MBIA
Insured)
Univ. of Texas Permanent
Univ. Fund:
5% 7/1/10 Aaa 250,000 245,015
5.25% 7/1/06 Aaa 1,495,000 1,528,428
11,113,464
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTAH - 3.5%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
(Cap. Appreciation) Series A, Aaa $ 2,860,000 $ 2,057,370
0% 7/1/06 (MBIA Insured)
Rfdg. (Cap. Appreciation) Aaa 500,000 487,360
Series B, 0% 7/1/00 (MBIA
Insured)
2,544,730
WASHINGTON - 10.4%
Grant County Pub. Util. Aaa 1,715,000 1,602,770
District No. 2 (Priest
Rapids Hydro Elec. Proj.)
Second Series B, 5.375%
1/1/16 (MBIA Insured) (e)
King County Gen. Oblig. Aa1 1,000,000 1,013,100
Series B, 5.9% 12/1/14
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg.:
Series A, 0% 7/1/06 (MBIA Aaa 2,700,000 1,927,152
Insured)
Series C, 7.5% 7/1/03 Aa1 525,000 554,274
(Pre-Refunded to 1/1/01 @
102) (f)
5.4% 7/1/12 Aa1 2,000,000 1,907,300
Washington Pub. Pwr. Supply Aa1 500,000 496,215
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
7,500,811
TOTAL MUNICIPAL BONDS 71,187,128
(Cost $72,033,544)
</TABLE>
CASH EQUIVALENTS - 1.5%
SHARES
Municipal Central Cash Fund, 1,083,452 1,083,452
3.56% (c)(d) (Cost
$1,083,452)
TOTAL INVESTMENT PORTFOLIO - 72,270,580
100.4% (Cost $73,116,996)
NET OTHER ASSETS - (0.4)% (320,581)
NET ASSETS - 100% $ 71,949,999
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) The rate quoted is the annualized seven-day yield of the fund at
period end.
(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 77.8% AAA, AA, A 69.7%
Baa 8.9% BBB 11.9%
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 net assets, is as follows:
General Obligations 27.1%
Education 22.6
Electric Utilities 19.9
Health Care 13.5
Others (individually less 17.3
than 5%)
Net Other Assets (0.4)
100.0%
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $73,116,996. Net unrealized depreciation
aggregated $846,416, of which $548,216 related to appreciated
investment securities and $1,394,632 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 72,270,580
value (cost $73,116,996) -
See accompanying schedule
Cash 34,990
Receivable for fund shares 376,953
sold
Interest receivable 1,035,548
Other receivables 911
TOTAL ASSETS 73,718,982
LIABILITIES
Payable for investments $ 1,286,864
purchased on a delayed
delivery basis
Payable for fund shares 280,543
redeemed
Distributions payable 124,885
Accrued management fee 10,539
Distribution fees payable 20,573
Other payables and accrued 45,579
expenses
TOTAL LIABILITIES 1,768,983
NET ASSETS $ 71,949,999
Net Assets consist of:
Paid in capital $ 72,801,661
Accumulated undistributed net (5,246)
realized gain (loss) on
investments
Net unrealized appreciation (846,416)
(depreciation) on investments
NET ASSETS $ 71,949,999
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.15
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($2,572,343 (divided by)
253,436 shares)
Maximum offering price per $10.55
share (100/96.25 of $10.15)
CLASS T: NET ASSET VALUE and $10.15
redemption price per share
($50,431,715 (divided by)
4,968,378 shares)
Maximum offering price per $10.44
share (100/97.25 of $10.15)
CLASS B: NET ASSET VALUE and $10.14
offering price per share
($10,387,389 (divided by)
1,024,065 shares) A
CLASS C: NET ASSET VALUE and $10.15
offering price per share
($2,561,719 (divided by)
252,268 shares) A
INSTITUTIONAL CLASS: NET $10.15
ASSET VALUE, offering price
and redemption price per
share ($5,996,833 (divided
by) 590,849 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INTEREST INCOME $ 3,879,149
EXPENSES
Management fee $ 293,995
Transfer agent fees 103,028
Distribution fees 255,689
Accounting fees and expenses 64,808
Non-interested trustees' 238
compensation
Custodian fees and expenses 5,121
Registration fees 95,132
Audit 51,521
Legal 11,903
Reports to shareholders 6,711
Miscellaneous 133
Total expenses before 888,279
reductions
Expense reductions (119,127) 769,152
NET INTEREST INCOME 3,109,997
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 25,014
Futures contracts (46,201) (21,187)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (3,986,395)
Futures contracts 38,839 (3,947,556)
NET GAIN (LOSS) (3,968,743)
NET INCREASE (DECREASE) IN $ (858,746)
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 3,109,997 $ 2,576,544 $ 2,794,353
Net realized gain (loss) (21,187) 831,999 875,029
Change in net unrealized (3,947,556) 795,349 192,183
appreciation (depreciation)
NET INCREASE (DECREASE) IN (858,746) 4,203,892 3,861,565
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (3,109,997) (2,576,544) (2,794,353)
From net interest income
From net realized gain (587,640) (172,795) (6,721)
TOTAL DISTRIBUTIONS (3,697,637) (2,749,339) (2,801,074)
Share transactions - net (3,244,402) 14,997,838 (8,495,226)
increase (decrease)
TOTAL INCREASE (DECREASE) (7,800,785) 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 $ 71,949,999 $ 79,750,784 $ 63,298,393
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 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 .431 .411 .459 .113
Net realized and unrealized (.540) .200 .191 .250
gain (loss)
Total from investment (.109) .611 .650 .363
operations
Less Distributions
From net interest income (.431) (.411) (.459) (.113)
From net realized gain (.080) (.030) (.001) -
Total distributions (.511) (.441) (.460) (.113)
Net asset value, end of period $ 10.150 $ 10.770 $ 10.600 $ 10.410
TOTAL RETURN B, C (1.07)% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,572 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .85% E .90% A, E .90% E .90% A, E
net assets
Ratio of net interest income 4.17% 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 19% 26% A, F 18% 35%
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>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 F 1997 G 1996 G 1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400 $ 10.460
period
Income from Invest- ment
Operations
Net interest income .427 .407 .449 .461 .451 .455
Net realized and unrealized (.540) .210 .181 .030 .980 (1.040)
gain (loss)
Total from investment (.113) .617 .630 .491 1.431 (.585)
operations
Less Distributions
From net interest income (.427) (.407) (.449) (.461) (.451) (.455)
From net realized gain (.080) (.030) (.001) - - -
In excess of net realized - - - - - (.020)
gain
Total distributions (.507) (.437) (.450) (.461) (.451) (.475)
Net asset value, end of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.380 $ 9.400
period
TOTAL RETURN B, C (1.11)% 5.94% 6.21% 4.89% 15.49% (5.78)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 50,432 $ 60,070 $ 48,830 $ 56,729 $ 62,852 $ 57,382
(000 omitted)
Ratio of expenses to average .90% D .95% A, D 1.00% D 1.00% D .94% D .90% D
net assets
Ratio of net interest income 4.12% 4.15% A 4.32% 4.42% 4.56% 4.49%
to aver- age net assets
Portfolio turnover rate 19% 26% A, E 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 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 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 .353 .339 .382 .394 .373 .155
Net realized and unrealized (.540) .200 .181 .030 .980 (.490)
gain (loss)
Total from investment (.187) .539 .563 .424 1.353 (.335)
operations
Less Distributions
From net interest income (.353) (.339) (.382) (.394) (.373) (.155)
From net realized gain (.080) (.030) (.001) - - -
Total distributions (.433) (.369) (.383) (.394) (.373) (.155)
Net asset value, end of $ 10.140 $ 10.760 $ 10.590 $ 10.410 $ 10.380 $ 9.400
period
TOTAL RETURN B, C (1.81)% 5.17% 5.54% 4.21% 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,387 $ 11,134 $ 7,917 $ 7,445 $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.60% 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 3.43% 3.45% A 3.67% 3.76% 3.71% 3.74% A
to average net assets
Portfolio turnover rate 19% 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
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 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 .342 .328 .027
Net realized and unrealized (.540) .210 .040
gain (loss)
Total from investment (.198) .538 .067
operations
Less Distributions
From net interest income (.342) (.328) (.027)
From net realized gain (.080) (.030) -
Total distributions (.422) (.358) (.027)
Net asset value, end of period $ 10.150 $ 10.770 $ 10.590
TOTAL RETURN B, C (1.91)% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,562 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.70% E 1.75% A, E 1.75% A, E
net assets
Ratio of net interest income 3.34% 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 19% 26% A, F 18%
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>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 G 1997 H 1996 H 1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410 $ 10.460
period
Income from Investment
Operations
Net interest income .448 .427 .475 .487 .477 .481
Net realized and unrealized (.540) .210 .181 .050 .950 (1.030)
gain (loss)
Total from investment (.092) .637 .656 .537 1.427 (.549)
operations
Less Distributions
From net interest income (.448) (.427) (.475) (.487) (.477) (.481)
From net realized gain (.080) (.030) (.001) - - -
In excess of net realized - - - - - (.020)
gain
Total distributions (.528) (.457) (.476) (.487) (.477) (.501)
Net asset value, end of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.360 $ 9.410
period
TOTAL RETURN B, C (.92)% 6.14% 6.48% 5.36% 15.44% (5.43)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,997 $ 6,328 $ 6,098 $ 6,455 $ 11,085 $ 11,702
(000 omitted)
Ratio of expenses to average .70% D .75% A, D .75% D .75% D .70% D .65% D
net assets
Ratio of expenses to average .70% .75% A .75% .74% E .70% .65%
net assets after expense
reductions
Ratio of net interest income 4.32% 4.36% A 4.57% 4.68% 4.96% 4.75%
to average net assets
Portfolio turnover rate 19% 26% A, F 18% 35% 53% 53%
</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
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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
Fidelity 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. Class B shares will automatically
convert to Class A shares after a holding period of four 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 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
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
transactions. 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 SEC), 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 after the
customary settlement period for that security. 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
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
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.
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 $16,576,179 and $14,786,415, 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 .0920% 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 annual rate of .38% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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.
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 has 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 $ 3,322 $ 311
CLASS T 140,713 2,587
CLASS B 93,961 67,917
CLASS C 17,693 14,383
$ 255,689 $ 85,198
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 is 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 $ 8,353 $ 2,999
CLASS T 22,401 9,014
CLASS B 30,967 30,967*
CLASS C 946 946*
$ 62,667 $ 43,926
* 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. Effective June 14, 1999, Citibank,
N.A.(Citibank) replaced UMB Bank, n.a. as the custodian, transfer
agent, and shareholder servicing agent for the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares. Citibank 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 Citibank, 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 $ 3,662 .17
CLASS T 73,465 .13
CLASS B 12,947 .12
CLASS C 3,001 .17
INSTITUTIONAL CLASS 9,953 .15
$ 103,028
Citibank 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, if
any) 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% $ 3,290
CLASS T .90% 93,455
CLASS B 1.60% 10,988
CLASS C 1.70% 2,659
INSTITUTIONAL CLASS .70% 8,735
$ 119,127
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>
YEAR ENDED ELEVEN MONTHS ENDED OCTOBER 31, YEAR ENDED NOVEMBER 30,
OCTOBER 31,
1999 1998 1997 A
FROM NET INTEREST INCOME
Class A $ 92,550 $ 31,705 $ 15,189
Class T 2,315,888 2,019,325 2,195,690
Class B 358,623 267,333 274,703
Class C 59,144 15,339 26
Institutional Class 283,792 242,842 308,745
Total $ 3,109,997 $ 2,576,544 $ 2,794,353
FROM NET REALIZED GAIN
Class A $ 8,027 $ 1,246 $ 24
Class T 448,244 136,882 5,310
Class B 74,885 22,913 767
Class C 9,946 35 -
Institutional Class 46,538 11,719 620
Total $ 587,640 $ 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
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
31, 1998
CLASS A Shares sold 213,824 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 7,447 2,327 1,437
Shares redeemed (68,308) (68,581) (7,082)
Net increase (decrease) 152,963 58,794 31,756
CLASS T Shares sold 2,607,737 833,212 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 195,749 146,958 150,942
Shares redeemed (3,412,827) (1,651,570) (2,228,549)
Net increase (decrease) (609,341) 968,275 (839,673)
CLASS B Shares sold 436,062 412,030 162,293
Reinvestment of distributions 24,808 17,176 17,600
Shares redeemed (471,198) (142,402) (147,606)
Net increase (decrease) (10,328) 286,804 32,287
CLASS C Shares sold 258,235 123,360 1,185
Reinvestment of distributions 4,045 1,212 2
Shares redeemed (115,591) (20,180) -
Net increase (decrease) 146,689 104,392 1,187
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997 A
31, 1998
CLASS A Shares sold $ 2,273,361 $ 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 77,827 24,853 14,999
Shares redeemed (711,636) (732,634) (74,532)
Net increase (decrease) $ 1,639,552 $ 621,978 $ 328,953
CLASS T Shares sold $ 27,740,166 $ 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 2,061,872 1,569,314 1,571,556
Shares redeemed (36,164,059) (17,602,042) (23,132,793)
Net increase (decrease) $ (6,362,021) $ 10,098,072 $ (8,692,694)
CLASS B Shares sold $ 4,584,924 $ 4,400,752 $ 1,686,065
Reinvestment of distributions 260,754 183,295 183,295
Shares redeemed (4,962,734) (1,517,988) (1,530,078)
Net increase (decrease) $ (117,056) $ 3,066,059 $ 339,282
CLASS C Shares sold $ 2,695,857 $ 1,314,301 $ 12,505
Reinvestment of distributions 42,439 12,987 25
Shares redeemed (1,199,769) (217,401) -
Net increase (decrease) $ 1,538,527 $ 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
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INSTITUTIONAL CLASS Shares 161,716 344,786 221,521
sold
Issue in exchange for the - 41,426 -
shares of Fidelity Advisor
Short-Intermediate Municipal
Income Fund Institutional
Class
Reinvestment of distributions 7,244 3,754 5,385
Shares redeemed (165,729) (378,091) (271,323)
Net increase (decrease) 3,231 11,875 (44,417)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DOLLARS
YEAR ENDED OCTOBER 31, 1999 ELEVEN MONTHS ENDED OCTOBER YEAR ENDED NOVEMBER 30, 1997
31, 1998
INSTITUTIONAL CLASS Shares $ 1,718,233 $ 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 76,239 40,053 55,968
Shares redeemed (1,737,876) (4,030,847) (2,832,902)
Net increase (decrease) $ 56,596 $ 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.
9. PROPOSED REORGANIZATION
The Board of Trustees of Fidelity Advisor Intermediate Municipal
Income Fund (the fund) has approved an Agreement and Plan of
Reorganization ("Agreement") between the fund and Fidelity Advisor
Municipal Income Fund ("Reorganization"). The Agreement provides for
the transfer of all of the assets of the fund to Fidelity Advisor
Municipal Income Fund in exchange solely for the number of shares of
Class A, Class T, Class B, Class C and Institutional Class of Fidelity
Advisor Municipal Income Fund having the same relative net asset value
as the outstanding shares of Class A, Class T, Class B, Class C and
Institutional Class of the fund as of the close of business of the New
York Stock Exchange on the day that the Reorganization is effective
and the assumption by Fidelity Advisor Municipal Income Fund of all of
the liabilities of the fund. The Reorganization can be consummated
only if, among other things, it is approved by the vote of a majority
(as defined by the 1940 Act) of outstanding voting securities of the
fund. A Special Meeting of Shareholders ("Meeting") of the fund will
be held on April 19, 2000 to vote on the Agreement. A detailed
description of the proposed transactions and voting information will
be sent to shareholders of the fund in February, 2000. If the
Agreement is approved at the Meeting, the Reorganization is expected
to become effective on or about May 25, 2000.
Effective at the close of business on December 29, 1999, Class A,
Class T, Class B, Class C and Institutional Class shares of Fidelity
Advisor Intermediate Municipal Income Fund are no longer available for
purchase or exchange to all accounts pending the proposed
Reorganization.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Intermediate Municipal Income Fund (formerly a fund
of Fidelity Advisor Series VI):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Intermediate Municipal Income Fund (a fund of
Fidelity Advisor Series II, formerly a fund of Fidelity Advisor Series
VI) at October 31, 1999, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fidelity Advisor Intermediate Municipal Income
Fund's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 1999
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor Intermediate Municipal
Income Fund voted to pay to shareholders of record at the opening of
business on record date, the following distributions derived from
capital gains realized from sales of portfolio securities, and
dividends derived from net investment income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Institutional Class 12/7/1998 12/4/1998 $- $.08
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
During fiscal year ended 1999, 100% of the fund's income dividends was
free from federal income tax, and 12.14% of the fund's income
dividends was subject to the federal alternative minimum tax.
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
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
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Citibank, N.A.
New York, NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
Citibank, N.A.
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 Emerging Asia 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 TechnoQuant(registered trademark)
Growth Fund
Fidelity Advisor Small Cap Fund
Fidelity Advisor Value Strategies 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
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 High Income Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
MORTGAGE SECURITIES FUND
(INITIAL CLASS OF FIDELITY ADVISOR MORTGAGE
SECURITIES FUND)
ANNUAL REPORT
OCTOBER 31, 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.
REPORT OF INDEPENDENT 31 The auditors' opinion.
ACCOUNTANTS
DISTRIBUTIONS 32
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 1-800-544-6666 FOR A
FREE PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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.
If you have questions, please call us at 1-800-544-6666, or visit our
web site at www.fidelity.com. We are available 24 hours a day, seven
days a week to provide you the information you need to make the
investments that are right for you.
Best regards,
Edward C. Johnson 3d
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.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 3.14% 46.31% 112.63%
- - INITIAL CL
LB Mortgage 2.99% 47.77% 115.44%
US Mortgage Funds Average 1.65% 41.15% 98.62%
CUMULATIVE TOTAL RETURNS show Initial Class' performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare 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 one year average represents a peer
group of 65 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 OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 3.14% 7.91% 7.84%
- - INITIAL CL
LB Mortgage 2.99% 8.12% 7.98%
US Mortgage Funds Average 1.65% 7.12% 7.09%
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
1989/10/31 10000.00 10000.00
1989/11/30 10096.36 10108.36
1989/12/31 10165.96 10168.18
1990/01/31 10072.30 10097.08
1990/02/28 10139.39 10156.41
1990/03/31 10147.36 10181.42
1990/04/30 10059.59 10089.97
1990/05/31 10352.04 10403.04
1990/06/30 10502.11 10567.54
1990/07/31 10654.74 10750.92
1990/08/31 10626.56 10636.68
1990/09/30 10683.28 10723.95
1990/10/31 10792.72 10845.55
1990/11/30 11028.89 11072.81
1990/12/31 11219.13 11258.40
1991/01/31 11335.55 11429.52
1991/02/28 11408.12 11525.86
1991/03/31 11484.85 11604.31
1991/04/30 11609.18 11711.20
1991/05/31 11669.53 11814.17
1991/06/30 11698.71 11824.71
1991/07/31 11866.75 12024.76
1991/08/31 12093.52 12243.44
1991/09/30 12282.32 12472.91
1991/10/31 12427.50 12679.58
1991/11/30 12503.47 12771.51
1991/12/31 12746.36 13028.19
1992/01/31 12685.05 12877.67
1992/02/29 12811.27 12999.51
1992/03/31 12722.73 12916.65
1992/04/30 12842.01 13043.64
1992/05/31 13053.97 13278.74
1992/06/30 13192.28 13435.40
1992/07/31 13169.64 13552.83
1992/08/31 13254.83 13729.35
1992/09/30 13338.04 13836.23
1992/10/31 13205.41 13714.88
1992/11/30 13269.23 13757.78
1992/12/31 13441.43 13935.52
1993/01/31 13564.06 14118.66
1993/02/28 13680.23 14261.83
1993/03/31 13769.57 14348.37
1993/04/30 13865.69 14422.41
1993/05/31 13906.75 14504.54
1993/06/30 14076.40 14615.59
1993/07/31 14153.77 14673.94
1993/08/31 14180.13 14743.07
1993/09/30 14211.11 14755.82
1993/10/31 14236.39 14798.48
1993/11/30 14206.63 14769.55
1993/12/31 14343.74 14889.19
1994/01/31 14475.84 15036.77
1994/02/28 14399.51 14931.85
1994/03/31 14236.32 14543.03
1994/04/30 14173.95 14435.89
1994/05/31 14294.61 14493.01
1994/06/30 14367.78 14461.63
1994/07/31 14597.45 14751.16
1994/08/31 14662.86 14797.74
1994/09/30 14503.93 14587.15
1994/10/31 14533.38 14578.82
1994/11/30 14518.88 14533.22
1994/12/31 14622.25 14649.18
1995/01/31 14898.69 14962.74
1995/02/28 15232.24 15344.69
1995/03/31 15296.88 15417.01
1995/04/30 15538.05 15636.19
1995/05/31 16026.94 16129.20
1995/06/30 16149.20 16220.89
1995/07/31 16185.88 16248.84
1995/08/31 16385.60 16417.01
1995/09/30 16554.99 16561.41
1995/10/31 16739.15 16708.75
1995/11/30 16924.48 16899.73
1995/12/31 17110.94 17110.81
1996/01/31 17251.03 17239.76
1996/02/29 17141.11 17096.59
1996/03/31 17078.92 17034.81
1996/04/30 17043.32 16986.76
1996/05/31 16977.33 16937.24
1996/06/30 17211.63 17170.38
1996/07/31 17273.09 17233.39
1996/08/31 17269.28 17233.15
1996/09/30 17542.59 17521.70
1996/10/31 17867.18 17865.41
1996/11/30 18143.22 18121.11
1996/12/31 18040.91 18026.23
1997/01/31 18153.82 18160.09
1997/02/28 18213.00 18220.64
1997/03/31 18042.23 18049.03
1997/04/30 18323.50 18336.85
1997/05/31 18504.26 18516.30
1997/06/30 18720.98 18732.29
1997/07/31 19059.57 19085.32
1997/08/31 19038.51 19039.96
1997/09/30 19245.08 19281.44
1997/10/31 19450.48 19495.22
1997/11/30 19514.56 19559.21
1997/12/31 19686.38 19737.44
1998/01/31 19875.76 19933.81
1998/02/28 19920.46 19975.97
1998/03/31 19987.45 20060.55
1998/04/30 20105.32 20174.06
1998/05/31 20240.50 20308.16
1998/06/30 20341.53 20405.00
1998/07/31 20422.23 20508.46
1998/08/31 20597.52 20694.53
1998/09/30 20792.65 20944.35
1998/10/31 20615.99 20917.38
1998/11/30 20770.09 21021.57
1998/12/31 20840.54 21110.81
1999/01/31 20957.71 21261.09
1999/02/28 20900.03 21177.00
1999/03/31 21056.75 21319.22
1999/04/30 21133.72 21417.59
1999/05/31 21057.48 21297.87
1999/06/30 20982.53 21222.92
1999/07/31 20869.35 21078.94
1999/08/31 20858.61 21078.19
1999/09/30 21169.23 21420.32
1999/10/29 21263.09 21543.51
IMATRL PRASUN SHR__CHT 19991031 19991110 093815 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Mortgage Securities Fund - Initial Class on
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $21,263 - a 112.63% 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 $21,544 - a 115.44% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 6.19% 6.17% 6.60% 6.66% 7.86%
Capital returns -3.05% -0.18% 2.26% 0.08% 7.32%
Total returns 3.14% 5.99% 8.86% 6.74% 15.18%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.66(cents) 32.24(cents) 66.19(cents)
Annualized dividend rate 6.40% 6.08% 6.20%
30-day annualized yield 6.57% - -
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 $10.42 over the past one month, $10.52 over the past six months and
$10.67 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Initial Class shares provided a total return of 3.14%. To get a sense
of how the fund did relative to its competitors, the U.S. mortgage
funds average returned 1.65% for the same 12-month period, according
to Lipper Inc. Additionally, the Lehman Brothers Mortgage-Backed
Securities Index - which tracks the types of securities in which the
fund invests - returned 2.99% for the same 12-month period.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS AND THE
LEHMAN INDEX?
A. The main contributor to the fund's strong performance was its
larger-than-average stake in commercial mortgage-backed securities
(CMBS), which performed relatively well. Commercial mortgage-backed
securities are bonds that are collateralized by mortgage loans on
commercial real estate - such as office buildings, shopping malls,
hotels and apartment buildings. At the beginning of the period, the
CMBS market had been severely punished over concerns about commercial
real-estate overbuilding and a lack of market liquidity. But the
global financial crisis of October 1998 effectively put a stop to the
financing of construction of new properties. By early 1999, liquidity
had returned and the CMBS market snapped back.
Q. PREPAYMENT ACTIVITY WAS A BIG CHALLENGE FOR THE MORTGAGE MARKET
DURING THE PAST YEAR. WHAT CHOICES DID YOU MAKE IN LIGHT OF THAT
CHALLENGE?
A. The biggest investment risk associated with mortgage securities is
a rapid acceleration in prepayment activity. That's what occurred in
1998 and early 1999 when interest rates fell dramatically and huge
waves of homeowners refinanced their mortgages. During the crush of
prepayment activity, I emphasized mortgage securities that had some
measure of prepayment protection, including 15-year Fannie Mae
securities and 30-year Ginnie Mae securities. Since homeowners with
Ginnie Mae loans have less flexibility to refinance, Ginnie Mae
securities are less sensitive to prepayments than their Fannie Mae and
Freddie Mac counterparts. Compared to homeowners with traditional
30-year loans, fewer 15-year mortgage borrowers refinance or pay off
their loans earlier. I also used "seasoned" - meaning older - mortgage
securities, which had, over time, withstood earlier waves of
prepayment. My emphasis on prepayment-resistant mortgage securities
was a plus for performance in the first several months of the period.
But in response to rising interest rates, I switched courses.
Q. TELL US ABOUT THAT SWITCH . . .
A. Higher interest rates dramatically curtailed prepayment activity.
So I sold most of the fund's stake in 15-year Fannie Maes, reduced its
stake in seasoned securities and focused instead on securities that
offered better yields. In particular, I added 30-year 7% Freddie Mac
and Fannie Mae securities.
Q. AND HOW DID THAT STRATEGY WORK OUT?
A. Unusually light demand caused Fannie Mae and Freddie Mac securities
to lag their Ginnie Mae counterparts over the past couple months. But
I continued to hold onto Fannie Mae and Freddie Mac securities because
I believe that they will outperform Ginnie Maes over time.
Furthermore, I wanted to position the fund to benefit from potential
outperformance of Fannie Mae and Freddie Mac securities once demand
returns to more normal levels.
Q. WHAT'S YOUR OUTLOOK?
A. I think that the mortgage securities market offers some very
attractive values at current levels. Even though prepayment activity
has slowed dramatically, many bonds are priced as if prepayments are
still a way of life. In other words, investors are getting compensated
- - in the form of relatively high yields - for taking on a risk that's
declined significantly in the current environment. To get the
prepayment engine going again would, by my calculations, require rates
to dip well below where they were a year ago. Given that outlook, I
believe that the best values to be found are in bonds that offer
relatively high yields, which I plan to continue searching for and
holding.
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, consistent
with prudent investment risk.
In seeking current income,
the fund may also consider
the potential for capital gain.
START DATE: December 31, 1984
SIZE: as of October 31, 1999,
more than $473 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON MORTGAGE
PREPAYMENT ACTIVITY:
"Falling interest rates weighed
heavily on mortgage securities
during the past year because, as
rates declined, the rate of
mortgage prepayment
accelerated. But an analysis of
more current data shows
definitive signs that prepayment
activity has slowed in response to
higher interest rates. The MBA
Refinancing Index - one of the
most widely watched barometers
of prepayment activity - rose to a
record high of 4400 in late 1998, 44
times higher than the base
reading of 100 in 1990. During the
past year, the largest one-month
volume of mortgages issued
peaked at $80 billion.
"But rising interest rates have
dramatically curtailed
prepayment activity. At the end of
October, the MBA refinancing
activity dropped to 416, a level 10
times off its peak earlier in the
year. Also, the one-month volume
of mortgages dropped to $25
billion. Given that mortgage rates
hovered around 8% at the end of
the period, volume is likely to
decline further through the winter
months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
OCTOBER 31, 1999
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 3.1
6 - 6.99% 47.0 45.7
7 - 7.99% 36.4 23.3
8 - 8.99% 7.8 8.4
9 - 9.99% 3.8 5.1
10% and over 3.1 3.0
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF OCTOBER 31, 1999
6 MONTHS AGO
Years 8.0 5.2
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 4.7 3.5
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 AS OF APRIL 30, 1999
Mortgage Securities 76.9% Mortgage Securities 88.4%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.0% Related Securities 17.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.1% Net Other Assets (6.2%)*
Row: 1, Col: 1, Value: 76.90000000000001 Row: 1, Col: 1, Value: 88.40000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: nil Row: 1, Col: 3, Value: nil
Row: 1, Col: 4, Value: 21.0 Row: 1, Col: 4, Value: 17.8
Row: 1, Col: 5, Value: 0.0 Row: 1, Col: 5, Value: nil
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: nil Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.1 Row: 1, Col: 8, Value: 0.0
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 76.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 51.9%
6% 10/1/28 to 7/1/29 $ 10,562,669 $ 9,855,604
6.5% 9/1/10 to 6/1/29 132,830,766 127,377,345
7% 3/1/19 to 9/1/29 75,047,423 73,758,602
7.5% 3/1/22 to 10/1/28 4,689,610 4,710,832
8% 1/1/07 to 11/1/29 17,960,269 18,296,623
8.25% 1/1/13 76,806 79,103
8.5% 6/1/16 to 11/1/23 3,657,034 3,794,939
8.75% 11/1/08 to 7/1/09 159,649 164,842
9% 1/1/08 to 2/1/13 583,645 605,628
9.5% 5/1/03 to 8/1/22 4,609,873 4,793,726
11% 12/1/02 to 8/1/10 1,270,775 1,375,576
12.25% 5/1/13 to 6/1/15 153,672 172,878
12.5% 11/1/14 to 3/1/16 329,243 371,774
12.75% 2/1/14 to 6/1/15 62,841 70,092
13.5% 9/1/13 to 12/1/14 133,209 153,857
14% 11/1/14 41,740 48,627
245,630,048
FREDDIE MAC - 12.4%
5% 7/1/10 2,374,483 2,199,366
6% 2/1/29 to 7/1/29 4,949,597 4,618,569
6.5% 1/1/24 to 9/1/24 22,191,188 21,477,363
7% 7/1/29 to 9/1/29 12,973,281 12,746,249
7.5% 6/1/26 to 8/1/28 3,111,718 3,125,486
8% 10/1/07 to 4/1/21 661,472 672,159
8.5% 11/1/03 to 1/1/20 1,587,836 1,639,793
9% 9/1/08 to 5/1/21 6,990,523 7,310,029
10% 1/1/09 to 5/1/19 1,177,016 1,246,705
10.5% 8/1/10 to 12/1/20 1,272,823 1,377,494
11.5% 4/1/12 65,071 71,350
12.25% 6/1/14 to 7/1/15 161,355 181,852
12.5% 5/1/12 to 12/1/14 644,783 724,276
12.75% 6/1/05 to 3/1/15 64,868 71,157
13% 1/1/11 to 6/1/15 1,049,360 1,200,158
58,662,006
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 12.6%
6.5% 5/15/28 to 1/15/29 4,296,716 4,106,028
7% 5/15/23 to 6/15/29 18,186,168 17,845,777
7.5% 7/15/05 to 9/15/27 14,743,215 14,867,495
8% 4/15/02 to 12/15/25 9,621,294 9,839,359
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - CONTINUED
8.5% 7/15/16 to 6/15/18 $ 1,950,831 $ 2,036,256
9% 9/20/16 to 4/20/18 66,797 70,198
9.5% 6/15/09 to 12/15/24 3,175,696 3,365,633
10% 12/15/17 to 1/15/26 4,876,056 5,332,643
10.5% 8/15/00 to 2/20/18 727,758 783,752
11% 1/15/10 to 9/15/19 1,300,473 1,448,626
11.5% 10/15/10 24,927 27,740
13% 10/15/13 58,637 67,689
13.5% 7/15/11 to 10/15/14 62,056 71,790
59,862,986
TOTAL U.S. GOVERNMENT AGENCY 364,155,040
- - MORTGAGE SECURITIES
(Cost $369,673,468)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.3%
U.S. GOVERNMENT AGENCY - 4.3%
Fannie Mae REMIC Pass Through 10,000,000 9,237,500
Trust Series 1999-51 Class
LK, 6.5% 8/25/29
Fanniemae Whole Loan 6.5% 10,049,260 9,185,652
2/25/29
Freddie Mac planned 1,757,086 1,818,585
amortization class Series 70
Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 20,241,737
OBLIGATIONS
(Cost $20,048,497)
COMMERCIAL MORTGAGE
SECURITIES - 16.7%
ACP Mortgage LP Series 1 2,320,648 2,058,647
Class E, 6.8464% 2/28/28
(a)(b)
Bankers Trust II Series 5,000,000 4,987,500
1999-S1A Class D, 7.5488%
2/28/14 (a)(b)
Bankers Trust REMIC Trust 4,000,000 4,006,250
Series 1998-S1A Class F,
7.38% 11/28/02 (b)
CBM Funding Corp. sequential 2,300,000 2,269,094
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
CS First Boston Mortgage 2,000,000 1,808,125
Securities Corp. Series 1997
C2 Class D, 7.27% 1/17/35
Deutsche Mortgage & Asset 10,200,000 9,052,500
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 3,498,052 3,488,761
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, $ 1,600,000 $ 1,366,624
7.1905% 4/13/31 (a)(b)
Series 1999-GSFL II Class F, 4,500,000 4,440,240
7.6634% 11/13/13 (a)(b)
Nomura Asset Securities Corp. 15,000,000 13,139,063
Series 1998-D6 Class A-4,
7.3506% 3/17/28 (b)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.3063% 2/15/34 7,900,000 7,484,016
(a)(b)
Class A-5, 6.6563% 2/15/34 5,278,196 4,944,185
(a)(b)
Structured Asset Securities 3,192,522 2,929,638
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 17,218,656
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 79,193,299
SECURITIES
(Cost $83,897,322)
</TABLE>
CASH EQUIVALENTS - 1.5%
MATURITY AMOUNT
Investments in repurchase $ 6,942,082 6,939,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $6,939,000)
TOTAL INVESTMENT PORTFOLIO - 470,529,076
99.4% (Cost $480,558,287)
NET OTHER ASSETS - 0.6% 2,974,520
NET ASSETS - 100% $ 473,503,596
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 $42,499,868 or 9.0% of net assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $480,637,465. Net unrealized depreciation
aggregated $10,108,389, of which $2,596,741 related to appreciated
investment securities and $12,705,130 related to depreciated
investment securities.
The fund hereby designates approximately $4,617,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $5,050,000, all of which will expire on October 31,
2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 470,529,076
value (including repurchase
agreements of $6,939,000)
(cost $480,558,287) - See
accompanying schedule
Receivable for investments 9,473,896
sold
Receivable for fund shares 160,026
sold
Interest receivable 2,668,553
TOTAL ASSETS 482,831,551
LIABILITIES
Payable to custodian bank $ 30,761
Payable for investments 8,124,926
purchased
Payable for fund shares 422,322
redeemed
Distributions payable 415,052
Accrued management fee 166,857
Distribution fees payable 20,453
Other payables and accrued 147,584
expenses
TOTAL LIABILITIES 9,327,955
NET ASSETS $ 473,503,596
Net Assets consist of:
Paid in capital $ 486,801,066
Undistributed net investment 1,901,973
income
Accumulated undistributed net (5,170,232)
realized gain (loss) on
investments
Net unrealized appreciation (10,029,211)
(depreciation) on investments
NET ASSETS $ 473,503,596
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $10.48
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,090,255 (divided by)
294,996 shares)
Maximum offering price per $11.00
share (100/95.25 of $10.48)
CLASS T: NET ASSET VALUE and $10.48
redemption price per share
($29,051,750 (divided by)
2,771,642 shares)
Maximum offering price per $10.86
share (100/96.50 of $10.48)
CLASS B: NET ASSET VALUE and $10.48
offering price per share
($19,101,218 (divided by)
1,823,400 shares) A
INITIAL CLASS: NET ASSET $10.49
VALUE, offering price and
redemption price per share
($406,838,729 (divided by)
38,797,891 shares)
INSTITUTIONAL CLASS: NET $10.47
ASSET VALUE, offering price
and redemption price per
share ($15,421,644 (divided
by) 1,473,289 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 34,267,086
Interest
EXPENSES
Management fee $ 2,110,419
Transfer agent fees 937,977
Distribution fees 190,306
Accounting fees and expenses 161,159
Non-interested trustees' 1,708
compensation
Custodian fees and expenses 91,213
Registration fees 91,994
Audit 54,626
Legal 15,537
Miscellaneous 345
Total expenses before 3,655,284
reductions
Expense reductions (27,083) 3,628,201
NET INVESTMENT INCOME 30,638,885
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (6,155,525)
Futures contracts 534,939 (5,620,586)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (10,123,506)
Futures contracts 115,853
Delayed delivery commitments (183,312) (10,190,965)
NET GAIN (LOSS) (15,811,551)
NET INCREASE (DECREASE) IN $ 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 30,638,885 $ 32,333,262
income
Net realized gain (loss) (5,620,586) 8,605,529
Change in net unrealized (10,190,965) (11,641,361)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 14,827,334 29,297,430
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (30,183,549) (30,575,427)
From net investment income
From net realized gain (6,924,572) (1,430,037)
TOTAL DISTRIBUTIONS (37,108,121) (32,005,464)
Share transactions - net (14,273,306) (19,139,888)
increase (decrease)
TOTAL INCREASE (DECREASE) (36,554,093) (21,847,922)
IN NET ASSETS
NET ASSETS
Beginning of period 510,057,689 531,905,611
End of period (including $ 473,503,596 $ 510,057,689
undistributed net investment
income of $1,901,973 and
$1,699,376, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .646 .669 .170 .268
Net realized and unrealized (.336) (.061) .048 .224
gain (loss)
Total from investment .310 .608 .218 .492
operations
Less Distributions
From net investment income (.640) (.638) (.168) (.272)
From net realized gain (.150) (.030) (.080) -
Total distributions (.790) (.668) (.248) (.272)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .637 .665 .167 .255
Net realized and unrealized (.338) (.063) .048 .233
gain (loss)
Total from investment .299 .602 .215 .488
operations
Less Distributions
From net investment income (.629) (.632) (.165) (.268)
From net realized gain (.150) (.030) (.080) -
Total distributions (.779) (.662) (.245) (.268)
Net asset value, end of period $ 10.480 $ 10.960 $ 11.020 $ 11.050
TOTAL RETURN B, C 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
</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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31, 1999 1998 1997 G 1997 F
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 .567 .584 .142 .234
Net realized and unrealized (.324) (.064) .065 .214
gain (loss)
Total from investment .243 .520 .207 .448
operations
Less Distributions
From net investment income (.563) (.560) (.147) (.238)
From net realized gain (.150) (.030) (.080) -
Total distributions (.713) (.590) (.227) (.238)
Net asset value, end of period $ 10.480 $ 10.950 $ 11.020 $ 11.040
TOTAL RETURN B, C 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 183% 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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 F 1997 G 1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .674 D .700 D .176 D .678 D .729 .772
Net realized and unrealized (.342) (.056) .047 .391 (.015) .325
gain (loss)
Total from investment .332 .644 .223 1.069 .714 1.097
operations
Less Distributions
From net investment income (.662) (.664) (.173) (.689) (.724) (.737)
From net realized gain (.150) (.030) (.080) (.110) (.100) -
In excess of net realized - - - - - (.050)
gain
Total distributions (.812) (.694) (.253) (.799) (.824) (.787)
Net asset value, end of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780 $ 10.890
period
TOTAL RETURN B, C 3.14% 5.99% 2.05% 10.34% 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 406,839 $ 459,212 $ 494,304 $ 506,113 $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .70% .71% .72% A .73% .74% .77%
net assets
Ratio of expenses to average .70% .71% .72% A .73% .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.29% 6.34% 6.36% A 6.26% 6.75% 7.37%
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149% 221% 329%
</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 THREE MONTHS ENDED OCTOBER 31
G YEAR ENDED JULY 31
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31, 1999 1998 1997 H 1997 G
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 .669 .693 .172 .263
Net realized and unrealized (.343) (.063) .050 .226
gain (loss)
Total from investment .326 .630 .222 .489
operations
Less Distributions
From net investment income (.656) (.660) (.172) (.279)
From net realized gain (.150) (.030) (.080) -
Total distributions (.806) (.690) (.252) (.279)
Net asset value, end of period $ 10.470 $ 10.950 $ 11.010 $ 11.040
TOTAL RETURN B, C 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 183% 262% 125% A 149%
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 FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
G FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO JULY 31, 1997
H THREE MONTHS ENDED OCTOBER 31
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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) 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.
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, futures
transactions, 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 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 after the customary settlement period for that security. 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 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.
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 $875,693,626 and $942,195,101, respectively, of which U.S.
government and government agency obligations aggregated $853,484,094
and $932,362,579, respectively.
The market value of futures contracts opened and closed during the
period amounted to $29,995,764 and $39,662,629, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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 $ 3,865 $ 146
CLASS T 61,872 4,924
CLASS B 124,569 89,966
$ 190,306 $ 95,036
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 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 is 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 $ 29,751 $ 10,398
CLASS T 74,991 27,421
CLASS B 68,549 68,549*
$ 173,291 $ 106,368
* 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 $ 8,236 .32
CLASS T 72,011 .29
CLASS B 28,891 .21
INITIAL CLASS 785,661 .18
INSTITUTIONAL CLASS 43,178 .24
$ 937,977
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, certain securities lending fees, brokerage
commissions and extraordinary expenses, if any) 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% $ 2,125
CLASS T 1.00% 13,483
INSTITUTIONAL CLASS .75% 454
$ 16,062
In addition, through an arrangement with the fund's custodian, 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 $11,021 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998
FROM NET INVESTMENT INCOME
Class A $ 153,223 $ 47,643
Class T 1,450,107 835,552
Class B 724,614 198,305
Initial Class 26,727,640 28,222,031
Institutional Class 1,127,965 1,271,896
Total $ 30,183,549 $ 30,575,427
FROM NET REALIZED GAIN
Class A $ 26,293 $ 4,543
Class T 278,709 41,653
Class B 132,050 4,898
Initial Class 6,182,269 1,324,784
Institutional Class 305,251 54,159
Total $ 6,924,572 $ 1,430,037
Total Distributions $ 37,108,121 $ 32,005,464
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998 1999 1998
CLASS A Shares sold 233,326 191,569 $ 2,488,784 $ 2,113,314
Reinvestment of
distributions 11,952 3,475 127,329 38,300
Shares redeemed (120,472) (174,371) (1,280,382) (1,919,263)
Net increase (decrease) 124,806 20,673 $ 1,335,731 $ 232,351
CLASS T Shares sold 2,003,369 1,214,468 $ 21,386,352 $ 13,402,368
Reinvestment of
distributions 148,336 72,903 1,582,559 803,861
Shares redeemed (1,122,570) (874,013) (11,947,707) (9,643,136)
Net increase (decrease) 1,029,135 413,358 $ 11,021,204 $ 4,563,093
CLASS B Shares sold 1,505,268 623,528 $ 16,049,817 $ 6,874,797
Reinvestment of
distributions 63,855 14,736 679,689 162,453
Shares redeemed (461,420) (66,613) (4,891,488) (734,102)
Net increase (decrease) 1,107,703 571,651 $ 11,838,018 $ 6,303,148
INITIAL CLASS Shares sold 3,914,002 5,885,198 $ 41,964,545 $ 64,970,201
Reinvestment of
distributions 2,515,203 2,196,325 26,913,754 24,230,109
Shares redeemed (9,502,966) (11,046,014) (101,601,425) (121,871,170)
Net increase (decrease) (3,073,761) (2,964,491) $ (32,723,126) $ (32,670,860)
INSTITUTIONAL CLASS Shares 667,600 1,131,767 $ 7,141,162 $ 12,463,547
sold
Reinvestment of
distributions 70,535 61,639 754,625 679,028
Shares redeemed (1,277,677) (971,330) (13,640,920) (10,710,195)
Net increase (decrease) (539,542) 222,076 $ (5,745,133) $ 2,432,380
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Mortgage Securities Fund (formerly a fund of Fidelity
Income Fund):
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor
Series II, formerly a fund of Fidelity Income Fund) at October 31,
1999, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fidelity
Advisor Mortgage Securities Fund's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 8, 1999
DISTRIBUTIONS
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
MANAGING YOUR INVESTMENTS
Fidelity offers several ways to conveniently manage your personal
investments via your telephone or PC. You can access your account
information, conduct trades and research your investments 24 hours a
day.
BY PHONE
Fidelity Automated Service Telephone provides a single toll-free
number to access account balances, positions, quotes and trading. It's
easy to navigate the service, and on your first call, the system will
help you create a personal identification number (PIN) for security.
(PHONE_GRAPHIC)FIDELITY AUTOMATED
SERVICE TELEPHONE (FASTSM)
1-800-544-5555
PRESS
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0To speak to a Fidelity representative.
BY PC
Fidelity's Web site on the Internet provides a wide range of
information, including daily financial news, fund performance,
interactive planning tools and news about Fidelity products and
services.
(COMPUTER_GRAPHIC)FIDELITY'S WEB SITE
WWW.FIDELITY.COM
If you are not currently on the Internet, call EarthLink Sprint at
1-800-288-2967, and be sure to ask for registration number SMD004 to
receive a special Fidelity package that includes 30 days of free
Internet access. EarthLink is North America's #1 independent Internet
access provider.
(COMPUTER_GRAPHIC)
FIDELITY ON-LINE XPRESS+(registered trademark)
Fidelity On-line Xpress+ software for Windows combines comprehensive
portfolio management capabilities, securities trading and access to
research and analysis tools . . . all on your desktop. Call Fidelity
at 1-800-544-0240 or visit our Web site for more information on how to
manage your investments via your PC.
* WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD
AND RETURN WILL VARY AND,
EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS
THAT YOU MAY HAVE A
GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT
MONEY MARKET FUNDS WILL BE
ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY
MARKET FUND IS NOT INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND
INCLUDE CHANGES IN SHARE
PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF
ANY SALES CHARGES.
TO VISIT FIDELITY
For directions and hours,
please call 1-800-544-9797.
ARIZONA
7373 N. Scottsdale Road
Scottsdale, AZ
CALIFORNIA
815 East Birch Street
Brea, CA
851 East Hamilton Avenue
Campbell, CA
527 North Brand Boulevard
Glendale, CA
19200 Von Karman Avenue
Irvine, CA
10100 Santa Monica Blvd.
Los Angeles, CA
251 University Avenue
Palo Alto, CA
1760 Challenge Way
Sacramento, CA
7676 Hazard Center Drive
San Diego, CA
455 Market Street
San Francisco, CA
950 Northgate Drive
San Rafael, CA
1400 Civic Drive
Walnut Creek, CA
6300 Canoga Avenue
Woodland Hills, CA
COLORADO
1625 Broadway
Denver, CO
CONNECTICUT
48 West Putnam Avenue
Greenwich, CT
265 Church Street
New Haven, CT
300 Atlantic Street
Stamford, CT
29 South Main Street
West Hartford, CT
DELAWARE
222 Delaware Avenue
Wilmington, DE
FLORIDA
4400 N. Federal Highway
Boca Raton, FL
90 Alhambra Plaza
Coral Gables, FL
4090 N. Ocean Boulevard
Ft. Lauderdale, FL
1907 West State Road 434
Longwood, FL
8880 Tamiami Trail, North
Naples, FL
2401 PGA Boulevard
Palm Beach Gardens, FL
8065 Beneva Road
Sarasota, FL
1502 N. Westshore Blvd.
Tampa, FL
GEORGIA
3445 Peachtree Road, N.E.
Atlanta, GA
1000 Abernathy Road
Atlanta, GA
ILLINOIS
One North Franklin Street
Chicago, IL
1415 West 22nd Street
Oak Brook, IL
1700 East Golf Road
Schaumburg, IL
3232 Lake Avenue
Wilmette, IL
INDIANA
4729 East 82nd Street
Indianapolis, IN
MAINE
3 Canal Plaza
Portland, ME
MARYLAND
7401 Wisconsin Avenue
Bethesda, MD
1 West Pennsylvania Ave.
Towson, MD
MASSACHUSETTS
470 Boylston Street
Boston, MA
155 Congress Street
Boston, MA
25 State Street
Boston, MA
300 Granite Street
Braintree, MA
44 Mall Road
Burlington, MA
416 Belmont Street
Worcester, MA
MICHIGAN
280 North Woodward Ave.
Birmingham, MI
29155 Northwestern Hwy.
Southfield, MI
MINNESOTA
7600 France Avenue South
Edina, MN
MISSOURI
700 West 47th Street
Kansas City, MO
8885 Ladue Road
Ladue, MO
200 North Broadway
St. Louis, MO
NEW JERSEY
150 Essex Street
Millburn, NJ
56 South Street
Morristown, NJ
501 Route 17, South
Paramus, NJ
NEW YORK
1055 Franklin Avenue
Garden City, NY
999 Walt Whitman Road
Melville, L.I., NY
1271 Avenue of the Americas
New York, NY
71 Broadway
New York, NY
350 Park Avenue
New York, NY
NORTH CAROLINA
4611 Sharon Road
Charlotte, NC
OHIO
600 Vine Street
Cincinnati, OH
28699 Chagrin Boulevard
Woodmere Village, OH
OREGON
16850 SW 72 Avenue
Tigard, OR
PENNSYLVANIA
1735 Market Street
Philadelphia, PA
439 Fifth Avenue
Pittsburgh, PA
TENNESSEE
6150 Poplar Road
Memphis, TN
TEXAS
10000 Research Boulevard
Austin, TX
4017 Northwest Parkway
Dallas, TX
1155 Dairy Ashford Street
Houston, TX
2701 Drexel Drive
Houston, TX
400 East Colinas Blvd.
Irving, TX
14100 San Pedro
San Antonio, TX
19740 IH 45 North
Spring, TX
UTAH
215 South State Street
Salt Lake City, UT
VIRGINIA
8180 Greensboro Drive
McLean, VA
WASHINGTON
411 108th Avenue, N.E.
Bellevue, WA
511 Pine Street
Seattle, WA
WASHINGTON, DC
1900 K Street, N.W.
Washington, DC
WISCONSIN
595 North Barker Road
Brookfield, WI
TO WRITE FIDELITY
If more than one address is listed, please locate the address that is
closest to you. We'll give your correspondence immediate attention and
send you written confirmation upon completion of your request.
(LETTER_GRAPHIC)MAKING CHANGES
TO YOUR ACCOUNT
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(LETTER_GRAPHIC)FOR NON-RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
OVERNIGHT EXPRESS
Fidelity Investments
2300 Litton Lane - KH1A
Hebron, KY 41048
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6I
400 East Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(LETTER_GRAPHIC)FOR RETIREMENT
ACCOUNTS
BUYING SHARES
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
SELLING SHARES
Fidelity Investments
P.O. Box 660602
Dallas, TX 75266-0602
OVERNIGHT EXPRESS
Fidelity Investments
Attn: Redemptions - CP6R
400 East Colinas Blvd.
Irving, TX 75039-5587
GENERAL CORRESPONDENCE
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
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
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
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
* INDEPENDENT TRUSTEES
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
Strategic Income
Target TimelineSM 2001 & 2003
THE FIDELITY TELEPHONE CONNECTION
MUTUAL FUND 24-HOUR SERVICE
Exchanges/Redemptions 1-800-544-6666
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(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)
Fidelity Automated Service
Telephone (FASTSM) 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(REGISTERED TRADEMARK) ADVISOR
SHORT FIXED-INCOME
FUND - CLASS A, CLASS T AND CLASS C
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 46 The auditors' opinion.
DISTRIBUTIONS 47
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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
five year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY(REGISTERED 3.12% 29.70% 83.10%
TRADEMARK) ADV SHORT
FIXED-INCOME - CL A
FIDELITY ADV SHORT 1.57% 27.75% 80.35%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.20% 36.56% 91.97%
Short Investment Grade Debt 2.98% 32.77% 86.39%
Funds Average
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to 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 one year average represents a peer
group of 112 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.12% 5.34% 6.24%
FIXED-INCOME - CL A
FIDELITY ADV SHORT 1.57% 5.02% 6.07%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.20% 6.43% 6.74%
Short Investment Grade Debt 2.98% 5.83% 6.41%
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
1989/10/31 9850.00 10000.00
1989/11/30 9927.37 10089.40
1989/12/31 9979.51 10129.34
1990/01/31 9956.92 10139.94
1990/02/28 9997.17 10193.74
1990/03/31 10050.08 10226.08
1990/04/30 10059.24 10251.62
1990/05/31 10217.33 10410.04
1990/06/30 10296.38 10520.09
1990/07/31 10418.32 10647.54
1990/08/31 10401.65 10685.31
1990/09/30 10427.58 10765.47
1990/10/31 10400.97 10876.61
1990/11/30 10466.48 10982.85
1990/12/31 10565.22 11111.38
1991/01/31 10533.46 11211.92
1991/02/28 10642.74 11292.90
1991/03/31 10832.79 11374.96
1991/04/30 10990.47 11486.37
1991/05/31 11102.65 11558.11
1991/06/30 11156.92 11601.04
1991/07/31 11233.57 11702.94
1991/08/31 11422.14 11861.63
1991/09/30 11540.30 11989.35
1991/10/31 11669.12 12118.42
1991/11/30 11787.16 12240.97
1991/12/31 11977.92 12426.02
1992/01/31 12027.04 12413.25
1992/02/29 12108.13 12452.65
1992/03/31 12164.65 12449.93
1992/04/30 12243.55 12563.79
1992/05/31 12370.48 12681.45
1992/06/30 12484.18 12811.06
1992/07/31 12639.42 12961.33
1992/08/31 12746.75 13065.95
1992/09/30 12852.18 13189.59
1992/10/31 12770.61 13110.24
1992/11/30 12776.57 13091.76
1992/12/31 12888.95 13215.40
1993/01/31 13084.28 13356.43
1993/02/28 13243.47 13465.39
1993/03/31 13328.50 13509.14
1993/04/30 13395.95 13593.92
1993/05/31 13452.81 13562.95
1993/06/30 13587.89 13665.66
1993/07/31 13668.26 13696.91
1993/08/31 13802.36 13811.58
1993/09/30 13850.04 13856.15
1993/10/31 13936.26 13888.48
1993/11/30 13993.61 13892.56
1993/12/31 14112.63 13948.81
1994/01/31 14200.68 14037.66
1994/02/28 14084.80 13952.61
1994/03/31 13762.19 13880.87
1994/04/30 13689.63 13828.16
1994/05/31 13772.06 13846.91
1994/06/30 13663.67 13883.32
1994/07/31 13788.30 14009.67
1994/08/31 13900.24 14056.95
1994/09/30 13894.89 14025.71
1994/10/31 13905.49 14057.77
1994/11/30 13929.38 13998.80
1994/12/31 13637.16 14025.43
1995/01/31 13738.62 14218.09
1995/02/28 13908.85 14414.83
1995/03/31 13981.96 14496.62
1995/04/30 14095.80 14627.86
1995/05/31 14349.41 14881.12
1995/06/30 14416.98 14962.09
1995/07/31 14470.09 15021.87
1995/08/31 14556.03 15112.90
1995/09/30 14625.88 15187.63
1995/10/31 14746.65 15313.71
1995/11/30 14866.29 15445.50
1995/12/31 14975.64 15562.62
1996/01/31 15085.86 15695.77
1996/02/29 15033.66 15635.99
1996/03/31 15005.61 15624.58
1996/04/30 15007.44 15640.34
1996/05/31 15040.21 15676.48
1996/06/30 15150.21 15791.15
1996/07/31 15197.02 15852.56
1996/08/31 15244.45 15910.98
1996/09/30 15370.55 16056.63
1996/10/31 15534.40 16237.87
1996/11/30 15646.54 16359.61
1996/12/31 15593.68 16362.33
1997/01/31 15658.68 16441.40
1997/02/28 15700.84 16482.16
1997/03/31 15682.55 16469.39
1997/04/30 15813.46 16604.44
1997/05/31 15912.76 16720.47
1997/06/30 16010.69 16836.77
1997/07/31 16197.17 17023.72
1997/08/31 16210.65 17039.75
1997/09/30 16325.91 17171.00
1997/10/31 16410.33 17294.64
1997/11/30 16459.83 17338.12
1997/12/31 16563.82 17452.51
1998/01/31 16771.85 17620.99
1998/02/28 16790.72 17638.65
1998/03/31 16850.77 17707.40
1998/04/30 16909.10 17795.17
1998/05/31 17006.55 17891.91
1998/06/30 17080.78 17984.29
1998/07/31 17160.77 18067.99
1998/08/31 17277.25 18275.86
1998/09/30 17484.14 18521.78
1998/10/31 17489.47 18601.94
1998/11/30 17493.13 18598.41
1998/12/31 17573.10 18670.42
1999/01/31 17672.06 18750.31
1999/02/28 17616.49 18671.23
1999/03/31 17739.38 18803.49
1999/04/30 17818.03 18867.94
1999/05/31 17788.22 18848.67
1999/06/30 17811.60 18908.37
1999/07/31 17838.29 18962.53
1999/08/31 17864.38 19012.35
1999/09/30 17987.08 19140.27
1999/10/29 18035.26 19196.90
IMATRL PRASUN SHR__CHT 19991031 19991112 092935 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
October 31, 1989, and the current 1.50% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,035 - an 80.35% 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 $19,197 - a 91.97% 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
YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
1999 1998 1997 1996
Dividend returns 5.57% 5.83% 6.28% 0.99%
Capital returns -2.45% 0.75% -0.64% 0.86%
Total returns 3.12% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.46(cents) 26.12(cents) 51.50(cents)
Annualized dividend rate 5.75% 5.64% 5.57%
30-day annualized yield 5.93% - -
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 $9.14 over the past one month, $9.19 over the past six months, and
$9.25 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 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.12% 29.93% 83.42%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 1.57% 27.98% 80.67%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.20% 36.56% 91.97%
Short Investment Grade Debt 2.98% 32.77% 86.39%
Funds Average
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to 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 one years average represents a peer
group of 112 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.12% 5.38% 6.25%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 1.57% 5.06% 6.09%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.20% 6.43% 6.74%
Short Investment Grade Debt 2.98% 5.83% 6.41%
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
1989/10/31 9850.00 10000.00
1989/11/30 9927.37 10089.40
1989/12/31 9979.51 10129.34
1990/01/31 9956.92 10139.94
1990/02/28 9997.17 10193.74
1990/03/31 10050.08 10226.08
1990/04/30 10059.24 10251.62
1990/05/31 10217.33 10410.04
1990/06/30 10296.38 10520.09
1990/07/31 10418.32 10647.54
1990/08/31 10401.65 10685.31
1990/09/30 10427.58 10765.47
1990/10/31 10400.97 10876.61
1990/11/30 10466.48 10982.85
1990/12/31 10565.22 11111.38
1991/01/31 10533.46 11211.92
1991/02/28 10642.74 11292.90
1991/03/31 10832.79 11374.96
1991/04/30 10990.47 11486.37
1991/05/31 11102.65 11558.11
1991/06/30 11156.92 11601.04
1991/07/31 11233.57 11702.94
1991/08/31 11422.14 11861.63
1991/09/30 11540.30 11989.35
1991/10/31 11669.12 12118.42
1991/11/30 11787.16 12240.97
1991/12/31 11977.92 12426.02
1992/01/31 12027.04 12413.25
1992/02/29 12108.13 12452.65
1992/03/31 12164.65 12449.93
1992/04/30 12243.55 12563.79
1992/05/31 12370.48 12681.45
1992/06/30 12484.18 12811.06
1992/07/31 12639.42 12961.33
1992/08/31 12746.75 13065.95
1992/09/30 12852.18 13189.59
1992/10/31 12770.61 13110.24
1992/11/30 12776.57 13091.76
1992/12/31 12888.95 13215.40
1993/01/31 13084.28 13356.43
1993/02/28 13243.47 13465.39
1993/03/31 13328.50 13509.14
1993/04/30 13395.95 13593.92
1993/05/31 13452.81 13562.95
1993/06/30 13587.89 13665.66
1993/07/31 13668.26 13696.91
1993/08/31 13802.36 13811.58
1993/09/30 13850.04 13856.15
1993/10/31 13936.26 13888.48
1993/11/30 13993.61 13892.56
1993/12/31 14112.63 13948.81
1994/01/31 14200.68 14037.66
1994/02/28 14084.80 13952.61
1994/03/31 13762.19 13880.87
1994/04/30 13689.63 13828.16
1994/05/31 13772.06 13846.91
1994/06/30 13663.67 13883.32
1994/07/31 13788.30 14009.67
1994/08/31 13900.24 14056.95
1994/09/30 13894.89 14025.71
1994/10/31 13905.49 14057.77
1994/11/30 13929.38 13998.80
1994/12/31 13637.16 14025.43
1995/01/31 13738.62 14218.09
1995/02/28 13908.85 14414.83
1995/03/31 13981.96 14496.62
1995/04/30 14095.80 14627.86
1995/05/31 14349.41 14881.12
1995/06/30 14416.98 14962.09
1995/07/31 14470.09 15021.87
1995/08/31 14556.03 15112.90
1995/09/30 14625.88 15187.63
1995/10/31 14746.65 15313.71
1995/11/30 14866.29 15445.50
1995/12/31 14975.64 15562.62
1996/01/31 15085.86 15695.77
1996/02/29 15033.66 15635.99
1996/03/31 15005.61 15624.58
1996/04/30 15007.44 15640.34
1996/05/31 15040.21 15676.48
1996/06/30 15150.21 15791.15
1996/07/31 15197.02 15852.56
1996/08/31 15244.45 15910.98
1996/09/30 15387.15 16056.63
1996/10/31 15551.06 16237.87
1996/11/30 15663.14 16359.61
1996/12/31 15660.72 16362.33
1997/01/31 15725.82 16441.40
1997/02/28 15767.94 16482.16
1997/03/31 15749.80 16469.39
1997/04/30 15880.82 16604.44
1997/05/31 15980.44 16720.47
1997/06/30 16078.40 16836.77
1997/07/31 16265.70 17023.72
1997/08/31 16280.13 17039.75
1997/09/30 16378.15 17171.00
1997/10/31 16479.45 17294.64
1997/11/30 16525.94 17338.12
1997/12/31 16627.97 17452.51
1998/01/31 16783.49 17620.99
1998/02/28 16805.61 17638.65
1998/03/31 16855.10 17707.40
1998/04/30 16937.35 17795.17
1998/05/31 17041.24 17891.91
1998/06/30 17104.63 17984.29
1998/07/31 17187.69 18067.99
1998/08/31 17305.74 18275.86
1998/09/30 17514.18 18521.78
1998/10/31 17520.76 18601.94
1998/11/30 17524.34 18598.41
1998/12/31 17605.04 18670.42
1999/01/31 17705.22 18750.31
1999/02/28 17648.94 18671.23
1999/03/31 17792.54 18803.49
1999/04/30 17854.48 18867.94
1999/05/31 17821.60 18848.67
1999/06/30 17863.89 18908.37
1999/07/31 17890.18 18962.53
1999/08/31 17915.78 19012.35
1999/09/30 18038.59 19140.27
1999/10/29 18066.98 19196.90
IMATRL PRASUN SHR__CHT 19991031 19991112 093541 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
October 31, 1989, and the current 1.50% sales charge was paid. As the
chart shows, by October 31, 1999, the value of the investment would
have grown to $18,067- an 80.67% 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 $19,197 - a 91.97% 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
YEARS ENDED OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.57% 6.00% 6.29% 6.40% 6.16%
Capital returns -2.45% 0.32% -0.32% -0.95% -0.11%
Total returns 3.12% 6.32% 5.97% 5.45% 6.05%
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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.45(cents) 25.87(cents) 51.50(cents)
Annualized dividend rate 5.73% 5.58% 5.56%
30-day annualized yield 5.91% - -
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 $9.14 over the past one month, $9.20 over the past six months, and
$9.26 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 one year, past five year and past 10 year
total return figures are 1%, 0% and 0%, respectively. If Fidelity had
not reimbursed certain class expenses, the past five year and past 10
year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 2.31% 27.81% 80.43%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 1.33% 27.81% 80.43%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 3.20% 36.56% 91.97%
Short Investment Grade Debt 2.98% 32.77% 86.39%
Funds Average
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class C's returns to 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 one year average represents a peer
group of 112 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 2.31% 5.03% 6.08%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 1.33% 5.03% 6.08%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 3.20% 6.43% 6.74%
Short Investment Grade Debt 2.98% 5.83% 6.41%
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
1989/10/31 10000.00 10000.00
1989/11/30 10078.55 10089.40
1989/12/31 10131.49 10129.34
1990/01/31 10108.55 10139.94
1990/02/28 10149.41 10193.74
1990/03/31 10203.12 10226.08
1990/04/30 10212.43 10251.62
1990/05/31 10372.93 10410.04
1990/06/30 10453.18 10520.09
1990/07/31 10576.97 10647.54
1990/08/31 10560.05 10685.31
1990/09/30 10586.38 10765.47
1990/10/31 10559.36 10876.61
1990/11/30 10625.86 10982.85
1990/12/31 10726.11 11111.38
1991/01/31 10693.87 11211.92
1991/02/28 10804.81 11292.90
1991/03/31 10997.76 11374.96
1991/04/30 11157.84 11486.37
1991/05/31 11271.72 11558.11
1991/06/30 11326.82 11601.04
1991/07/31 11404.64 11702.94
1991/08/31 11596.08 11861.63
1991/09/30 11716.04 11989.35
1991/10/31 11846.82 12118.42
1991/11/30 11966.66 12240.97
1991/12/31 12160.33 12426.02
1992/01/31 12210.20 12413.25
1992/02/29 12292.51 12452.65
1992/03/31 12349.90 12449.93
1992/04/30 12430.00 12563.79
1992/05/31 12558.86 12681.45
1992/06/30 12674.29 12811.06
1992/07/31 12831.90 12961.33
1992/08/31 12940.87 13065.95
1992/09/30 13047.90 13189.59
1992/10/31 12965.09 13110.24
1992/11/30 12971.13 13091.76
1992/12/31 13085.23 13215.40
1993/01/31 13283.53 13356.43
1993/02/28 13445.14 13465.39
1993/03/31 13531.47 13509.14
1993/04/30 13599.95 13593.92
1993/05/31 13657.67 13562.95
1993/06/30 13794.82 13665.66
1993/07/31 13876.41 13696.91
1993/08/31 14012.55 13811.58
1993/09/30 14060.95 13856.15
1993/10/31 14148.49 13888.48
1993/11/30 14206.71 13892.56
1993/12/31 14327.55 13948.81
1994/01/31 14416.94 14037.66
1994/02/28 14299.29 13952.61
1994/03/31 13971.77 13880.87
1994/04/30 13898.11 13828.16
1994/05/31 13981.79 13846.91
1994/06/30 13871.75 13883.32
1994/07/31 13998.28 14009.67
1994/08/31 14111.92 14056.95
1994/09/30 14106.49 14025.71
1994/10/31 14117.25 14057.77
1994/11/30 14141.50 13998.80
1994/12/31 13844.83 14025.43
1995/01/31 13947.83 14218.09
1995/02/28 14120.66 14414.83
1995/03/31 14194.89 14496.62
1995/04/30 14310.45 14627.86
1995/05/31 14567.93 14881.12
1995/06/30 14636.53 14962.09
1995/07/31 14690.44 15021.87
1995/08/31 14777.69 15112.90
1995/09/30 14848.61 15187.63
1995/10/31 14971.22 15313.71
1995/11/30 15092.68 15445.50
1995/12/31 15203.69 15562.62
1996/01/31 15315.60 15695.77
1996/02/29 15262.60 15635.99
1996/03/31 15234.12 15624.58
1996/04/30 15235.98 15640.34
1996/05/31 15269.25 15676.48
1996/06/30 15380.93 15791.15
1996/07/31 15428.45 15852.56
1996/08/31 15476.60 15910.98
1996/09/30 15621.47 16056.63
1996/10/31 15787.88 16237.87
1996/11/30 15901.67 16359.61
1996/12/31 15899.21 16362.33
1997/01/31 15965.30 16441.40
1997/02/28 16008.06 16482.16
1997/03/31 15989.64 16469.39
1997/04/30 16122.66 16604.44
1997/05/31 16223.80 16720.47
1997/06/30 16323.25 16836.77
1997/07/31 16513.40 17023.72
1997/08/31 16528.05 17039.75
1997/09/30 16627.56 17171.00
1997/10/31 16730.41 17294.64
1997/11/30 16746.12 17338.12
1997/12/31 16855.23 17452.51
1998/01/31 17000.57 17620.99
1998/02/28 17013.62 17638.65
1998/03/31 17068.08 17707.40
1998/04/30 17138.96 17795.17
1998/05/31 17213.36 17891.91
1998/06/30 17284.38 17984.29
1998/07/31 17337.24 18067.99
1998/08/31 17462.93 18275.86
1998/09/30 17642.37 18521.78
1998/10/31 17635.82 18601.94
1998/11/30 17646.51 18598.41
1998/12/31 17715.85 18670.42
1999/01/31 17785.25 18750.31
1999/02/28 17736.20 18671.23
1999/03/31 17844.35 18803.49
1999/04/30 17911.55 18867.94
1999/05/31 17864.66 18848.67
1999/06/30 17874.58 18908.37
1999/07/31 17887.01 18962.53
1999/08/31 17899.43 19012.35
1999/09/30 18009.29 19140.27
1999/10/29 18043.05 19196.90
IMATRL PRASUN SHR__CHT 19991031 19991112 092925 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
October 31, 1989. As the chart shows, by October 31, 1999, the value
of the investment would have grown to $18,043 - a 80.43% 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 $19,197 - a 91.97% 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
YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
1999 1998
Dividend returns 4.66% 5.06%
Capital returns -2.35% 0.43%
Total returns 2.31% 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 OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.72(cents) 21.71(cents) 43.20(cents)
Annualized dividend rate 4.79% 4.68% 4.66%
30-day annualized yield 5.07% - -
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 $9.15 over the past one month, $9.20 over the past six months and
$9.26 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Class A, Class T and Class C shares returned 3.12%, 3.12% and 2.31%,
respectively. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 3.20%, while the short
investment grade debt funds average tracked by Lipper Inc. returned
2.98% during the 12-month period.
Q. HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT DURING THE PERIOD?
WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. It was a difficult period for the bond market. Rates moved much
higher and spread sectors - including corporate bonds, mortgage
securities, asset-backed and federal agency securities - experienced
substantial volatility. At the same time, however, I was struck by how
much bad news the market was able to withstand more recently. From the
beginning of June through the end of the period, the yield on the
30-year Treasury bond stayed within a trading range of 40 basis
points, despite two interest-rate hikes by the Federal Reserve Board,
a $9 per barrel increase in the price of oil and a roughly 12% decline
in the dollar against the Japanese yen. Additionally, investors'
general perception that inflation remained under control resulted in a
cautious yet stable trading pattern. Regarding its performance versus
the index and Lipper peer group, the fund's overweighted positions in
fixed-income spread sectors helped returns. In general, these spread
sectors outperformed comparable duration Treasuries during the period.
Q. DID ANY OTHER MARKET FACTORS AFFECT PERFORMANCE?
A. Volatility in the equity market normally has a negative effect on
the performance of the corporate bond sector, and this past period was
no exception. Historically, corporate bond investors prefer a stable
equity market, which has a closer correlation to bond performance than
other sectors of the fixed-income market. Since August, however,
despite turbulence in the equity markets, the weak supply of corporate
issues due to Y2K concerns helped support prices.
Q. CAN YOU TELL US A BIT ABOUT YOUR STRATEGY DURING THE PERIOD? HOW
WERE THE FUND'S ASSETS ALLOCATED?
A. The fund's strategy of maintaining an overweighted exposure to
spread sectors remained a consistent theme. Following the global
financial crisis and the massive flight to quality we experienced last
fall, spread sectors appeared severely undervalued relative to
Treasuries and government agency bonds. As a result, the fund's
overall exposure to corporate bonds, asset-backed securities - which
are bonds backed by a pool of loans such as credit cards, for example
- - and mortgage securities remained high and accounted for
approximately 73% of the fund's net assets at the end of the period.
Within these holdings, corporate bonds accounted for roughly 46%,
while asset-backed and mortgage securities represented approximately
16% and 11%, respectively.
Q. WHICH HOLDINGS HURT THE FUND'S RELATIVE PERFORMANCE?
A. From May through mid-August, spread sectors began to price in the
worst fears about potential Y2K problems resulting in less demand for
corporate and mortgage bonds. As a result, yield spreads widened. In
other words, spread sector yields - which move in the opposite
direction of bond prices - moved higher while their prices decreased
relative to Treasuries. This caused some slight underperformance. As
investors' worst fears were not realized, spread sectors rebounded
moderately through September.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. There are several factors in the short term that may cause concern:
the market's uncertainty about the Fed's next move, fears about the
potential impact of turbulent equity markets and concerns with Y2K
issues. However, because many parts of the market remain priced in
expectation of a more difficult environment, I think spread products
could offer good value. This would be particularly true if the
market's fears are not realized.
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 October 31, 1999,
more than $364 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON THE
INTRODUCTION OF
AGENCY-BENCHMARK-CLASS
SECURITIES AND ITS POTENTIAL
IMPACT ON THE FUND'S
STRATEGY:
"Federal agencies have taken
steps to capture the market's
attention as Treasury supply has
declined. Fannie Mae, Freddie
Mac and the Federal Home Loan
Bank, for instance, have created
`Benchmark Notes,' `Reference
Notes' and `Bank Global Notes,'
respectively, and we refer to these
securities generically as
`Agency-Benchmark-Class
Securities.'
"In issuing these securities, the
agencies seek to consolidate their
offerings into fairly large issues,
taking them to the market on a
regular, but less frequent, basis.
The intent is to enhance the
appeal of these issues by
approaching the predictability and
liquidity of Treasury securities.
Should investors begin to view
agency securities as suitable
replacements for Treasuries,
demand may improve, which could
ultimately improve relative prices.
Accordingly, I will be closely
monitoring these securities as a
potentially high-quality,
yield-enhancing alternative to
Treasuries."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 39.4 36.0
Aa 5.1 7.3
A 17.5 18.7
Baa 32.7 32.4
Ba and Below 1.9 1.3
Not Rated 0.4 0.9
</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 OCTOBER 31, 1999
6 MONTHS AGO
Years 2.4 2.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 1.8 1.9
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 46.0% Corporate Bonds 44.7%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 23.8% Obligations 20.8%
Asset Backed Securities 15.8% Asset Backed Securities 18.3%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 7.7% Related Securities 9.7%
Other Investments 2.3% Other Investments 3.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 4.4% Net Other Assets 3.1%
* FOREIGN INVESTMENTS 5.2% ** FOREIGN INVESTMENTS 6.3%
Row: 1, Col: 1, Value: 46.0 Row: 1, Col: 1, Value: 44.7
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 23.8 Row: 1, Col: 3, Value: 20.8
Row: 1, Col: 4, Value: 15.8 Row: 1, Col: 4, Value: 18.3
Row: 1, Col: 5, Value: 7.7 Row: 1, Col: 5, Value: 9.699999999999999
Row: 1, Col: 6, Value: 2.3 Row: 1, Col: 6, Value: 3.4
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.4 Row: 1, Col: 8, Value: 3.1
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 46.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 1.1%
Equistar Chemicals Baa3 $ 2,450,000 $ 2,432,229
LP/Equistar Funding Corp.
8.5% 2/15/04
Monsanto Co. 5.375% 12/1/01 A2 1,470,000 1,437,307
(b)
3,869,536
CONSTRUCTION & REAL ESTATE -
2.1%
REAL ESTATE - 0.5%
Cabot Industrial Property LP Baa2 575,000 556,543
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 1,200,000 1,146,876
3/15/05
1,703,419
REAL ESTATE INVESTMENT TRUSTS
- - 1.6%
Avalonbay Communities, Inc. Baa1 705,000 679,345
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 439,882
7.125% 3/15/04 Baa2 1,300,000 1,241,227
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,621,109
6.375% 2/15/03 Baa1 1,200,000 1,165,020
Merry Land & Investment Co., A3 600,000 576,084
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 245,000 233,363
5,956,030
TOTAL CONSTRUCTION & REAL 7,659,449
ESTATE
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES -
1.1%
Daimler-Chrysler North A1 1,500,000 1,502,100
America Holding Corp. 5.75%
8/23/02 (c)
TRW, Inc.:
6.45% 6/15/01 (b) Baa1 1,550,000 1,540,700
6.5% 6/1/02 (b) Baa1 800,000 787,888
3,830,688
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.8%
Jones Apparel Group, Baa2 $ 2,155,000 $ 2,108,883
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 800,000 782,160
7.5% 6/15/04 (b)
2,891,043
TOTAL DURABLES 6,721,731
ENERGY - 1.0%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 575,000 589,663
(Petronas) yankee 8.875%
8/1/04 (b)
OIL & GAS - 0.8%
Occidental Petroleum Corp. Baa3 700,000 700,091
6.09% 11/29/99
Oryx Energy Co. 8% 10/15/03 Baa1 335,000 339,238
The Coastal Corp. 6.2% 5/15/04 Baa2 1,700,000 1,633,275
YPF Sociedad Anonima 7.5% Baa1 400,000 402,250
10/26/02
3,074,854
TOTAL ENERGY 3,664,517
FINANCE - 18.8%
BANKS - 4.6%
Banc One Corp. 7.25% 8/1/02 A1 1,100,000 1,114,883
Banco Latinoamericano Baa2 700,000 700,000
Exportaciones SA euro 6.9%
12/4/99 (b)
Capital One Bank:
6.48% 6/28/02 Baa2 1,500,000 1,468,050
6.65% 3/15/04 Baa3 2,500,000 2,406,500
First USA Bank NA 6.125% Aa2 1,600,000 1,590,368
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa3 745,000 712,809
7.125% 9/17/01 Baa3 115,000 113,780
7.375% 9/17/04 Baa3 250,000 242,750
yankee 6.5% 11/15/02 Baa3 580,000 558,250
Popular, Inc. 6.2% 4/30/01 A3 2,885,000 2,855,862
Providian National Bank:
6.25% 5/7/01 Baa3 1,010,000 995,446
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank: -
continued
6.7% 3/15/03 Baa3 $ 2,200,000 $ 2,136,134
6.75% 3/15/02 Baa3 390,000 381,919
Wells Fargo & Co. 6.5% 9/3/02 Aa3 1,500,000 1,492,950
16,769,701
CREDIT & OTHER FINANCE - 10.8%
AT&T Capital Corp.:
6.25% 5/15/01 A1 3,050,000 3,022,276
6.875% 1/16/01 A1 1,870,000 1,868,990
Chrysler Financial Corp.:
5.25% 5/4/01 A1 2,600,000 2,555,618
5.25% 10/22/01 A1 2,500,000 2,440,875
Edison Mission Energy Funding Baa1 1,817,275 1,769,318
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 360,000 355,943
11/15/01
Ford Motor Credit Co.:
6.4463% 7/16/02 (c) A1 3,200,000 3,198,144
6.5% 2/28/02 A1 1,300,000 1,294,488
General Electric Capital Corp.:
6.33% 9/17/01 Aaa 4,000,000 3,986,800
6.65% 9/3/02 Aaa 1,300,000 1,299,766
General Motors Acceptance A2 2,200,000 2,174,568
Corp. 5.625% 2/15/01
GS Escrow Corp. 6.75% 8/1/01 Ba1 2,200,000 2,118,292
Heller Financial, Inc. 6.25% A3 1,900,000 1,890,443
3/1/01
PNC Funding Corp. 6.95% 9/1/02 A2 1,400,000 1,403,766
Popular North America, Inc. A3 2,380,000 2,373,574
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 208,068 208,416
7.02% 5/30/00
Spieker Properties LP 6.8% Baa2 315,000 303,931
5/1/04
Sprint Capital Corp. 5.7% Baa1 1,880,000 1,794,817
11/15/03
The Money Store, Inc. 7.3% A2 800,000 803,360
12/1/02
Trizec Finance Ltd. yankee Baa3 575,000 612,375
10.875% 10/15/05
TXU Eastern Funding 6.15% Baa1 1,800,000 1,757,160
5/15/02 (b)
U.S. West Capital Funding, Baa1 2,100,000 2,101,050
Inc. 6.875% 8/15/01 (b)
39,333,970
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 1.0%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 $ 1,350,000 $ 1,332,855
7% 6/13/02 Baa3 1,250,000 1,237,075
Sovereign Bancorp, Inc. Ba1 1,000,000 980,210
6.625% 3/15/01
3,550,140
SECURITIES INDUSTRY - 2.4%
Amvescap PLC yankee:
6.375% 5/15/03 A3 2,450,000 2,375,202
6.6% 5/15/05 A3 600,000 574,182
Donaldson Lufkin & Jenrette, A3 2,600,000 2,575,820
Inc. 6.25% 8/1/01
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 1,000,000 995,160
6.6% 7/15/02 (b) A1 500,000 497,050
Lehman Brothers Holdings 7% A3 2,000,000 1,980,620
5/15/03
8,998,034
TOTAL FINANCE 68,651,845
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 1,900,000 1,887,954
yankee 6.125% 6/15/01 Baa1 2,250,000 2,221,673
4,109,627
MEDIA & LEISURE - 3.4%
BROADCASTING - 1.6%
Continental Cablevision, Inc. Baa2 3,015,000 3,098,907
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 1,400,000 1,402,506
8/15/01
TCI Communications, Inc.:
8.25% 1/15/03 A2 300,000 312,402
9% 1/2/02 Ba1 970,000 1,014,707
5,828,522
ENTERTAINMENT - 0.4%
Viacom, Inc. 7.75% 6/1/05 Baa3 1,530,000 1,548,605
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 1.4%
News America Holdings, Inc. Baa3 $ 2,750,000 $ 2,856,260
8.625% 2/1/03
Time Warner Entertainment Co. Baa2 1,985,000 2,100,904
LP 9.625% 5/1/02
4,957,164
TOTAL MEDIA & LEISURE 12,334,291
NONDURABLES - 3.6%
BEVERAGES - 1.6%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,005,000 988,990
6.25% 12/15/01 Baa3 1,000,000 982,000
6.4% 12/15/03 Baa3 4,000,000 3,856,000
5,826,990
FOODS - 0.7%
Dole Food Co., Inc. 6.75% Baa2 2,590,000 2,590,777
7/15/00
TOBACCO - 1.3%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 1,125,000 1,131,919
7.625% 5/15/02 A2 1,750,000 1,774,465
8.75% 6/1/01 A2 1,000,000 1,028,190
RJR Nabisco, Inc. 7.375% Baa2 800,000 768,304
5/15/03 (b)
4,702,878
TOTAL NONDURABLES 13,120,645
RETAIL & WHOLESALE - 1.7%
DRUG STORES - 0.7%
Rite Aid Corp. 6% 12/15/00 (b) Ba2 3,210,000 2,600,100
GENERAL MERCHANDISE STORES -
0.5%
Federated Department Stores, Baa1 1,860,000 1,910,890
Inc. 8.125% 10/15/02
GROCERY STORES - 0.5%
Safeway, Inc. 7% 9/15/02 Baa2 1,700,000 1,696,311
TOTAL RETAIL & WHOLESALE 6,207,301
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TECHNOLOGY - 2.5%
COMPUTERS & OFFICE EQUIPMENT
- - 2.5%
Comdisco, Inc.:
6.1% 6/5/01 Baa1 $ 5,210,000 $ 5,177,959
6.65% 11/13/01 Baa1 2,010,000 2,006,060
7.25% 9/1/02 Baa1 1,500,000 1,494,570
Sun Microsystems, Inc. 7% Baa1 330,000 330,231
8/15/02
9,008,820
TRANSPORTATION - 3.2%
AIR TRANSPORTATION - 1.5%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 2,199,092 2,126,522
7.08% 11/1/04 Baa1 1,249,831 1,230,934
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 660,000 636,029
9.875% 5/15/00 Baa3 475,000 482,804
Qantas Airways Ltd. 7.5% Baa1 1,000,000 991,460
6/30/03 (b)
5,467,749
RAILROADS - 1.2%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,601,520
9.5% 8/1/00 Baa2 1,800,000 1,838,376
Norfolk Southern Corp. 6.95% Baa1 900,000 898,308
5/1/02
4,338,204
TRUCKING & FREIGHT - 0.5%
Federal Express Corp. 7.53% A3 1,953,000 1,953,703
9/23/06
TOTAL TRANSPORTATION 11,759,656
UTILITIES - 5.6%
CELLULAR - 0.1%
Cable & Wireless Baa1 425,000 423,589
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 3.4%
Avon Energy Partners Holdings Baa2 2,300,000 2,265,109
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
6.875% 3/1/01 Baa2 1,420,000 1,421,619
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Niagara Mohawk Power Corp.: -
continued
9.25% 10/1/01 Baa2 $ 1,700,000 $ 1,772,556
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,910,000 1,929,348
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,519,190
6.5% 5/1/03 Baa1 720,000 709,301
7.125% 9/1/02 Baa1 400,000 402,012
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 721,000 727,914
8% 6/1/02 A3 1,750,000 1,791,580
12,538,629
GAS - 1.5%
Cms Panhandle Holding Co. Baa3 1,100,000 1,052,700
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa3 1,700,000 1,692,010
7/15/01
Enron Corp.:
6.45% 11/15/01 Baa2 1,050,000 1,041,285
6.5% 8/1/02 Baa2 950,000 935,750
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 632,093
5,353,838
TELEPHONE SERVICES - 0.6%
MCI WorldCom, Inc. 8.875% A3 811,000 853,788
1/15/06
Telecomunicaciones de Puerto Baa2 1,430,000 1,390,847
Rico, Inc. 6.15% 5/15/02 (b)
2,244,635
TOTAL UTILITIES 20,560,691
TOTAL NONCONVERTIBLE BONDS 167,668,109
(Cost $170,946,610)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 20.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
Fannie Mae 6.1% 8/10/01 Aaa 5,000,000 4,989,050
Freddie Mac 7.625% 9/9/09 Aaa 6,000,000 6,019,680
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates Aaa $ 259,624 $ 266,839
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust Aaa 1,764,705 1,754,781
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1995-A, 6.28% 6/15/04
Israel Export Trust Aaa 494,117 498,372
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 858,600 864,229
secured 6.86% 4/30/04
14,392,951
U.S. TREASURY OBLIGATIONS -
16.3%
U.S. Treasury Notes:
5.5% 8/31/01 Aaa 20,000,000 19,890,600
5.75% 10/31/00 Aaa 27,700,000 27,730,191
6.625% 4/30/02 Aaa 8,100,000 8,240,454
7.875% 8/15/01 Aaa 3,300,000 3,412,926
59,274,171
TOTAL U.S. GOVERNMENT AND 73,667,122
GOVERNMENT AGENCY OBLIGATIONS
(Cost $73,952,455)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 3.6%
FANNIE MAE - 2.4%
6.5% 10/1/11 Aaa 206,732 203,156
7% 7/1/25 to 8/1/29 Aaa 8,225,601 8,086,533
11.5% 11/1/15 Aaa 376,202 416,306
8,705,995
FREDDIE MAC - 0.0%
12% 11/1/19 Aaa 90,228 100,153
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.2%
9.5% 9/15/16 to 10/15/20 Aaa $ 1,406,818 $ 1,493,885
11% 12/15/09 to 1/15/16 Aaa 1,589,693 1,755,648
11.5% 8/15/13 to 11/15/15 Aaa 538,756 605,537
12% 2/15/16 Aaa 515,332 582,944
4,438,014
TOTAL U.S. GOVERNMENT AGENCY 13,244,162
- - MORTGAGE SECURITIES
(Cost $13,539,007)
ASSET-BACKED SECURITIES - 15.8%
Americredit Automobile Aaa 2,000,000 2,008,125
Receivables Trust 7.02%
12/15/05
Arcadia Automobile
Receivables Trust:
5.67% 1/15/04 Aaa 1,300,000 1,262,300
7.2% 6/15/07 Aaa 1,700,000 1,713,281
ARG Funding Corp. 5.88% Aaa 2,650,000 2,592,031
5/20/03 (b)
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 2,200,000 2,181,366
6.57% 3/15/01 Aa3 1,020,000 1,018,470
Caterpillar Financial Asset Aaa 2,100,000 2,093,289
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 2,020,000 2,020,444
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 1,154,866 1,144,762
6.2% 3/20/04 Aaa 472,183 469,675
Citibank Credit Card Master Aaa 1,800,000 1,784,531
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 1,647,777 1,640,560
6.3% 7/15/12 Aaa 1,600,000 1,583,488
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 678,781 678,781
6.7% 2/15/02 Aaa 181,409 181,267
CS First Boston Mortgage Aaa 933,474 936,100
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,238,516
5.7663% 7/18/05 (c)
Fidelity Funding Auto Trust Aaa 211,017 211,941
6.99% 11/15/02 (b)
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
First Security Auto Owner A3 $ 1,400,000 $ 1,382,500
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 1,800,000 1,777,500
6.87% 11/15/04 A2 650,000 647,359
Green Tree Lease Finance LLC A 297 295
6.66% 10/20/04
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,160,469
6.65% 10/15/03 Baa3 178,996 178,493
Newcourt Equipment Trust Aaa 2,050,000 2,024,055
Securities sequential pay
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 1,424,000 1,422,665
5/15/03
Olympic Automobile Aaa 406,956 403,905
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 1,378,720 1,372,254
6.2% 6/15/03 Aaa 610,129 609,367
Petroleum Enhanced Trust Baa2 1,455,053 1,449,597
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(c)
Premier Auto Trust 5.7% Aaa 4,000,000 3,962,480
10/6/02
Prime Credit Card Master Aaa 1,000,000 1,001,560
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 239,964 239,964
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 2/16/06 Aaa 1,600,000 1,593,488
6.2% 7/16/07 Aaa 2,700,000 2,666,250
TMS Auto Grantor Trust 5.9% Aaa 70,140 70,162
9/15/02
Tranex Auto Receivables Owner Aaa 653,118 650,159
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 1,600,302 1,579,298
Trust 5.98% 9/17/05
Western Financial Grantor Aaa 361,444 360,541
Trust 5.875% 3/1/02
WFS Financial Owner Trust:
6.9% 12/20/03 Aaa 1,571,589 1,574,046
7.05% 11/20/03 Aaa 1,762,343 1,765,648
TOTAL ASSET-BACKED SECURITIES 57,650,982
(Cost $58,010,682)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.5%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PRIVATE SPONSOR - 0.5%
GE Capital Mortgage Services, Aaa $ 497,584 $ 494,708
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 1,472,294 1,462,633
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 1,957,341
OBLIGATIONS
(Cost $1,965,531)
COMMERCIAL MORTGAGE
SECURITIES - 7.2%
Allied Capital Commercial Aaa 928,118 918,257
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,194,500
1999-S1A, Class D 7.5488%
2/28/14 (b)(c)
Bankers Trust REMIC Trust Baa2 2,350,000 2,353,672
Series 1998-S1A Class F,
7.38% 11/28/02 (c)
CBM Funding Corp. sequential AA 1,243,397 1,239,318
pay Series 1996-1 Class A-2,
6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 1,522,753 1,509,429
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 5.9% 12/10/00 (b)(c) A2 1,000,000 990,000
Class E, 6.25% 1/10/13 (b)(c) Baa2 2,700,000 2,646,000
DLJ Commercial Mortgage Corp. Aa2 1,170,000 1,168,903
floater Series 1998-STFA
Class A-3, 6.0075% 12/8/00
(b)(c)
Equitable Life Assurance
Society of the United States:
floater Series 174 Class D-2, Baa2 1,200,000 1,185,000
6.7063% 5/15/03 (b)(c)
sequential pay Series 174 Aaa 1,000,000 1,002,010
Class A1, 7.24% 5/15/06 (b)
Fannie Mae ACES sequential Aaa 805,931 796,865
pay Series 1995 - M1 Class
A, 6.65% 7/25/10
Federal Deposit Insurance
Corp. REMIC Trust:
sequential pay Series 1996-C1 Aaa 1,025,613 1,022,889
Class 1A, 6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Federal Deposit Insurance
Corp. REMIC Trust: - continued
sequential pay Series 1994-C1 Aaa $ 52,813 $ 52,863
Class II-A2, 7.85% 9/25/25
FMAC Loan Receivables Trust Aaa 679,153 654,958
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 1,249,274 1,218,043
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, 7.4676% 11/13/13 Baa2 1,100,000 1,095,875
(b)(c)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,085,392
(b)(c)
Host Marriot Pool Trust 6.98% Aaa 988,705 978,819
8/1/15
Nomura Depositor Trust Baa2 2,290,000 2,169,417
floater Series 1998-ST1A
Class A-4, 6.3063% 2/15/34
(b)(c)
Resolution Trust Corp. Aaa 56,324 56,324
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 2,019,277 2,003,502
Corp. floater Series
1998-C2A Class C, 5.8388%
1/25/13 (b)(c)
TOTAL COMMERCIAL MORTGAGE 26,342,036
SECURITIES
(Cost $26,742,560)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (D) - 0.7%
Korean Republic yankee 8.75% Baa3 115,000 118,690
4/15/03
Ontario Province:
5.75% 11/7/00 Aa3 1,180,000 1,173,628
yankee 8% 10/17/01 Aa3 1,200,000 1,234,188
TOTAL FOREIGN GOVERNMENT AND 2,526,506
GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,546,610)
SUPRANATIONAL OBLIGATIONS -
1.6%
African Development Bank:
7.75% 12/15/01 Aa1 2,240,000 2,297,859
9.3% 7/1/00 Aa1 3,320,000 3,391,114
TOTAL SUPRANATIONAL OBLIGATIONS 5,688,973
(Cost $5,922,376)
</TABLE>
CASH EQUIVALENTS - 3.0%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 10,725,762 $ 10,721,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $10,721,000)
TOTAL INVESTMENT PORTFOLIO - 359,466,231
98.6% (Cost $364,346,831)
NET OTHER ASSETS - 1.4% 5,271,743
NET ASSETS - 100% $ 364,737,974
LEGEND
(a) Standard & Poor's 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 $46,851,048
or 12.8% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) 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 61.7% AAA, AA, A 55.9%
Baa 32.7% BBB 30.7%
Ba 1.9% BB 1.5%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.4%.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $364,393,025. Net unrealized depreciation
aggregated $4,926,794, of which $171,764 related to appreciated
investment securities and $5,098,558 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $45,403,000 of which $38,000, $336,000, $17,691,000,
$19,457,000, $2,265,000, $3,149,000 and $2,467,000 will expire on
October 31, 2000, 2001, 2002, 2003, 2004 and 2005 and 2007,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 359,466,231
value (including repurchase
agreements of $10,721,000)
(cost $364,346,831) - See
accompanying schedule
Cash 733
Receivable for investments 99,336
sold
Receivable for fund shares 2,126,831
sold
Interest receivable 5,055,018
TOTAL ASSETS 366,748,149
LIABILITIES
Payable for fund shares $ 1,439,829
redeemed
Distributions payable 278,182
Accrued management fee 129,050
Distribution fees payable 64,474
Other payables and accrued 98,640
expenses
TOTAL LIABILITIES 2,010,175
NET ASSETS $ 364,737,974
Net Assets consist of:
Paid in capital $ 414,939,579
Undistributed net investment 128,689
income
Accumulated undistributed net (45,449,694)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (4,880,600)
(depreciation) on investments
NET ASSETS $ 364,737,974
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.15
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($17,834,533 (divided by)
1,949,666 shares)
Maximum offering price per $9.29
share (100/98.50 of $9.15)
CLASS T: NET ASSET VALUE and $9.15
redemption price per share
($309,669,728 (divided by)
33,835,291 shares)
Maximum offering price per $9.29
share (100/98.50 of $9.15)
CLASS C: NET ASSET VALUE and $9.16
offering price per share
($30,428,297 (divided by)
3,323,666 shares) A
INSTITUTIONAL CLASS: NET $9.15
ASSET VALUE, offering price
and redemption price per
share ($6,805,416 (divided
by) 743,622 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 21,968,830
Interest
EXPENSES
Management fee $ 1,459,500
Transfer agent fees 614,887
Distribution fees 599,601
Accounting fees and expenses 105,213
Non-interested trustees' 1,125
compensation
Custodian fees and expenses 24,614
Registration fees 82,409
Audit 33,971
Legal 6,186
Interest 961
Total expenses before 2,928,467
reductions
Expense reductions (12,612) 2,915,855
NET INVESTMENT INCOME 19,052,975
REALIZED AND UNREALIZED GAIN (2,605,978)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (6,052,422)
Delayed delivery commitments (10,500) (6,062,922)
NET GAIN (LOSS) (8,668,900)
NET INCREASE (DECREASE) IN $ 10,384,075
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 19,052,975 $ 20,862,249
income
Net realized gain (loss) (2,605,978) 173,470
Change in net unrealized (6,062,922) 421,556
appreciation (depreciation)
NET INCREASE (DECREASE) IN 10,384,075 21,457,275
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (18,762,496) (20,556,957)
from net investment income
Share transactions - net 15,720,432 (21,594,124)
increase (decrease)
TOTAL INCREASE (DECREASE) 7,342,011 (20,693,806)
IN NET ASSETS
NET ASSETS
Beginning of period 357,395,963 378,089,769
End of period (including $ 364,737,974 $ 357,395,963
undistributed net investment
income and distributions in
excess of net investment
income of $128,689 and
$56,261, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 G
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 .518 .572 .532 .090
Net realized and unrealized (.233) .024 (.021) .081
gain (loss)
Total from investment .285 .596 .511 .171
operations
Less Distributions
From net investment income (.515) (.526) (.571) (.091)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.310 $ 9.370
TOTAL RETURN B, C 3.12% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,835 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .82% .90% E .90% E .90% A, E
net assets
Ratio of expenses to average .80% F .90% .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.68% 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 139% 124% 105% 124%
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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.380 $ 9.350 $ 9.380 $ 9.470 $ 9.480
of period
Income from Investment
Operations
Net investment income .523 C .555 C .578 C .594 C .403
Net realized and unrealized (.238) .019 (.036) (.094) .148
gain (loss)
Total from investment .285 .574 .542 .500 .551
operations
Less Distributions
From net investment income (.515) (.544) (.572) (.590) (.407)
Return of capital - - - - (.154)
Total distributions (.515) (.544) (.572) (.590) (.561)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.350 $ 9.380 $ 9.470
TOTAL RETURN A, B 3.12% 6.32% 5.97% 5.45% 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 309,670 $ 333,050 $ 351,614 $ 416,700 $ 546,546
(000 omitted)
Ratio of expenses to average .84% .89% .89% .88% .89%
net assets
Ratio of expenses to average .83% D .89% .89% .88% .89%
net assets after expense
reductions
Ratio of net investment 5.64% 5.93% 6.19% 6.29% 6.05%
income to average net assets
Portfolio turnover rate 139% 124% 105% 124% 179%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .434 .437
Net realized and unrealized (.222) .064
gain (loss)
Total from investment .212 .501
operations
Less Distributions
From net investment income (.432) (.461)
Net asset value, end of period $ 9.160 $ 9.380
TOTAL RETURN B, C 2.31% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 30,428 $ 11,795
(000 omitted)
Ratio of expenses to average 1.73% 1.75% A, E
net assets
Ratio of expenses to average 1.72% F 1.75% A
net assets after expense
reductions
Ratio of net investment 4.75% 4.92% A
income to average net assets
Portfolio turnover rate 139% 124%
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 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 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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995 G
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 .534 D .566 D .589 D .598 D .137
Net realized and unrealized (.236) .021 (.023) (.098) .067
gain (loss)
Total from investment .298 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.528) (.557) (.586) (.600) (.136)
Return of capital - - - - (.048)
Total distributions (.528) (.557) (.586) (.600) (.184)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470
TOTAL RETURN B, C 3.27% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,805 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .71% .75% E .75% E .80% E .85% A, E
net assets
Ratio of expenses to average .70% F .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 5.77% 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 139% 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 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 FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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 after the customary settlement period for that security. 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 fund may receive compensation for interest forgone
in the purchase of a delayed delivery security.
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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.
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 $460,855,484 and $452,272,824, respectively, of which U.S.
government and government agency obligations aggregated $285,250,239
and $288,006,719, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .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 $ 19,542 $ -
CLASS T 460,956 3,071
CLASS C 119,103 101,821
$ 599,601 $ 104,892
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 is 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 $ 56,679 $ 14,321
CLASS T 248,099 79,649
CLASS C 26,881 26,881*
$ 331,659 $ 120,851
* 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 (collectively referred to
as the transfer agent) for the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 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 $ 21,088 .16
CLASS T 553,315 .18
CLASS C 26,661 .22
INSTITUTIONAL CLASS 13,823 .20
$ 614,887
ACCOUNTING FEES. Fidelity Service Company, Inc. maintains the fund's
accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. The average daily loan balance during the period for which
the loan was outstanding amounted to $6,019,000. The weighted average
interest rate was 5.75%.
6. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian and each class'
transfer agent, 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 $10,995 under the custodian
arrangement, and Class A's expenses were reduced by $1,617 under the
transfer agent arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998A
FROM NET INVESTMENT INCOME
CLASS A $ 728,649 $ 388,579
CLASS T 17,079,838 19,688,772
CLASS C 560,143 94,836
INSTITUTIONAL CLASS 393,866 384,770
TOTAL $ 18,762,496 $ 20,556,957
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998A 1999 1998A
CLASS A Shares sold 4,473,072 592,781 $ 41,324,913 $ 5,547,089
Reinvestment of
distributions 71,481 15,963 658,379 149,204
Shares redeemed (3,183,911) (2,137,845) (29,310,347) (20,007,107)
Net increase (decrease) 1,360,642 (1,529,101) $ 12,672,945 $ (14,310,814)
CLASS T Shares sold 21,974,295 18,467,587 $ 203,715,730 $ 172,851,708
Reinvestment of
distributions 1,462,245 1,675,946 13,533,243 15,669,989
Shares redeemed (25,110,949) (22,231,985) (233,084,712) (207,892,792)
Net increase (decrease) (1,674,409) (2,088,452) $ (15,835,739) $ (19,371,095)
CLASS C Shares sold 4,501,972 1,458,611 $ 41,508,375 $ 13,712,358
Reinvestment of
distributions 46,606 6,695 430,046 62,751
Shares redeemed (2,481,867) (208,351) (23,005,901) (1,947,580)
Net increase (decrease) 2,066,711 1,256,955 $ 18,932,520 $ 11,827,529
INSTITUTIONAL CLASS Shares 527,018 733,154 $ 4,875,430 $ 6,860,400
sold
Reinvestment of
distributions 36,799 33,202 340,500 310,406
Shares redeemed (569,453) (738,984) (5,265,224) (6,910,550)
Net increase (decrease) (5,636) 27,372 $ (49,294) $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor Short
Fixed-Income Fund as of October 31, 1999, and the related statements
of operations, changes in net assets and financial highlights for the
year then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1998, and the financial highlights for
each of the years in the four-year period ended October 31, 1998
were audited by other auditors whose report, dated December 15, 1998,
expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Short Fixed-Income Fund at October 31, 1999, the
results of its operations, the changes in its net assets, and its
financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
DISTRIBUTIONS
A total of 11.01% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
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
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
Ned C. Lautenbach
* 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
(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
SHORT FIXED-INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 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.
INDEPENDENT AUDITORS' REPORT 38 The auditors' opinion.
DISTRIBUTIONS 39
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:
All major U.S. equity market indexes posted positive returns for the
month of October, led by the technology-heavy NASDAQ Index, which
climbed to a record high close during the month. Domestic bonds,
however, turned in relatively flat performance, due in large part to
lingering fears of a potential interest rate hike by the Federal
Reserve Board, and its adoption of a tightening bias during the first
week of the month.
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 five year and past
10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY(REGISTERED 3.27% 30.68% 84.49%
TRADEMARK) ADV SHORT
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 3.20% 36.56% 91.97%
Short Investment Grade Debt 2.98% 32.77% 86.39%
Funds Average
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you 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 one year average represents a peer group of 112 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.27% 5.50% 6.32%
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 3.20% 6.43% 6.74%
Short Investment Grade Debt 2.98% 5.83% 6.41%
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
1989/10/31 10000.00 10000.00
1989/11/30 10078.55 10089.40
1989/12/31 10131.49 10129.34
1990/01/31 10108.55 10139.94
1990/02/28 10149.41 10193.74
1990/03/31 10203.12 10226.08
1990/04/30 10212.43 10251.62
1990/05/31 10372.93 10410.04
1990/06/30 10453.18 10520.09
1990/07/31 10576.97 10647.54
1990/08/31 10560.05 10685.31
1990/09/30 10586.38 10765.47
1990/10/31 10559.36 10876.61
1990/11/30 10625.86 10982.85
1990/12/31 10726.11 11111.38
1991/01/31 10693.87 11211.92
1991/02/28 10804.81 11292.90
1991/03/31 10997.76 11374.96
1991/04/30 11157.84 11486.37
1991/05/31 11271.72 11558.11
1991/06/30 11326.82 11601.04
1991/07/31 11404.64 11702.94
1991/08/31 11596.08 11861.63
1991/09/30 11716.04 11989.35
1991/10/31 11846.82 12118.42
1991/11/30 11966.66 12240.97
1991/12/31 12160.33 12426.02
1992/01/31 12210.20 12413.25
1992/02/29 12292.51 12452.65
1992/03/31 12349.90 12449.93
1992/04/30 12430.00 12563.79
1992/05/31 12558.86 12681.45
1992/06/30 12674.29 12811.06
1992/07/31 12831.90 12961.33
1992/08/31 12940.87 13065.95
1992/09/30 13047.90 13189.59
1992/10/31 12965.09 13110.24
1992/11/30 12971.13 13091.76
1992/12/31 13085.23 13215.40
1993/01/31 13283.53 13356.43
1993/02/28 13445.14 13465.39
1993/03/31 13531.47 13509.14
1993/04/30 13599.95 13593.92
1993/05/31 13657.67 13562.95
1993/06/30 13794.82 13665.66
1993/07/31 13876.41 13696.91
1993/08/31 14012.55 13811.58
1993/09/30 14060.95 13856.15
1993/10/31 14148.49 13888.48
1993/11/30 14206.71 13892.56
1993/12/31 14327.55 13948.81
1994/01/31 14416.94 14037.66
1994/02/28 14299.29 13952.61
1994/03/31 13971.77 13880.87
1994/04/30 13898.11 13828.16
1994/05/31 13981.79 13846.91
1994/06/30 13871.75 13883.32
1994/07/31 13998.28 14009.67
1994/08/31 14111.92 14056.95
1994/09/30 14106.49 14025.71
1994/10/31 14117.25 14057.77
1994/11/30 14141.50 13998.80
1994/12/31 13844.83 14025.43
1995/01/31 13947.83 14218.09
1995/02/28 14120.66 14414.83
1995/03/31 14194.89 14496.62
1995/04/30 14310.45 14627.86
1995/05/31 14567.93 14881.12
1995/06/30 14636.53 14962.09
1995/07/31 14707.24 15021.87
1995/08/31 14797.09 15112.90
1995/09/30 14869.85 15187.63
1995/10/31 14978.24 15313.71
1995/11/30 15102.31 15445.50
1995/12/31 15216.06 15562.62
1996/01/31 15331.03 15695.77
1996/02/29 15280.83 15635.99
1996/03/31 15252.18 15624.58
1996/04/30 15253.82 15640.34
1996/05/31 15286.40 15676.48
1996/06/30 15398.51 15791.15
1996/07/31 15446.16 15852.56
1996/08/31 15493.98 15910.98
1996/09/30 15624.33 16056.63
1996/10/31 15794.44 16237.87
1996/11/30 15929.29 16359.61
1996/12/31 15929.20 16362.33
1997/01/31 15995.23 16441.40
1997/02/28 16039.86 16482.16
1997/03/31 16023.36 16469.39
1997/04/30 16141.36 16604.44
1997/05/31 16244.44 16720.47
1997/06/30 16363.71 16836.77
1997/07/31 16555.53 17023.72
1997/08/31 16553.72 17039.75
1997/09/30 16673.49 17171.00
1997/10/31 16780.01 17294.64
1997/11/30 16831.59 17338.12
1997/12/31 16937.64 17452.51
1998/01/31 17096.74 17620.99
1998/02/28 17120.97 17638.65
1998/03/31 17172.97 17707.40
1998/04/30 17258.55 17795.17
1998/05/31 17348.17 17891.91
1998/06/30 17433.55 17984.29
1998/07/31 17520.35 18067.99
1998/08/31 17642.81 18275.86
1998/09/30 17857.31 18521.78
1998/10/31 17865.12 18601.94
1998/11/30 17872.42 18598.41
1998/12/31 17957.10 18670.42
1999/01/31 18062.04 18750.31
1999/02/28 18007.26 18671.23
1999/03/31 18155.51 18803.49
1999/04/30 18220.22 18867.94
1999/05/31 18188.88 18848.67
1999/06/30 18233.85 18908.37
1999/07/31 18262.42 18962.53
1999/08/31 18287.89 19012.35
1999/09/30 18417.57 19140.27
1999/10/29 18448.74 19196.90
IMATRL PRASUN SHR__CHT 19991031 19991112 093532 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 October 31, 1989. As the chart shows, by October 31, 1999,
the value of the investment would have grown to $18,449 - a 84.49%
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 $19,197 - a 91.97% 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
YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
1999 1998 1997 1996 1995
Dividend returns 5.72% 6.15% 6.45% 6.51% 1.97%
Capital returns -2.45% 0.32% -0.21% -1.06% 0.21%
Total returns 3.27% 6.47% 6.24% 5.45% 2.18%
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED OCTOBER 31, 1999 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.55(cents) 26.46(cents) 52.85(cents)
Annualized dividend rate 5.86% 5.71% 5.71%
30-day annualized yield 6.20% - -
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 $9.14 over the past one month, $9.20 over the past six months, and
$9.26 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
Rising interest rates stormed onto
the scene, leaving most bonds
standing by the wayside during
the 12-month period that ended
October 31, 1999. The Lehman
Brothers Aggregate Bond Index, a
popular measure of taxable-bond
performance, could muster only a
0.53% return during the period.
Fear of inflation and runaway
growth in the economy sent rates
higher, and Treasury prices lower.
Anticipation of and reaction to two
quarter-point rate hikes levied by
the Federal Reserve Board in the
summer kept the heat on Treasuries,
erasing a majority of the
interest-rate cuts of 1998. The
Lehman Brothers Treasury Index fell
1.55% during the 12-month period.
Elsewhere, spread sectors -
including corporate bonds and
mortgage securities - enjoyed an
edge over comparable duration
Treasuries. Investors seeking
higher-yielding alternatives to
Treasuries bid spread sector prices
higher from their depressed levels
of last fall. The excitement
surrounding corporate bonds
abated, however, as these issues
were upended in July and August
by market expectations of strong
year-end debt issuance. Corporates
recovered sharply, though, in
September and October in response
to lighter-than-expected supply. The
Lehman Brothers Corporate Bond
Index inched up 0.61% during the
period. In contrast, mortgage
securities mounted a sustained rally
during the period, benefiting from
favorable refinancing and
prepayment levels, as well as
declining interest-rate volatility late
in the period. The Lehman Brothers
Mortgage-Backed Securities Index
returned 2.99% during this time
frame.
(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 12-month period that ended October 31, 1999, the fund's
Institutional Class shares returned 3.27%. In comparison, the Lehman
Brothers 1-3 Year Government/Corporate Bond Index returned 3.20%,
while the short investment grade debt funds average tracked by Lipper
Inc. returned 2.98% during the 12-month period.
Q. HOW WOULD YOU DESCRIBE THE MARKET ENVIRONMENT DURING THE PERIOD?
WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. It was a difficult period for the bond market. Rates moved much
higher and spread sectors - including corporate bonds, mortgage
securities, asset-backed and federal agency securities - experienced
substantial volatility. At the same time, however, I was struck by how
much bad news the market was able to withstand more recently. From the
beginning of June through the end of the period, the yield on the
30-year Treasury bond stayed within a trading range of 40 basis
points, despite two interest-rate hikes by the Federal Reserve Board,
a $9 per barrel increase in the price of oil and a roughly 12% decline
in the dollar against the Japanese yen. Additionally, investors'
general perception that inflation remained under control resulted in a
cautious yet stable trading pattern. Regarding its performance versus
the index and Lipper peer group, the fund's overweighted positions in
fixed-income spread sectors helped returns. In general, these spread
sectors outperformed comparable duration Treasuries during the period.
Q. DID ANY OTHER MARKET FACTORS AFFECT PERFORMANCE?
A. Volatility in the equity market normally has a negative effect on
the performance of the corporate bond sector, and this past period was
no exception. Historically, corporate bond investors prefer a stable
equity market, which has a closer correlation to bond performance than
other sectors of the fixed-income market. Since August, however,
despite turbulence in the equity markets, the weak supply of corporate
issues due to Y2K concerns helped support prices.
Q. CAN YOU TELL US A BIT ABOUT YOUR STRATEGY DURING THE PERIOD? HOW
WERE THE FUND'S ASSETS ALLOCATED?
A. The fund's strategy of maintaining an overweighted exposure to
spread sectors remained a consistent theme. Following the global
financial crisis and the massive flight to quality we experienced last
fall, spread sectors appeared severely undervalued relative to
Treasuries and government agency bonds. As a result, the fund's
overall exposure to corporate bonds, asset-backed securities - which
are bonds backed by a pool of loans such as credit cards, for example
- - and mortgage securities remained high and accounted for
approximately 73% of the fund's net assets at the end of the period.
Within these holdings, corporate bonds accounted for roughly 46%,
while asset-backed and mortgage securities represented approximately
16% and 11%, respectively.
Q. WHICH HOLDINGS HURT THE FUND'S RELATIVE PERFORMANCE?
A. From May through mid-August, spread sectors began to price in the
worst fears about potential Y2K problems resulting in less demand for
corporate and mortgage bonds. As a result, yield spreads widened. In
other words, spread sector yields - which move in the opposite
direction of bond prices - moved higher while their prices decreased
relative to Treasuries. This caused some slight underperformance. As
investors' worst fears were not realized, spread sectors rebounded
moderately through September.
Q. WHAT'S YOUR OUTLOOK, ANDY?
A. There are several factors in the short term that may cause concern:
the market's uncertainty about the Fed's next move, fears about the
potential impact of turbulent equity markets and concerns with Y2K
issues. However, because many parts of the market remain priced in
expectation of a more difficult environment, I think spread products
could offer good value. This would be particularly true if the
market's fears are not realized.
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 October 31, 1999,
more than $364 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON THE
INTRODUCTION OF
AGENCY-BENCHMARK-CLASS
SECURITIES AND ITS POTENTIAL
IMPACT ON THE FUND'S
STRATEGY:
"Federal agencies have taken
steps to capture the market's
attention as Treasury supply has
declined. Fannie Mae, Freddie
Mac and the Federal Home Loan
Bank, for instance, have created
`Benchmark Notes,' `Reference
Notes' and `Bank Global Notes,'
respectively, and we refer to these
securities generically as
`Agency-Benchmark-Class
Securities.'
"In issuing these securities, the
agencies seek to consolidate their
offerings into fairly large issues,
taking them to the market on a
regular, but less frequent, basis.
The intent is to enhance the
appeal of these issues by
approaching the predictability and
liquidity of Treasury securities.
Should investors begin to view
agency securities as suitable
replacements for Treasuries,
demand may improve, which could
ultimately improve relative prices.
Accordingly, I will be closely
monitoring these securities as a
potentially high-quality,
yield-enhancing alternative to
Treasuries."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
OCTOBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 39.4 36.0
Aa 5.1 7.3
A 17.5 18.7
Baa 32.7 32.4
Ba and Below 1.9 1.3
Not Rated 0.4 0.9
</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 OCTOBER 31, 1999
6 MONTHS AGO
Years 2.4 2.6
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME REMAINING UNTIL
PRINCIPAL PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS,
WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1999
6 MONTHS AGO
Years 1.8 1.9
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF OCTOBER 31, 1999 * AS OF APRIL 30, 1999 **
Corporate Bonds 46.0% Corporate Bonds 44.7%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 23.8% Obligations 20.8%
Asset Backed Securities 15.8% Asset Backed Securities 18.3%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 7.7% Related Securities 9.7%
Other Investments 2.3% Other Investments 3.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 4.4% Net Other Assets 3.1%
* FOREIGN INVESTMENTS 5.2% ** FOREIGN INVESTMENTS 6.3%
Row: 1, Col: 1, Value: 46.0 Row: 1, Col: 1, Value: 44.7
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 23.8 Row: 1, Col: 3, Value: 20.8
Row: 1, Col: 4, Value: 15.8 Row: 1, Col: 4, Value: 18.3
Row: 1, Col: 5, Value: 7.7 Row: 1, Col: 5, Value: 9.699999999999999
Row: 1, Col: 6, Value: 2.3 Row: 1, Col: 6, Value: 3.4
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.4 Row: 1, Col: 8, Value: 3.1
</TABLE>
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 46.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 1.1%
Equistar Chemicals Baa3 $ 2,450,000 $ 2,432,229
LP/Equistar Funding Corp.
8.5% 2/15/04
Monsanto Co. 5.375% 12/1/01 A2 1,470,000 1,437,307
(b)
3,869,536
CONSTRUCTION & REAL ESTATE -
2.1%
REAL ESTATE - 0.5%
Cabot Industrial Property LP Baa2 575,000 556,543
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 1,200,000 1,146,876
3/15/05
1,703,419
REAL ESTATE INVESTMENT TRUSTS
- - 1.6%
Avalonbay Communities, Inc. Baa1 705,000 679,345
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 439,882
7.125% 3/15/04 Baa2 1,300,000 1,241,227
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,621,109
6.375% 2/15/03 Baa1 1,200,000 1,165,020
Merry Land & Investment Co., A3 600,000 576,084
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 245,000 233,363
5,956,030
TOTAL CONSTRUCTION & REAL 7,659,449
ESTATE
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES -
1.1%
Daimler-Chrysler North A1 1,500,000 1,502,100
America Holding Corp. 5.75%
8/23/02 (c)
TRW, Inc.:
6.45% 6/15/01 (b) Baa1 1,550,000 1,540,700
6.5% 6/1/02 (b) Baa1 800,000 787,888
3,830,688
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.8%
Jones Apparel Group, Baa2 $ 2,155,000 $ 2,108,883
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 800,000 782,160
7.5% 6/15/04 (b)
2,891,043
TOTAL DURABLES 6,721,731
ENERGY - 1.0%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 575,000 589,663
(Petronas) yankee 8.875%
8/1/04 (b)
OIL & GAS - 0.8%
Occidental Petroleum Corp. Baa3 700,000 700,091
6.09% 11/29/99
Oryx Energy Co. 8% 10/15/03 Baa1 335,000 339,238
The Coastal Corp. 6.2% 5/15/04 Baa2 1,700,000 1,633,275
YPF Sociedad Anonima 7.5% Baa1 400,000 402,250
10/26/02
3,074,854
TOTAL ENERGY 3,664,517
FINANCE - 18.8%
BANKS - 4.6%
Banc One Corp. 7.25% 8/1/02 A1 1,100,000 1,114,883
Banco Latinoamericano Baa2 700,000 700,000
Exportaciones SA euro 6.9%
12/4/99 (b)
Capital One Bank:
6.48% 6/28/02 Baa2 1,500,000 1,468,050
6.65% 3/15/04 Baa3 2,500,000 2,406,500
First USA Bank NA 6.125% Aa2 1,600,000 1,590,368
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa3 745,000 712,809
7.125% 9/17/01 Baa3 115,000 113,780
7.375% 9/17/04 Baa3 250,000 242,750
yankee 6.5% 11/15/02 Baa3 580,000 558,250
Popular, Inc. 6.2% 4/30/01 A3 2,885,000 2,855,862
Providian National Bank:
6.25% 5/7/01 Baa3 1,010,000 995,446
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Providian National Bank: -
continued
6.7% 3/15/03 Baa3 $ 2,200,000 $ 2,136,134
6.75% 3/15/02 Baa3 390,000 381,919
Wells Fargo & Co. 6.5% 9/3/02 Aa3 1,500,000 1,492,950
16,769,701
CREDIT & OTHER FINANCE - 10.8%
AT&T Capital Corp.:
6.25% 5/15/01 A1 3,050,000 3,022,276
6.875% 1/16/01 A1 1,870,000 1,868,990
Chrysler Financial Corp.:
5.25% 5/4/01 A1 2,600,000 2,555,618
5.25% 10/22/01 A1 2,500,000 2,440,875
Edison Mission Energy Funding Baa1 1,817,275 1,769,318
Corp. 6.77% 9/15/03 (b)
ERP Operating LP 6.55% A3 360,000 355,943
11/15/01
Ford Motor Credit Co.:
6.4463% 7/16/02 (c) A1 3,200,000 3,198,144
6.5% 2/28/02 A1 1,300,000 1,294,488
General Electric Capital Corp.:
6.33% 9/17/01 Aaa 4,000,000 3,986,800
6.65% 9/3/02 Aaa 1,300,000 1,299,766
General Motors Acceptance A2 2,200,000 2,174,568
Corp. 5.625% 2/15/01
GS Escrow Corp. 6.75% 8/1/01 Ba1 2,200,000 2,118,292
Heller Financial, Inc. 6.25% A3 1,900,000 1,890,443
3/1/01
PNC Funding Corp. 6.95% 9/1/02 A2 1,400,000 1,403,766
Popular North America, Inc. A3 2,380,000 2,373,574
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 208,068 208,416
7.02% 5/30/00
Spieker Properties LP 6.8% Baa2 315,000 303,931
5/1/04
Sprint Capital Corp. 5.7% Baa1 1,880,000 1,794,817
11/15/03
The Money Store, Inc. 7.3% A2 800,000 803,360
12/1/02
Trizec Finance Ltd. yankee Baa3 575,000 612,375
10.875% 10/15/05
TXU Eastern Funding 6.15% Baa1 1,800,000 1,757,160
5/15/02 (b)
U.S. West Capital Funding, Baa1 2,100,000 2,101,050
Inc. 6.875% 8/15/01 (b)
39,333,970
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 1.0%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 $ 1,350,000 $ 1,332,855
7% 6/13/02 Baa3 1,250,000 1,237,075
Sovereign Bancorp, Inc. Ba1 1,000,000 980,210
6.625% 3/15/01
3,550,140
SECURITIES INDUSTRY - 2.4%
Amvescap PLC yankee:
6.375% 5/15/03 A3 2,450,000 2,375,202
6.6% 5/15/05 A3 600,000 574,182
Donaldson Lufkin & Jenrette, A3 2,600,000 2,575,820
Inc. 6.25% 8/1/01
Goldman Sachs Group L.P.:
6.2% 2/15/01 A1 1,000,000 995,160
6.6% 7/15/02 (b) A1 500,000 497,050
Lehman Brothers Holdings 7% A3 2,000,000 1,980,620
5/15/03
8,998,034
TOTAL FINANCE 68,651,845
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 1,900,000 1,887,954
yankee 6.125% 6/15/01 Baa1 2,250,000 2,221,673
4,109,627
MEDIA & LEISURE - 3.4%
BROADCASTING - 1.6%
Continental Cablevision, Inc. Baa2 3,015,000 3,098,907
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 1,400,000 1,402,506
8/15/01
TCI Communications, Inc.:
8.25% 1/15/03 A2 300,000 312,402
9% 1/2/02 Ba1 970,000 1,014,707
5,828,522
ENTERTAINMENT - 0.4%
Viacom, Inc. 7.75% 6/1/05 Baa3 1,530,000 1,548,605
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 1.4%
News America Holdings, Inc. Baa3 $ 2,750,000 $ 2,856,260
8.625% 2/1/03
Time Warner Entertainment Co. Baa2 1,985,000 2,100,904
LP 9.625% 5/1/02
4,957,164
TOTAL MEDIA & LEISURE 12,334,291
NONDURABLES - 3.6%
BEVERAGES - 1.6%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 1,005,000 988,990
6.25% 12/15/01 Baa3 1,000,000 982,000
6.4% 12/15/03 Baa3 4,000,000 3,856,000
5,826,990
FOODS - 0.7%
Dole Food Co., Inc. 6.75% Baa2 2,590,000 2,590,777
7/15/00
TOBACCO - 1.3%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 1,125,000 1,131,919
7.625% 5/15/02 A2 1,750,000 1,774,465
8.75% 6/1/01 A2 1,000,000 1,028,190
RJR Nabisco, Inc. 7.375% Baa2 800,000 768,304
5/15/03 (b)
4,702,878
TOTAL NONDURABLES 13,120,645
RETAIL & WHOLESALE - 1.7%
DRUG STORES - 0.7%
Rite Aid Corp. 6% 12/15/00 (b) Ba2 3,210,000 2,600,100
GENERAL MERCHANDISE STORES -
0.5%
Federated Department Stores, Baa1 1,860,000 1,910,890
Inc. 8.125% 10/15/02
GROCERY STORES - 0.5%
Safeway, Inc. 7% 9/15/02 Baa2 1,700,000 1,696,311
TOTAL RETAIL & WHOLESALE 6,207,301
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TECHNOLOGY - 2.5%
COMPUTERS & OFFICE EQUIPMENT
- - 2.5%
Comdisco, Inc.:
6.1% 6/5/01 Baa1 $ 5,210,000 $ 5,177,959
6.65% 11/13/01 Baa1 2,010,000 2,006,060
7.25% 9/1/02 Baa1 1,500,000 1,494,570
Sun Microsystems, Inc. 7% Baa1 330,000 330,231
8/15/02
9,008,820
TRANSPORTATION - 3.2%
AIR TRANSPORTATION - 1.5%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 2,199,092 2,126,522
7.08% 11/1/04 Baa1 1,249,831 1,230,934
Delta Air Lines, Inc.:
6.65% 3/15/04 Baa3 660,000 636,029
9.875% 5/15/00 Baa3 475,000 482,804
Qantas Airways Ltd. 7.5% Baa1 1,000,000 991,460
6/30/03 (b)
5,467,749
RAILROADS - 1.2%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,601,520
9.5% 8/1/00 Baa2 1,800,000 1,838,376
Norfolk Southern Corp. 6.95% Baa1 900,000 898,308
5/1/02
4,338,204
TRUCKING & FREIGHT - 0.5%
Federal Express Corp. 7.53% A3 1,953,000 1,953,703
9/23/06
TOTAL TRANSPORTATION 11,759,656
UTILITIES - 5.6%
CELLULAR - 0.1%
Cable & Wireless Baa1 425,000 423,589
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 3.4%
Avon Energy Partners Holdings Baa2 2,300,000 2,265,109
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
6.875% 3/1/01 Baa2 1,420,000 1,421,619
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - CONTINUED
Niagara Mohawk Power Corp.: -
continued
9.25% 10/1/01 Baa2 $ 1,700,000 $ 1,772,556
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,910,000 1,929,348
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,519,190
6.5% 5/1/03 Baa1 720,000 709,301
7.125% 9/1/02 Baa1 400,000 402,012
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 721,000 727,914
8% 6/1/02 A3 1,750,000 1,791,580
12,538,629
GAS - 1.5%
Cms Panhandle Holding Co. Baa3 1,100,000 1,052,700
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa3 1,700,000 1,692,010
7/15/01
Enron Corp.:
6.45% 11/15/01 Baa2 1,050,000 1,041,285
6.5% 8/1/02 Baa2 950,000 935,750
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 632,093
5,353,838
TELEPHONE SERVICES - 0.6%
MCI WorldCom, Inc. 8.875% A3 811,000 853,788
1/15/06
Telecomunicaciones de Puerto Baa2 1,430,000 1,390,847
Rico, Inc. 6.15% 5/15/02 (b)
2,244,635
TOTAL UTILITIES 20,560,691
TOTAL NONCONVERTIBLE BONDS 167,668,109
(Cost $170,946,610)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 20.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
Fannie Mae 6.1% 8/10/01 Aaa 5,000,000 4,989,050
Freddie Mac 7.625% 9/9/09 Aaa 6,000,000 6,019,680
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Government Trust Certificates Aaa $ 259,624 $ 266,839
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class T-3, 9.625%
5/15/02
Guaranteed Export Trust Aaa 1,764,705 1,754,781
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1995-A, 6.28% 6/15/04
Israel Export Trust Aaa 494,117 498,372
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 858,600 864,229
secured 6.86% 4/30/04
14,392,951
U.S. TREASURY OBLIGATIONS -
16.3%
U.S. Treasury Notes:
5.5% 8/31/01 Aaa 20,000,000 19,890,600
5.75% 10/31/00 Aaa 27,700,000 27,730,191
6.625% 4/30/02 Aaa 8,100,000 8,240,454
7.875% 8/15/01 Aaa 3,300,000 3,412,926
59,274,171
TOTAL U.S. GOVERNMENT AND 73,667,122
GOVERNMENT AGENCY OBLIGATIONS
(Cost $73,952,455)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 3.6%
FANNIE MAE - 2.4%
6.5% 10/1/11 Aaa 206,732 203,156
7% 7/1/25 to 8/1/29 Aaa 8,225,601 8,086,533
11.5% 11/1/15 Aaa 376,202 416,306
8,705,995
FREDDIE MAC - 0.0%
12% 11/1/19 Aaa 90,228 100,153
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.2%
9.5% 9/15/16 to 10/15/20 Aaa $ 1,406,818 $ 1,493,885
11% 12/15/09 to 1/15/16 Aaa 1,589,693 1,755,648
11.5% 8/15/13 to 11/15/15 Aaa 538,756 605,537
12% 2/15/16 Aaa 515,332 582,944
4,438,014
TOTAL U.S. GOVERNMENT AGENCY 13,244,162
- - MORTGAGE SECURITIES
(Cost $13,539,007)
ASSET-BACKED SECURITIES - 15.8%
Americredit Automobile Aaa 2,000,000 2,008,125
Receivables Trust 7.02%
12/15/05
Arcadia Automobile
Receivables Trust:
5.67% 1/15/04 Aaa 1,300,000 1,262,300
7.2% 6/15/07 Aaa 1,700,000 1,713,281
ARG Funding Corp. 5.88% Aaa 2,650,000 2,592,031
5/20/03 (b)
Capita Equipment Receivables
Trust:
6.45% 8/15/02 Aa3 2,200,000 2,181,366
6.57% 3/15/01 Aa3 1,020,000 1,018,470
Caterpillar Financial Asset Aaa 2,100,000 2,093,289
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 2,020,000 2,020,444
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 1,154,866 1,144,762
6.2% 3/20/04 Aaa 472,183 469,675
Citibank Credit Card Master Aaa 1,800,000 1,784,531
Trust I 5.75% 1/15/03
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 1,647,777 1,640,560
6.3% 7/15/12 Aaa 1,600,000 1,583,488
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 678,781 678,781
6.7% 2/15/02 Aaa 181,409 181,267
CS First Boston Mortgage Aaa 933,474 936,100
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,238,516
5.7663% 7/18/05 (c)
Fidelity Funding Auto Trust Aaa 211,017 211,941
6.99% 11/15/02 (b)
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
First Security Auto Owner A3 $ 1,400,000 $ 1,382,500
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 1,800,000 1,777,500
6.87% 11/15/04 A2 650,000 647,359
Green Tree Lease Finance LLC A 297 295
6.66% 10/20/04
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,160,469
6.65% 10/15/03 Baa3 178,996 178,493
Newcourt Equipment Trust Aaa 2,050,000 2,024,055
Securities sequential pay
5.24% 12/20/02
Norwest Automobile Trust 6.3% A2 1,424,000 1,422,665
5/15/03
Olympic Automobile Aaa 406,956 403,905
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust:
5.95% 7/15/04 Aaa 1,378,720 1,372,254
6.2% 6/15/03 Aaa 610,129 609,367
Petroleum Enhanced Trust Baa2 1,455,053 1,449,597
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(c)
Premier Auto Trust 5.7% Aaa 4,000,000 3,962,480
10/6/02
Prime Credit Card Master Aaa 1,000,000 1,001,560
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 239,964 239,964
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 2/16/06 Aaa 1,600,000 1,593,488
6.2% 7/16/07 Aaa 2,700,000 2,666,250
TMS Auto Grantor Trust 5.9% Aaa 70,140 70,162
9/15/02
Tranex Auto Receivables Owner Aaa 653,118 650,159
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 1,600,302 1,579,298
Trust 5.98% 9/17/05
Western Financial Grantor Aaa 361,444 360,541
Trust 5.875% 3/1/02
WFS Financial Owner Trust:
6.9% 12/20/03 Aaa 1,571,589 1,574,046
7.05% 11/20/03 Aaa 1,762,343 1,765,648
TOTAL ASSET-BACKED SECURITIES 57,650,982
(Cost $58,010,682)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.5%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PRIVATE SPONSOR - 0.5%
GE Capital Mortgage Services, Aaa $ 497,584 $ 494,708
Inc. planned amortization
class Series 1994-2 Class
A-4, 6% 1/25/09
Residential Funding Mortgage Aa1 1,472,294 1,462,633
Securities I, Inc. planned
amortization class Series
1994-S12 Class A-2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 1,957,341
OBLIGATIONS
(Cost $1,965,531)
COMMERCIAL MORTGAGE
SECURITIES - 7.2%
Allied Capital Commercial Aaa 928,118 918,257
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,194,500
1999-S1A, Class D 7.5488%
2/28/14 (b)(c)
Bankers Trust REMIC Trust Baa2 2,350,000 2,353,672
Series 1998-S1A Class F,
7.38% 11/28/02 (c)
CBM Funding Corp. sequential AA 1,243,397 1,239,318
pay Series 1996-1 Class A-2,
6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 1,522,753 1,509,429
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 5.9% 12/10/00 (b)(c) A2 1,000,000 990,000
Class E, 6.25% 1/10/13 (b)(c) Baa2 2,700,000 2,646,000
DLJ Commercial Mortgage Corp. Aa2 1,170,000 1,168,903
floater Series 1998-STFA
Class A-3, 6.0075% 12/8/00
(b)(c)
Equitable Life Assurance
Society of the United States:
floater Series 174 Class D-2, Baa2 1,200,000 1,185,000
6.7063% 5/15/03 (b)(c)
sequential pay Series 174 Aaa 1,000,000 1,002,010
Class A1, 7.24% 5/15/06 (b)
Fannie Mae ACES sequential Aaa 805,931 796,865
pay Series 1995 - M1 Class
A, 6.65% 7/25/10
Federal Deposit Insurance
Corp. REMIC Trust:
sequential pay Series 1996-C1 Aaa 1,025,613 1,022,889
Class 1A, 6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Federal Deposit Insurance
Corp. REMIC Trust: - continued
sequential pay Series 1994-C1 Aaa $ 52,813 $ 52,863
Class II-A2, 7.85% 9/25/25
FMAC Loan Receivables Trust Aaa 679,153 654,958
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 1,249,274 1,218,043
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, 7.4676% 11/13/13 Baa2 1,100,000 1,095,875
(b)(c)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,085,392
(b)(c)
Host Marriot Pool Trust 6.98% Aaa 988,705 978,819
8/1/15
Nomura Depositor Trust Baa2 2,290,000 2,169,417
floater Series 1998-ST1A
Class A-4, 6.3063% 2/15/34
(b)(c)
Resolution Trust Corp. Aaa 56,324 56,324
sequential pay Series 1995
C-1 Class A2C, 6.9% 2/25/27
Structured Asset Securities A3 2,019,277 2,003,502
Corp. floater Series
1998-C2A Class C, 5.8388%
1/25/13 (b)(c)
TOTAL COMMERCIAL MORTGAGE 26,342,036
SECURITIES
(Cost $26,742,560)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (D) - 0.7%
Korean Republic yankee 8.75% Baa3 115,000 118,690
4/15/03
Ontario Province:
5.75% 11/7/00 Aa3 1,180,000 1,173,628
yankee 8% 10/17/01 Aa3 1,200,000 1,234,188
TOTAL FOREIGN GOVERNMENT AND 2,526,506
GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,546,610)
SUPRANATIONAL OBLIGATIONS -
1.6%
African Development Bank:
7.75% 12/15/01 Aa1 2,240,000 2,297,859
9.3% 7/1/00 Aa1 3,320,000 3,391,114
TOTAL SUPRANATIONAL OBLIGATIONS 5,688,973
(Cost $5,922,376)
</TABLE>
CASH EQUIVALENTS - 3.0%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 10,725,762 $ 10,721,000
agreements (U.S. Government
obligations), in a joint
trading account at 5.33%,
dated 10/29/99 due 11/1/99
(Cost $10,721,000)
TOTAL INVESTMENT PORTFOLIO - 359,466,231
98.6% (Cost $364,346,831)
NET OTHER ASSETS - 1.4% 5,271,743
NET ASSETS - 100% $ 364,737,974
LEGEND
(a) Standard & Poor's 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 $46,851,048
or 12.8% of net assets.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(d) 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 61.7% AAA, AA, A 55.9%
Baa 32.7% BBB 30.7%
Ba 1.9% BB 1.5%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.4%.
INCOME TAX INFORMATION
At October 31, 1999, the aggregate cost of investment securities for
income tax purposes was $364,393,025. Net unrealized depreciation
aggregated $4,926,794, of which $171,764 related to appreciated
investment securities and $5,098,558 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $45,403,000 of which $38,000, $336,000, $17,691,000,
$19,457,000, $2,265,000, $3,149,000 and $2,467,000 will expire on
October 31, 2000, 2001, 2002, 2003, 2004 and 2005 and 2007,
respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS
Investment in securities, at $ 359,466,231
value (including repurchase
agreements of $10,721,000)
(cost $364,346,831) - See
accompanying schedule
Cash 733
Receivable for investments 99,336
sold
Receivable for fund shares 2,126,831
sold
Interest receivable 5,055,018
TOTAL ASSETS 366,748,149
LIABILITIES
Payable for fund shares $ 1,439,829
redeemed
Distributions payable 278,182
Accrued management fee 129,050
Distribution fees payable 64,474
Other payables and accrued 98,640
expenses
TOTAL LIABILITIES 2,010,175
NET ASSETS $ 364,737,974
Net Assets consist of:
Paid in capital $ 414,939,579
Undistributed net investment 128,689
income
Accumulated undistributed net (45,449,694)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (4,880,600)
(depreciation) on investments
NET ASSETS $ 364,737,974
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1999
CALCULATION OF MAXIMUM $9.15
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($17,834,533 (divided by)
1,949,666 shares)
Maximum offering price per $9.29
share (100/98.50 of $9.15)
CLASS T: NET ASSET VALUE and $9.15
redemption price per share
($309,669,728 (divided by)
33,835,291 shares)
Maximum offering price per $9.29
share (100/98.50 of $9.15)
CLASS C: NET ASSET VALUE and $9.16
offering price per share
($30,428,297 (divided by)
3,323,666 shares) A
INSTITUTIONAL CLASS: NET $9.15
ASSET VALUE, offering price
and redemption price per
share ($6,805,416 (divided
by) 743,622 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME $ 21,968,830
Interest
EXPENSES
Management fee $ 1,459,500
Transfer agent fees 614,887
Distribution fees 599,601
Accounting fees and expenses 105,213
Non-interested trustees' 1,125
compensation
Custodian fees and expenses 24,614
Registration fees 82,409
Audit 33,971
Legal 6,186
Interest 961
Total expenses before 2,928,467
reductions
Expense reductions (12,612) 2,915,855
NET INVESTMENT INCOME 19,052,975
REALIZED AND UNREALIZED GAIN (2,605,978)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (6,052,422)
Delayed delivery commitments (10,500) (6,062,922)
NET GAIN (LOSS) (8,668,900)
NET INCREASE (DECREASE) IN $ 10,384,075
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 19,052,975 $ 20,862,249
income
Net realized gain (loss) (2,605,978) 173,470
Change in net unrealized (6,062,922) 421,556
appreciation (depreciation)
NET INCREASE (DECREASE) IN 10,384,075 21,457,275
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (18,762,496) (20,556,957)
from net investment income
Share transactions - net 15,720,432 (21,594,124)
increase (decrease)
TOTAL INCREASE (DECREASE) 7,342,011 (20,693,806)
IN NET ASSETS
NET ASSETS
Beginning of period 357,395,963 378,089,769
End of period (including $ 364,737,974 $ 357,395,963
undistributed net investment
income and distributions in
excess of net investment
income of $128,689 and
$56,261, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 G
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 .518 .572 .532 .090
Net realized and unrealized (.233) .024 (.021) .081
gain (loss)
Total from investment .285 .596 .511 .171
operations
Less Distributions
From net investment income (.515) (.526) (.571) (.091)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.310 $ 9.370
TOTAL RETURN B, C 3.12% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,835 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .82% .90% E .90% E .90% A, E
net assets
Ratio of expenses to average .80% F .90% .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.68% 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 139% 124% 105% 124%
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 FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.380 $ 9.350 $ 9.380 $ 9.470 $ 9.480
of period
Income from Investment
Operations
Net investment income .523 C .555 C .578 C .594 C .403
Net realized and unrealized (.238) .019 (.036) (.094) .148
gain (loss)
Total from investment .285 .574 .542 .500 .551
operations
Less Distributions
From net investment income (.515) (.544) (.572) (.590) (.407)
Return of capital - - - - (.154)
Total distributions (.515) (.544) (.572) (.590) (.561)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.350 $ 9.380 $ 9.470
TOTAL RETURN A, B 3.12% 6.32% 5.97% 5.45% 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 309,670 $ 333,050 $ 351,614 $ 416,700 $ 546,546
(000 omitted)
Ratio of expenses to average .84% .89% .89% .88% .89%
net assets
Ratio of expenses to average .83% D .89% .89% .88% .89%
net assets after expense
reductions
Ratio of net investment 5.64% 5.93% 6.19% 6.29% 6.05%
income to average net assets
Portfolio turnover rate 139% 124% 105% 124% 179%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
FINANCIAL HIGHLIGHTS - CLASS C
YEARS ENDED OCTOBER 31, 1999 1998 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .434 .437
Net realized and unrealized (.222) .064
gain (loss)
Total from investment .212 .501
operations
Less Distributions
From net investment income (.432) (.461)
Net asset value, end of period $ 9.160 $ 9.380
TOTAL RETURN B, C 2.31% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 30,428 $ 11,795
(000 omitted)
Ratio of expenses to average 1.73% 1.75% A, E
net assets
Ratio of expenses to average 1.72% F 1.75% A
net assets after expense
reductions
Ratio of net investment 4.75% 4.92% A
income to average net assets
Portfolio turnover rate 139% 124%
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 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 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
YEARS ENDED OCTOBER 31, 1999 1998 1997 1996 1995 G
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 .534 D .566 D .589 D .598 D .137
Net realized and unrealized (.236) .021 (.023) (.098) .067
gain (loss)
Total from investment .298 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.528) (.557) (.586) (.600) (.136)
Return of capital - - - - (.048)
Total distributions (.528) (.557) (.586) (.600) (.184)
Net asset value, end of period $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470
TOTAL RETURN B, C 3.27% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,805 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .71% .75% E .75% E .80% E .85% A, E
net assets
Ratio of expenses to average .70% F .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 5.77% 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 139% 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 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 FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1999
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 after the customary settlement period for that security. 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 fund may receive compensation for interest forgone
in the purchase of a delayed delivery security.
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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.
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 $460,855,484 and $452,272,824, respectively, of which U.S.
government and government agency obligations aggregated $285,250,239
and $288,006,719, 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 .0920% 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 annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement 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 has 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .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 $ 19,542 $ -
CLASS T 460,956 3,071
CLASS C 119,103 101,821
$ 599,601 $ 104,892
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 is 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 $ 56,679 $ 14,321
CLASS T 248,099 79,649
CLASS C 26,881 26,881*
$ 331,659 $ 120,851
* 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 (collectively referred to
as the transfer agent) for the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
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 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 $ 21,088 .16
CLASS T 553,315 .18
CLASS C 26,661 .22
INSTITUTIONAL CLASS 13,823 .20
$ 614,887
ACCOUNTING FEES. Fidelity Service Company, Inc. maintains the fund's
accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
5. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. The average daily loan balance during the period for which
the loan was outstanding amounted to $6,019,000. The weighted average
interest rate was 5.75%.
6. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian and each class'
transfer agent, 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 $10,995 under the custodian
arrangement, and Class A's expenses were reduced by $1,617 under the
transfer agent arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEAR ENDED OCTOBER 31,
1999 1998A
FROM NET INVESTMENT INCOME
CLASS A $ 728,649 $ 388,579
CLASS T 17,079,838 19,688,772
CLASS C 560,143 94,836
INSTITUTIONAL CLASS 393,866 384,770
TOTAL $ 18,762,496 $ 20,556,957
A DISTRIBUTIONS FOR CLASS C ARE FOR THE PERIOD NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1998.
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1999 1998A 1999 1998A
CLASS A Shares sold 4,473,072 592,781 $ 41,324,913 $ 5,547,089
Reinvestment of
distributions 71,481 15,963 658,379 149,204
Shares redeemed (3,183,911) (2,137,845) (29,310,347) (20,007,107)
Net increase (decrease) 1,360,642 (1,529,101) $ 12,672,945 $ (14,310,814)
CLASS T Shares sold 21,974,295 18,467,587 $ 203,715,730 $ 172,851,708
Reinvestment of
distributions 1,462,245 1,675,946 13,533,243 15,669,989
Shares redeemed (25,110,949) (22,231,985) (233,084,712) (207,892,792)
Net increase (decrease) (1,674,409) (2,088,452) $ (15,835,739) $ (19,371,095)
CLASS C Shares sold 4,501,972 1,458,611 $ 41,508,375 $ 13,712,358
Reinvestment of
distributions 46,606 6,695 430,046 62,751
Shares redeemed (2,481,867) (208,351) (23,005,901) (1,947,580)
Net increase (decrease) 2,066,711 1,256,955 $ 18,932,520 $ 11,827,529
INSTITUTIONAL CLASS Shares 527,018 733,154 $ 4,875,430 $ 6,860,400
sold
Reinvestment of
distributions 36,799 33,202 340,500 310,406
Shares redeemed (569,453) (738,984) (5,265,224) (6,910,550)
Net increase (decrease) (5,636) 27,372 $ (49,294) $ 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.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Fidelity Advisor Series II and the Shareholders of
Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Fidelity Advisor Short
Fixed-Income Fund as of October 31, 1999, and the related statements
of operations, changes in net assets and financial highlights for the
year then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit. The statement of changes in net assets
for the year ended October 31, 1998, and the financial highlights for
each of the years in the four-year period ended October 31, 1998
were audited by other auditors whose report, dated December 15, 1998,
expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned at October 31, 1999, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Fidelity Advisor Short Fixed-Income Fund at October 31, 1999, the
results of its operations, the changes in its net assets, and its
financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 3, 1999
DISTRIBUTIONS
A total of 11.01% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
The fund will notify shareholders in January 2000 of amounts for use
in preparing 1999 income tax returns.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc., London, England
Fidelity Management & Research
(Far East) Inc., Tokyo, Japan
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
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
Ned C. Lautenbach
* 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
(2_FIDELITY_LOGOS)(registered trademark)
