FIDELITY(REGISTERED TRADEMARK) ADVISOR
GOVERNMENT INVESTMENT
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 2000
(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 27 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 36 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.70% 0.98% 33.85% 98.20%
CL A
FIDELITY ADV GOVERNMENT INV - -3.13% -3.82% 27.49% 88.79%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond 2.25% 1.99% 39.08% 116.62%
General US Government Funds 1.33% 0.19% 32.51% 98.85%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Lehman Brothers Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class A's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 188 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 0.98% 6.00% 7.08%
CL A
FIDELITY ADV GOVERNMENT INV - -3.82% 4.98% 6.56%
CL A (INCL. 4.75% SALES
CHARGE)
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 9525.00 10000.00
1990/05/31 9804.09 10278.87
1990/06/30 9945.31 10441.60
1990/07/31 10065.86 10575.18
1990/08/31 10001.50 10427.91
1990/09/30 10067.98 10527.93
1990/10/31 10169.13 10699.93
1990/11/30 10346.44 10937.07
1990/12/31 10479.88 11106.20
1991/01/31 10594.87 11225.44
1991/02/28 10683.08 11289.69
1991/03/31 10726.02 11347.10
1991/04/30 10815.15 11471.63
1991/05/31 10871.91 11516.23
1991/06/30 10865.74 11499.89
1991/07/31 10982.21 11636.34
1991/08/31 11152.55 11906.16
1991/09/30 11354.11 12155.88
1991/10/31 11455.54 12262.31
1991/11/30 11521.77 12385.29
1991/12/31 11889.50 12807.24
1992/01/31 11728.24 12607.86
1992/02/29 11782.18 12657.10
1992/03/31 11701.36 12583.13
1992/04/30 11769.92 12662.40
1992/05/31 11985.97 12896.00
1992/06/30 12151.90 13080.81
1992/07/31 12357.09 13410.47
1992/08/31 12463.46 13535.44
1992/09/30 12579.24 13726.87
1992/10/31 12427.58 13528.81
1992/11/30 12459.02 13505.41
1992/12/31 12660.40 13732.83
1993/01/31 12877.23 14024.51
1993/02/28 13118.89 14305.37
1993/03/31 13194.10 14353.28
1993/04/30 13293.50 14463.68
1993/05/31 13314.44 14447.78
1993/06/30 13576.53 14768.38
1993/07/31 13643.77 14858.47
1993/08/31 13866.22 15190.11
1993/09/30 13891.66 15248.18
1993/10/31 13984.84 15305.81
1993/11/30 13770.91 15138.00
1993/12/31 13845.07 15196.51
1994/01/31 14086.46 15404.50
1994/02/28 13760.23 15078.38
1994/03/31 13344.36 14739.24
1994/04/30 13211.22 14623.32
1994/05/31 13225.00 14604.55
1994/06/30 13179.96 14570.99
1994/07/31 13467.30 14838.82
1994/08/31 13459.44 14841.69
1994/09/30 13270.34 14632.59
1994/10/31 13247.90 14621.55
1994/11/30 13222.64 14594.83
1994/12/31 13312.14 14683.59
1995/01/31 13551.12 14956.94
1995/02/28 13847.24 15278.87
1995/03/31 13939.02 15374.70
1995/04/30 14104.10 15575.62
1995/05/31 14652.65 16203.80
1995/06/30 14755.50 16328.11
1995/07/31 14703.68 16268.05
1995/08/31 14870.77 16459.26
1995/09/30 15006.22 16617.80
1995/10/31 15223.69 16870.83
1995/11/30 15440.87 17133.80
1995/12/31 15662.00 17376.68
1996/01/31 15742.37 17483.33
1996/02/29 15419.66 17127.18
1996/03/31 15277.30 16984.10
1996/04/30 15179.17 16875.69
1996/05/31 15147.04 16847.43
1996/06/30 15323.37 17064.91
1996/07/31 15354.30 17107.09
1996/08/31 15318.39 17068.89
1996/09/30 15561.66 17352.17
1996/10/31 15892.47 17733.94
1996/11/30 16154.47 18042.39
1996/12/31 15981.98 17858.25
1997/01/31 15994.84 17878.12
1997/02/28 16018.65 17902.63
1997/03/31 15843.35 17713.18
1997/04/30 16077.82 17968.87
1997/05/31 16194.59 18123.87
1997/06/30 16361.78 18327.22
1997/07/31 16826.80 18847.43
1997/08/31 16662.09 18661.07
1997/09/30 16899.70 18941.71
1997/10/31 17177.78 19269.38
1997/11/30 17247.39 19368.07
1997/12/31 17422.43 19570.55
1998/01/31 17683.14 19863.33
1998/02/28 17631.95 19809.45
1998/03/31 17660.38 19865.53
1998/04/30 17722.37 19954.96
1998/05/31 17897.53 20159.86
1998/06/30 18072.81 20389.05
1998/07/31 18102.06 20420.62
1998/08/31 18482.05 20951.87
1998/09/30 18954.57 21516.67
1998/10/31 18851.29 21443.36
1998/11/30 18860.35 21450.65
1998/12/31 18891.13 21498.56
1999/01/31 19015.31 21623.32
1999/02/28 18560.81 21109.07
1999/03/31 18630.22 21191.94
1999/04/30 18696.08 21239.96
1999/05/31 18510.99 21053.65
1999/06/30 18440.83 21010.80
1999/07/31 18353.79 20980.35
1999/08/31 18343.48 20980.07
1999/09/30 18549.39 21150.45
1999/10/31 18563.02 21184.37
1999/11/30 18534.63 21155.17
1999/12/31 18445.02 21018.24
2000/01/31 18397.32 21047.66
2000/02/29 18670.24 21347.22
2000/03/31 18928.57 21722.00
2000/04/28 18878.54 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000518 161844 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class A on
April 30, 1990, and the current 4.75% sales charge was paid. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $18,879 - an 88.79% 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 $21,662 - a 116.62% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it
will do tomorrow. Bond
prices, for example, generally
move in the opposite direction
of interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
2000 1999 1998 1997 1996
Dividend returns 3.10% 5.56% 6.12% 6.19% 0.99%
Capital returns -1.40% -7.09% 3.62% 1.90% 2.59%
Total returns 1.70% -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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.56(cents) 28.45(cents) 55.43(cents)
Annualized dividend rate 5.98% 6.20% 5.97%
30-day annualized yield 5.97% - -
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 $9.27 over the past one
month, $9.20 over the past six months and $9.29 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.75% 0.88% 33.30% 97.38%
CL T
FIDELITY ADV GOVERNMENT INV - -1.81% -2.65% 28.63% 90.47%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond 2.25% 1.99% 39.08% 116.62%
General US Government Funds 1.33% 0.19% 32.51% 98.85%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Lehman Brothers Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class T's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 188 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 0.88% 5.92% 7.04%
CL T
FIDELITY ADV GOVERNMENT INV - -2.65% 5.16% 6.66%
CL T (INCL. 3.50% SALES
CHARGE)
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 9650.00 10000.00
1990/05/31 9932.75 10278.87
1990/06/30 10075.83 10441.60
1990/07/31 10197.96 10575.18
1990/08/31 10132.75 10427.91
1990/09/30 10200.11 10527.93
1990/10/31 10302.58 10699.93
1990/11/30 10482.22 10937.07
1990/12/31 10617.41 11106.20
1991/01/31 10733.91 11225.44
1991/02/28 10823.28 11289.69
1991/03/31 10866.78 11347.10
1991/04/30 10957.08 11471.63
1991/05/31 11014.58 11516.23
1991/06/30 11008.33 11499.89
1991/07/31 11126.34 11636.34
1991/08/31 11298.90 11906.16
1991/09/30 11503.12 12155.88
1991/10/31 11605.88 12262.31
1991/11/30 11672.97 12385.29
1991/12/31 12045.53 12807.24
1992/01/31 11882.15 12607.86
1992/02/29 11936.80 12657.10
1992/03/31 11854.92 12583.13
1992/04/30 11924.38 12662.40
1992/05/31 12143.27 12896.00
1992/06/30 12311.37 13080.81
1992/07/31 12519.25 13410.47
1992/08/31 12627.02 13535.44
1992/09/30 12744.33 13726.87
1992/10/31 12590.67 13528.81
1992/11/30 12622.53 13505.41
1992/12/31 12826.55 13732.83
1993/01/31 13046.23 14024.51
1993/02/28 13291.05 14305.37
1993/03/31 13367.25 14353.28
1993/04/30 13467.96 14463.68
1993/05/31 13489.18 14447.78
1993/06/30 13754.70 14768.38
1993/07/31 13822.82 14858.47
1993/08/31 14048.19 15190.11
1993/09/30 14073.97 15248.18
1993/10/31 14168.37 15305.81
1993/11/30 13951.63 15138.00
1993/12/31 14026.76 15196.51
1994/01/31 14271.32 15404.50
1994/02/28 13940.81 15078.38
1994/03/31 13519.48 14739.24
1994/04/30 13384.60 14623.32
1994/05/31 13398.55 14604.55
1994/06/30 13352.92 14570.99
1994/07/31 13644.04 14838.82
1994/08/31 13636.07 14841.69
1994/09/30 13444.49 14632.59
1994/10/31 13421.75 14621.55
1994/11/30 13396.17 14594.83
1994/12/31 13486.84 14683.59
1995/01/31 13728.96 14956.94
1995/02/28 14028.96 15278.87
1995/03/31 14121.94 15374.70
1995/04/30 14289.19 15575.62
1995/05/31 14844.94 16203.80
1995/06/30 14949.14 16328.11
1995/07/31 14896.64 16268.05
1995/08/31 15065.92 16459.26
1995/09/30 15203.15 16617.80
1995/10/31 15423.48 16870.83
1995/11/30 15643.51 17133.80
1995/12/31 15867.53 17376.68
1996/01/31 15948.96 17483.33
1996/02/29 15622.02 17127.18
1996/03/31 15477.79 16984.10
1996/04/30 15378.37 16875.69
1996/05/31 15345.82 16847.43
1996/06/30 15524.46 17064.91
1996/07/31 15555.80 17107.09
1996/08/31 15519.42 17068.89
1996/09/30 15765.13 17352.17
1996/10/31 16098.75 17733.94
1996/11/30 16362.97 18042.39
1996/12/31 16204.26 17858.25
1997/01/31 16197.60 17878.12
1997/02/28 16220.58 17902.63
1997/03/31 16041.69 17713.18
1997/04/30 16260.56 17968.87
1997/05/31 16394.95 18123.87
1997/06/30 16580.42 18327.22
1997/07/31 17032.00 18847.43
1997/08/31 16863.33 18661.07
1997/09/30 17102.51 18941.71
1997/10/31 17382.51 19269.38
1997/11/30 17444.21 19368.07
1997/12/31 17615.43 19570.55
1998/01/31 17877.92 19863.33
1998/02/28 17824.78 19809.45
1998/03/31 17852.02 19865.53
1998/04/30 17913.23 19954.96
1998/05/31 18088.59 20159.86
1998/06/30 18282.93 20389.05
1998/07/31 18292.31 20420.62
1998/08/31 18655.97 20951.87
1998/09/30 19150.77 21516.67
1998/10/31 19044.97 21443.36
1998/11/30 19051.74 21450.65
1998/12/31 19081.77 21498.56
1999/01/31 19206.58 21623.32
1999/02/28 18727.29 21109.07
1999/03/31 18815.72 21191.94
1999/04/30 18880.97 21239.96
1999/05/31 18672.98 21053.65
1999/06/30 18600.57 21010.80
1999/07/31 18531.12 20980.35
1999/08/31 18499.62 20980.07
1999/09/30 18706.27 21150.45
1999/10/31 18718.75 21184.37
1999/11/30 18708.60 21155.17
1999/12/31 18616.54 21018.24
2000/01/31 18566.72 21047.66
2000/02/29 18819.91 21347.22
2000/03/31 19099.28 21722.00
2000/04/28 19046.94 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000522 103048 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class T on
April 30, 1990, and the current 3.50% sales charge was paid. As the
chart shows, by April 30, 2000 the value of the investment would have
grown to $19,047 - a 90.47% 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 $21,662 - a 116.62% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.04% 5.48% 5.94% 6.07% 6.24% 6.99%
Capital returns -1.29% -7.19% 3.62% 1.90% -1.86% 7.92%
Total returns 1.75% -1.71% 9.56% 7.97% 4.38% 14.91%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.46(cents) 27.94(cents) 54.51(cents)
Annualized dividend rate 5.86% 6.09% 5.87%
30-day annualized yield 5.94% - -
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 $9.26 over the past one
month, $9.20 over the past six months and $9.29 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering price used in
the calculation of the yield includes the effect of Class T's current
3.50% sales charge.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on June 30, 1994. Class B shares bear a 0.90% 12b-1 fee
(1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B's 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six months,
past one year, past five years and past 10 years total return figures
are 5%, 5%, 2% and 0%, respectively. If Fidelity had not reimbursed
certain class expenses, the past five year and past 10 year total
returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.32% 0.23% 29.03% 89.59%
CL B
FIDELITY ADV GOVERNMENT INV - -3.61% -4.52% 27.05% 89.59%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 2.25% 1.99% 39.08% 116.62%
General US Government Funds 1.33% 0.19% 32.51% 98.85%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class B's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 188 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 0.23% 5.23% 6.61%
CL B
FIDELITY ADV GOVERNMENT INV - -4.52% 4.90% 6.61%
CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 10000.00 10000.00
1990/05/31 10293.01 10278.87
1990/06/30 10441.27 10441.60
1990/07/31 10567.83 10575.18
1990/08/31 10500.26 10427.91
1990/09/30 10570.06 10527.93
1990/10/31 10676.25 10699.93
1990/11/30 10862.40 10937.07
1990/12/31 11002.50 11106.20
1991/01/31 11123.22 11225.44
1991/02/28 11215.84 11289.69
1991/03/31 11260.92 11347.10
1991/04/30 11354.49 11471.63
1991/05/31 11414.08 11516.23
1991/06/30 11407.60 11499.89
1991/07/31 11529.88 11636.34
1991/08/31 11708.71 11906.16
1991/09/30 11920.33 12155.88
1991/10/31 12026.82 12262.31
1991/11/30 12096.34 12385.29
1991/12/31 12482.42 12807.24
1992/01/31 12313.11 12607.86
1992/02/29 12369.74 12657.10
1992/03/31 12284.89 12583.13
1992/04/30 12356.87 12662.40
1992/05/31 12583.70 12896.00
1992/06/30 12757.90 13080.81
1992/07/31 12973.32 13410.47
1992/08/31 13084.99 13535.44
1992/09/30 13206.56 13726.87
1992/10/31 13047.32 13528.81
1992/11/30 13080.34 13505.41
1992/12/31 13291.76 13732.83
1993/01/31 13519.41 14024.51
1993/02/28 13773.11 14305.37
1993/03/31 13852.07 14353.28
1993/04/30 13956.43 14463.68
1993/05/31 13978.42 14447.78
1993/06/30 14253.57 14768.38
1993/07/31 14324.16 14858.47
1993/08/31 14557.71 15190.11
1993/09/30 14584.42 15248.18
1993/10/31 14682.24 15305.81
1993/11/30 14457.65 15138.00
1993/12/31 14535.50 15196.51
1994/01/31 14788.94 15404.50
1994/02/28 14446.44 15078.38
1994/03/31 14009.83 14739.24
1994/04/30 13870.05 14623.32
1994/05/31 13884.51 14604.55
1994/06/30 13837.22 14570.99
1994/07/31 14114.80 14838.82
1994/08/31 14109.27 14841.69
1994/09/30 13883.00 14632.59
1994/10/31 13850.52 14621.55
1994/11/30 13815.04 14594.83
1994/12/31 13899.25 14683.59
1995/01/31 14139.73 14956.94
1995/02/28 14442.89 15278.87
1995/03/31 14529.75 15374.70
1995/04/30 14692.61 15575.62
1995/05/31 15254.86 16203.80
1995/06/30 15352.45 16328.11
1995/07/31 15288.27 16268.05
1995/08/31 15452.29 16459.26
1995/09/30 15583.44 16617.80
1995/10/31 15815.52 16870.83
1995/11/30 16031.34 17133.80
1995/12/31 16251.64 17376.68
1996/01/31 16325.50 17483.33
1996/02/29 15982.49 17127.18
1996/03/31 15826.92 16984.10
1996/04/30 15701.04 16875.69
1996/05/31 15658.39 16847.43
1996/06/30 15848.82 17064.91
1996/07/31 15872.02 17107.09
1996/08/31 15825.77 17068.89
1996/09/30 16068.16 17352.17
1996/10/31 16399.40 17733.94
1996/11/30 16661.04 18042.39
1996/12/31 16474.56 17858.25
1997/01/31 16476.93 17878.12
1997/02/28 16474.54 17902.63
1997/03/31 16301.19 17713.18
1997/04/30 16514.90 17968.87
1997/05/31 16624.47 18123.87
1997/06/30 16803.78 18327.22
1997/07/31 17252.60 18847.43
1997/08/31 17072.18 18661.07
1997/09/30 17323.42 18941.71
1997/10/31 17579.37 19269.38
1997/11/30 17632.73 19368.07
1997/12/31 17796.27 19570.55
1998/01/31 18070.25 19863.33
1998/02/28 17989.08 19809.45
1998/03/31 18006.72 19865.53
1998/04/30 18058.89 19954.96
1998/05/31 18225.89 20159.86
1998/06/30 18412.05 20389.05
1998/07/31 18430.05 20420.62
1998/08/31 18786.42 20951.87
1998/09/30 19256.22 21516.67
1998/10/31 19139.19 21443.36
1998/11/30 19136.33 21450.65
1998/12/31 19175.73 21498.56
1999/01/31 19271.91 21623.32
1999/02/28 18799.86 21109.07
1999/03/31 18858.85 21191.94
1999/04/30 18914.33 21239.96
1999/05/31 18715.19 21053.65
1999/06/30 18632.76 21010.80
1999/07/31 18533.39 20980.35
1999/08/31 18511.88 20980.07
1999/09/30 18688.76 21150.45
1999/10/31 18711.29 21184.37
1999/11/30 18671.09 21155.17
1999/12/31 18569.08 21018.24
2000/01/31 18509.37 21047.66
2000/02/29 18772.62 21347.22
2000/03/31 19020.79 21722.00
2000/04/28 18958.51 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000522 170451 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class B on
April 30, 1990. As the chart shows, by April 30, 2000, the value of
the investment would have grown to $18,959 - an 89.59% 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 $21,662 - a 116.62%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.72% 4.85% 5.25% 5.41% 5.55% 6.15%
Capital returns -1.40% -7.09% 3.62% 1.79% -1.86% 8.04%
Total returns 1.32% -2.24% 8.87% 7.20% 3.69% 14.19%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.97(cents) 25.00(cents) 48.55(cents)
Annualized dividend rate 5.22% 5.46% 5.23%
30-day annualized yield 5.51% - -
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 $9.26 over the past one
month, $9.19 over the past six months, and $9.28 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
FIDELITY ADVISOR GOVERNMENT INVESTMENT FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class C shares
took place on November 3, 1997. Class C shares bear a 1.00% 12b-1 fee.
Returns between June 30, 1994 and November 3, 1997 are those of Class
B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to
January 1, 1996). Returns prior to June 30, 1994 are those of Class T,
the original class of the fund, and reflect Class T shares' 0.25%
12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns
between November 3, 1997 and January 1, 1996 and prior to June 30,
1994 would have been lower. Class C shares' contingent deferred sales
charge included in the past six months, past one year, past five years
and past 10 years total return figures are 1%, 1%, 0%, and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five year and past 10 year total returns would have been
lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.39% 0.15% 28.69% 89.07%
CL C
FIDELITY ADV GOVERNMENT INV - 0.40% -0.81% 28.69% 89.07%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 2.25% 1.99% 39.08% 116.62%
General US Government Funds 1.33% 0.19% 32.51% 98.95%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to those of the
Lehman Brothers Government Bond Index - a market value-weighted index
of U.S. government and government agency securities (other than
mortgage securities) with maturities of one year or more. To measure
how Class C's performance stacked up against its peers, you can
compare it to the general U.S. government funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 188 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 0.15% 5.17% 6.58%
CL C
FIDELITY ADV GOVERNMENT INV - -0.81% 5.17% 6.58%
CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 10000.00 10000.00
1990/05/31 10293.01 10278.87
1990/06/30 10441.27 10441.60
1990/07/31 10567.83 10575.18
1990/08/31 10500.26 10427.91
1990/09/30 10570.06 10527.93
1990/10/31 10676.25 10699.93
1990/11/30 10862.40 10937.07
1990/12/31 11002.50 11106.20
1991/01/31 11123.22 11225.44
1991/02/28 11215.84 11289.69
1991/03/31 11260.92 11347.10
1991/04/30 11354.49 11471.63
1991/05/31 11414.08 11516.23
1991/06/30 11407.60 11499.89
1991/07/31 11529.88 11636.34
1991/08/31 11708.71 11906.16
1991/09/30 11920.33 12155.88
1991/10/31 12026.82 12262.31
1991/11/30 12096.34 12385.29
1991/12/31 12482.42 12807.24
1992/01/31 12313.11 12607.86
1992/02/29 12369.74 12657.10
1992/03/31 12284.89 12583.13
1992/04/30 12356.87 12662.40
1992/05/31 12583.70 12896.00
1992/06/30 12757.90 13080.81
1992/07/31 12973.32 13410.47
1992/08/31 13084.99 13535.44
1992/09/30 13206.56 13726.87
1992/10/31 13047.32 13528.81
1992/11/30 13080.34 13505.41
1992/12/31 13291.76 13732.83
1993/01/31 13519.41 14024.51
1993/02/28 13773.11 14305.37
1993/03/31 13852.07 14353.28
1993/04/30 13956.43 14463.68
1993/05/31 13978.42 14447.78
1993/06/30 14253.57 14768.38
1993/07/31 14324.16 14858.47
1993/08/31 14557.71 15190.11
1993/09/30 14584.42 15248.18
1993/10/31 14682.24 15305.81
1993/11/30 14457.65 15138.00
1993/12/31 14535.50 15196.51
1994/01/31 14788.94 15404.50
1994/02/28 14446.44 15078.38
1994/03/31 14009.83 14739.24
1994/04/30 13870.05 14623.32
1994/05/31 13884.51 14604.55
1994/06/30 13837.22 14570.99
1994/07/31 14114.80 14838.82
1994/08/31 14109.27 14841.69
1994/09/30 13883.00 14632.59
1994/10/31 13850.52 14621.55
1994/11/30 13815.04 14594.83
1994/12/31 13899.25 14683.59
1995/01/31 14139.73 14956.94
1995/02/28 14442.89 15278.87
1995/03/31 14529.75 15374.70
1995/04/30 14692.61 15575.62
1995/05/31 15254.86 16203.80
1995/06/30 15352.45 16328.11
1995/07/31 15288.27 16268.05
1995/08/31 15452.29 16459.26
1995/09/30 15583.44 16617.80
1995/10/31 15815.52 16870.83
1995/11/30 16031.34 17133.80
1995/12/31 16251.64 17376.68
1996/01/31 16325.50 17483.33
1996/02/29 15982.49 17127.18
1996/03/31 15826.92 16984.10
1996/04/30 15701.04 16875.69
1996/05/31 15658.39 16847.43
1996/06/30 15848.82 17064.91
1996/07/31 15872.02 17107.09
1996/08/31 15825.77 17068.89
1996/09/30 16068.16 17352.17
1996/10/31 16399.40 17733.94
1996/11/30 16661.04 18042.39
1996/12/31 16474.56 17858.25
1997/01/31 16476.93 17878.12
1997/02/28 16474.54 17902.63
1997/03/31 16301.19 17713.18
1997/04/30 16514.90 17968.87
1997/05/31 16624.47 18123.87
1997/06/30 16803.78 18327.22
1997/07/31 17252.60 18847.43
1997/08/31 17072.18 18661.07
1997/09/30 17323.42 18941.71
1997/10/31 17579.37 19269.38
1997/11/30 17628.50 19368.07
1997/12/31 17789.70 19570.55
1998/01/31 18043.13 19863.33
1998/02/28 17977.84 19809.45
1998/03/31 17994.90 19865.53
1998/04/30 18045.44 19954.96
1998/05/31 18210.53 20159.86
1998/06/30 18394.72 20389.05
1998/07/31 18392.30 20420.62
1998/08/31 18745.88 20951.87
1998/09/30 19231.60 21516.67
1998/10/31 19113.26 21443.36
1998/11/30 19109.16 21450.65
1998/12/31 19128.03 21498.56
1999/01/31 19241.52 21623.32
1999/02/28 18749.75 21109.07
1999/03/31 18826.19 21191.94
1999/04/30 18879.87 21239.96
1999/05/31 18659.84 21053.65
1999/06/30 18576.15 21010.80
1999/07/31 18495.34 20980.35
1999/08/31 18452.79 20980.07
1999/09/30 18647.39 21150.45
1999/10/31 18648.30 21184.37
1999/11/30 18627.04 21155.17
1999/12/31 18503.93 21018.24
2000/01/31 18443.44 21047.66
2000/02/29 18704.37 21347.22
2000/03/31 18970.78 21722.00
2000/04/28 18907.30 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000523 085738 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund - Class C on
April 30, 1990. As the chart shows, by April 30, 2000, the value of
the investment would have grown to $18,907 - an 89.07% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Government Bond Index did over the same period. With dividends
reinvested the same $10,000 would have grown to $21,662 - a 116.62%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
2000 1999 1998
Dividend returns 2.68% 4.76% 5.08%
Capital returns -1.29% -7.19% 3.94%
Total returns 1.39% -2.43% 9.02%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.90(cents) 24.62(cents) 47.70(cents)
Annualized dividend rate 5.12% 5.37% 5.13%
30-day annualized yield 5.41% - -
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 $9.26 over the past one
month, $9.20 over the past six months, and $9.29 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(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 six-month period that ended April 30, 2000, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
1.70%, 1.75%, 1.32% and 1.39%, respectively. To get a sense of how the
fund did relative to its competitors, the general U.S. government
funds average returned 1.33% for the same six-month period, according
to Lipper Inc. Additionally, the Lehman Brothers Government Bond Index
- which tracks the types of securities in which the fund invests -
returned 2.25% for the same six-month period. For the 12-month period
that ended April 30, 2000, the fund's Class A, Class T, Class B and
Class C shares provided total returns of 0.98%, 0.88%, 0.23% and
0.15%, respectively. For the same one-year period, the U.S. government
funds average returned 0.19% and the Lehman Brothers index returned
1.99%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST
SIX MONTHS?
A. The fund's holdings in U.S. Treasury securities - particularly
those with long maturities - performed relatively well as the U.S.
government bought back older, high-interest Treasury bonds and scaled
back its number of auctions of new debt in response to a swelling
federal budget surplus. Fortunately, we held more longer-term
Treasuries than many of our peers. That said, 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 30% of its investments
in mortgage securities, which are not included in the index. While
agency and mortgage securities underperformed Treasuries on a price
basis, they generated far more income for the fund than Treasuries
did, which was a plus.
Q. WHAT OTHER FACTORS CAUSED AGENCY AND MORTGAGE SECURITIES TO PERFORM
POORLY?
A. First off, agency and mortgage securities suffered from a
deteriorating supply and demand backdrop. While the Treasury curtailed
issuance and bought back outstanding debt, many agencies increased
their issuance activity. A second problem was proposals to change the
relationship between agencies and the U.S. government. In a surprising
development, a senior Treasury official shook up the market when he
urged Congress to cut off longstanding but never-used lines of credit
that give some agencies - particularly mortgage security issuers
Fannie Mae and Freddie Mac - implicit government backing. He also
asked Congress to curtail the amount of agency securities that
commercial banks could own. Although it remained unclear whether those
recommendations would translate into actual policy, investors
generally avoided agency and mortgage debt in favor of Treasury
securities.
Q. WHAT CHANGES DID YOU MAKE IN RESPONSE TO ALL THESE SHIFTS?
A. I sold some longer-term Treasury securities to lock in their very
strong performance and replaced them with agency securities, which I
felt were much more attractively priced. As a key indicator of
agencies' cheapness, they offered 120 basis points (1.20 percentage
points) more in yield than 30-year Treasuries at the end of April.
That disparity is wider than it has been over the past decade.
Q. WHERE ELSE DID YOU FIND OPPORTUNITIES DURING THE PAST SIX MONTHS?
A. At various points during the period, I identified opportunities to
swap between mortgage securities and callable agency securities. On
some occasions, mortgage securities that carried an interest rate of
6.5%, which currently make up the bulk of the mortgage securities
market, were more cheaply priced. On other occasions, agency
securities issued by Fannie Mae with a 10-year maturity, which are
callable in three years, offered the better value. Callable means that
the security can be bought back by the issuing agency before maturity.
Because the two securities carry the same interest-rate sensitivity,
they theoretically should experience similar gains and losses as
interest rates move down and up. But that wasn't always the case, so I
was able to exploit various price inefficiencies that occur, buying
the security that was cheapest and selling the one that looked rich.
Q. WHAT'S YOUR OUTLOOK?
A. The current yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries, in
my view, and I plan to keep relatively large weightings in them. Both
of the spread securities are positioned to do well to the extent that
their spread relationship relative to Treasuries returns to more
normal levels. Their yield advantage over Treasuries also positions
them to outpace Treasuries even if spreads remain constant.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a high level of
current income by investing
in U.S. government securities
and instruments related to
U.S. government securities
START DATE: January 7, 1987
SIZE: as of April 30, 2000;
more than $316 million
MANAGER: Tom Silvia, since
1998; joined Fidelity in
1993
TOM SILVIA ON RECENT
DEVELOPMENTS IN THE
MORTGAGE SECURITIES MARKET:
"Fannie Mae and Freddie Mac are
government-sponsored
enterprises (GSEs) and, as such,
enjoy certain benefits, including a
$4.5 billion line of credit from the
U.S. Treasury. They purchase home
loans from originators such as banks,
thrifts and mortgage banks, which
they hold for their own investment
portfolios. They also pool home loans
into mortgage securities. Whether
they hold mortgages for their
own portfolios or whether they
package them as securities, the
effect is that cash is freed up so that
originators can make new loans. As
a result, Fannie Mae and Freddie
Mac securities make up a
fast-growing share of the government
debt markets at a time when the
Treasury is limiting its issuance.
"Although its emergency line of credit
from the U.S. Treasury has never been
tapped, it carries symbolic
significance because it traditionally
has allowed Fannie Mae and
Freddie Mac to borrow at interest
rates close to the U.S. government's
rate. Renewed government
interest in curbing Fannie's and
Freddie's line of credit and
limiting how much of their
securities commercial banks can
own have caused these securities
to perform poorly recently."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.3 1.1
5 - 5.99% 14.4 16.0
6 - 6.99% 26.6 28.1
7 - 7.99% 27.4 18.8
8 - 8.99% 21.6 24.6
9 - 9.99% 3.7 3.8
10% and over 2.4 5.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 9.5 9.7
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 APRIL 30, 2000
6 MONTHS AGO
Years 5.3 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 APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 30.2% Mortgage Securities 19.6%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 3.6% Related Securities 2.1%
U.S. Treasury Obligations 18.5% U.S. Treasury Obligations 24.9%
U.S. Government Agency U.S. Government Agency
Obligations 45.0% Obligations 51.2%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.7% Net Other Assets 2.2%
Row: 1, Col: 1, Value: 30.2 Row: 1, Col: 1, Value: 19.6
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 3.6 Row: 1, Col: 3, Value: 2.1
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 18.5 Row: 1, Col: 5, Value: 24.9
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 45.0 Row: 1, Col: 7, Value: 51.2
Row: 1, Col: 8, Value: 2.7 Row: 1, Col: 8, Value: 2.2
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 63.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 45.0%
Fannie Mae:
5.125% 2/13/04 $ 12,000,000 $ 11,169,360
5.25% 1/15/09 8,000,000 6,942,480
5.45% 2/4/02 5,000,000 4,807,600
6.5% 8/15/04 2,900,000 2,819,786
6.5% 4/29/09 17,250,000 15,959,010
7.125% 1/15/30 23,100,000 22,865,304
Federal Home Loan Bank 5.83% 7,000,000 6,554,870
8/25/05
Financing Corp. - coupon 4,500,000 4,224,735
STRIPS 0% 4/6/01
Freddie Mac:
6.25% 7/15/04 8,000,000 7,711,280
7% 2/15/03 5,000,000 4,978,100
Government Loan Trusts 908,145 941,664
(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 3,120,865 3,172,578
Class 2-E, 9.4% 5/15/02 457,418 465,725
Class 3-T, 9.625% 5/15/02 226,278 228,541
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1993-C, 5.2% 10/15/04 191,200 182,119
Series 1993-D, 5.23% 5/15/05 218,936 207,229
Series 1994-A, 7.12% 4/15/06 9,862,285 9,811,988
Series 1994-F, 8.187% 12/15/04 3,864,423 3,909,351
Series 1995-A, 6.28% 6/15/04 1,858,235 1,814,461
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1994-A, 7.39% 6/26/06 4,875,000 4,886,212
Series 1994-B, 7.5% 1/26/06 187,811 187,754
Series 1997-A, 6.104% 7/15/03 2,333,333 2,286,433
Israel Export Trust 187,059 186,479
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% 1,501,625 1,466,847
8/15/04 (callable)
Series 1996-A1, 6.726% 1,826,087 1,790,917
9/15/10 (callable)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) $ 1,700,000 $ 1,599,173
5.65% 3/15/03 514,500 503,973
5.82% 6/15/03 (a) 8,600,000 8,140,760
6.86% 4/30/04 806,000 796,936
State of Israel (guaranteed 8,000,000 7,740,960
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 1999-A:
5.75% 8/1/06 2,100,000 1,936,620
5.96% 8/1/09 1,800,000 1,694,358
U.S. Trade Trust Certificates 420,000 429,114
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank) 8.17%
1/15/07
TOTAL U.S. GOVERNMENT AGENCY 142,412,717
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
18.5%
U.S. Treasury Bonds:
6.5% 11/15/26 3,000,000 3,109,230
8.75% 5/15/17 30,345,000 37,926,397
8.875% 8/15/17 9,411,000 11,906,421
14% 11/15/11 4,200,000 5,800,578
TOTAL U.S. TREASURY 58,742,626
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 201,155,343
GOVERNMENT AGENCY OBLIGATIONS
(Cost $206,518,847)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 30.2%
FANNIE MAE - 23.7%
5.5% 7/1/09 1,945,305 1,828,840
6% 9/1/08 to 6/1/14 9,046,030 8,574,160
6.5% 6/1/07 to 8/1/29 15,367,234 14,422,341
7% 4/1/26 to 9/1/29 20,844,627 19,961,426
7.5% 3/1/09 to 3/1/30 20,690,974 20,342,154
8% 7/1/29 to 4/1/30 3,988,799 3,982,536
8.25% 12/1/01 658,146 659,174
8.5% 9/1/16 to 1/1/17 77,081 78,376
9% 11/1/11 to 5/1/14 3,234,498 3,270,642
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
9.25% 9/1/16 $ 32,830 $ 34,119
9.5% 11/1/06 to 5/1/20 1,446,627 1,510,717
11.5% 6/1/19 278,960 307,536
12.5% 8/1/15 11,913 13,335
74,985,356
FREDDIE MAC - 4.3%
6.5% 5/1/08 to 8/1/11 3,112,151 3,013,541
6.775% 11/15/03 4,628,888 4,526,365
8.5% 8/1/09 to 2/1/10 209,607 211,595
8.5% 5/1/30 (b) 3,640,000 3,694,600
9% 10/1/08 to 10/1/20 711,328 727,953
9.5% 5/1/21 to 7/1/21 470,190 491,325
10.5% 1/1/16 to 12/1/20 313,496 333,290
11% 7/1/13 to 5/1/14 304,948 325,291
12.5% 2/1/10 to 6/1/19 344,204 382,981
13,706,941
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.2%
7.5% 9/15/06 to 1/15/08 1,409,971 1,412,367
8% 12/15/23 4,688,544 4,710,486
9% 5/15/01 to 12/15/09 180,364 182,622
10.5% 8/15/16 to 1/20/18 433,680 467,295
13.5% 7/15/11 37,211 42,569
6,815,339
TOTAL U.S. GOVERNMENT AGENCY 95,507,636
- MORTGAGE SECURITIES
(Cost $97,479,304)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.9%
U.S. GOVERNMENT AGENCY - 2.9%
Fannie Mae REMIC planned
amortization class:
Series 1993-134 Class GA, 2,730,000 2,680,519
6.5% 2/25/07
Series 1993-160 Class PK, 5,413,000 5,176,181
6.5% 11/25/22
Freddie Mac REMIC planned 1,446,803 1,486,590
amortization class Series
1141 Class G, 9% 9/15/21
TOTAL COLLATERALIZED MORTGAGE 9,343,290
OBLIGATIONS
(Cost $9,304,983)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
Fannie Mae ACES REMIC $ 2,189,315 $ 2,155,791
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,208,603)
CASH EQUIVALENTS - 2.7%
MATURITY AMOUNT
Investments in repurchase $ 8,444,119 8,440,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $8,440,000)
TOTAL INVESTMENT PORTFOLIO - 316,602,060
100.0%
(Cost $323,951,737)
NET OTHER ASSETS - 0.0% 106,076
NET ASSETS - 100% $ 316,708,136
</TABLE>
LEGEND
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $9,739,933 or 3.1% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $324,049,995. Net unrealized depreciation
aggregated $7,447,935, of which $899,879 related to appreciated
investment securities and $8,347,814 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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 316,602,060
value (including repurchase
agreements of $8,440,000)
(cost $323,951,737) - See
accompanying schedule
Cash 10,361
Receivable for investments 150,139
sold
Receivable for fund shares 563,371
sold
Interest receivable 5,071,075
TOTAL ASSETS 322,397,006
LIABILITIES
Payable for investments $ 3,720,282
purchased on a delayed
delivery basis
Payable for fund shares 1,389,045
redeemed
Distributions payable 273,699
Accrued management fee 113,107
Distribution fees payable 121,263
Other payables and accrued 71,474
expenses
TOTAL LIABILITIES 5,688,870
NET ASSETS $ 316,708,136
Net Assets consist of:
Paid in capital $ 341,048,773
Undistributed net investment 244,047
income
Accumulated undistributed net (17,235,007)
realized gain (loss) on
investments
Net unrealized appreciation (7,349,677)
(depreciation) on investments
NET ASSETS $ 316,708,136
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $9.18
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($12,018,504 (divided by)
1,308,880 shares)
Maximum offering price per $9.64
share (100/95.25 of $9.18)
CLASS T: NET ASSET VALUE and $9.18
redemption price per share
($177,565,528 (divided by)
19,345,505 shares)
Maximum offering price per $9.51
share (100/96.50 of $9.18)
CLASS B: NET ASSET VALUE and $9.17
offering price per share
($75,630,319 (divided by)
8,246,467 shares) A
CLASS C: NET ASSET VALUE and $9.18
offering price per share
($30,178,058 (divided by)
3,288,506 shares) A
INSTITUTIONAL CLASS: NET $9.14
ASSET VALUE, offering price
and redemption price per
share ($21,315,727 (divided
by) 2,331,264 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 11,850,430
Interest
Security lending 14,307
TOTAL INCOME 11,864,737
EXPENSES
Management fee $ 734,562
Transfer agent fees 312,369
Distribution fees 787,344
Accounting and security 50,885
lending fees
Non-interested trustees' 525
compensation
Custodian fees and expenses 12,152
Registration fees 46,316
Audit 21,391
Legal 3,303
Miscellaneous 1,248
Total expenses before 1,970,095
reductions
Expense reductions (2,370) 1,967,725
NET INVESTMENT INCOME 9,897,012
REALIZED AND UNREALIZED GAIN (7,964,201)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized 2,752,314
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (5,211,887)
NET INCREASE (DECREASE) IN $ 4,685,125
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,897,012 $ 19,798,129
income
Net realized gain (loss) (7,964,201) (9,202,613)
Change in net unrealized 2,752,314 (17,582,000)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,685,125 (6,986,484)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (10,140,273) (20,097,409)
from net investment income
Share transactions - net (61,358,511) 75,179,570
increase (decrease)
TOTAL INCREASE (DECREASE) (66,813,659) 48,095,677
IN NET ASSETS
NET ASSETS
Beginning of period 383,521,795 335,426,118
End of period (including $ 316,708,136 $ 383,521,795
undistributed net investment
income of $244,047 and
$487,308, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.310 $ 10.020 $ 9.670 $ 9.490 $ 9.250
of period
Income from Investment
Operations
Net investment income D .279 .545 .545 .552 .090
Net realized and unrealized (.124) (.696) .368 .187 .241
gain (loss)
Total from investment .155 (.151) .913 .739 .331
operations
Less Distributions
From net investment income (.285) (.559) (.563) (.559) (.091)
Net asset value, end of $ 9.180 $ 9.310 $ 10.020 $ 9.670 $ 9.490
period
TOTAL RETURN B, C 1.70% (1.53)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,019 $ 15,273 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .85% A .87% .90% F .90% F .90% A, F
net assets
Ratio of net investment 6.07% A 5.73% 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30,2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.020 $ 9.670 $ 9.490 $ 9.670
period
Income from Investment
Operations
Net investment income .274 D .541 D .546 D .558 D .586 D
Net realized and unrealized (.115) (.710) .351 .171 (.180)
gain (loss)
Total from investment .159 (.169) .897 .729 .406
operations
Less Distributions
From net investment income (.279) (.551) (.547) (.549) (.586)
Net asset value, end of $ 9.180 $ 9.300 $ 10.020 $ 9.670 $ 9.490
period
TOTAL RETURN B, C 1.75% (1.71)% 9.56% 7.97% 4.38%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 177,566 $ 215,089 $ 212,933 $ 144,948 $ 217,883
(000 omitted)
Ratio of expenses to average .95% A .96% 1.00% E 1.00% E 1.00%
net assets
Ratio of expenses to average .95% A .95% F 1.00% 1.00% .99% F
net assets after expense
reductions
Ratio of net investment 5.97% A 5.65% 5.59% 5.88% 6.19%
income to average net assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 8.960
period
Income from Investment
Operations
Net investment income .594
Net realized and unrealized .701
gain (loss)
Total from investment 1.295
operations
Less Distributions
From net investment income (.585)
Net asset value, end of $ 9.670
period
TOTAL RETURN B, C 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 208,620
(000 omitted)
Ratio of expenses to average .89% E
net assets
Ratio of expenses to average .89%
net assets after expense
reductions
Ratio of net investment 6.34%
income to average net assets
Portfolio turnover rate 261%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
period
Income from Investment
Operations
Net investment income .245 D .479 D .475 D .494 D .520 D .542
Net realized and unrealized (.125) (.699) .359 .166 (.177) .693
gain (loss)
Total from investment .120 (.220) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.250) (.490) (.484) (.490) (.523) (.515)
Net asset value, end of period $ 9.170 $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670
TOTAL RETURN B, C 1.32% (2.24)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 75,630 $ 94,871 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.59% A 1.59% 1.65% E 1.65% E 1.67% E 1.65% E
net assets
Ratio of net investment 5.33% A 5.01% 4.92% 5.24% 5.51% 5.58%
income to average net
assets
Portfolio turnover rate 124% A 174% 243% 136% 153% 261%
</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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .240 .468 .450
Net realized and unrealized (.114) (.708) .398
gain (loss)
Total from investment .126 (.240) .848
operations
Less Distributions
From net investment income (.246) (.480) (.468)
Net asset value, end of period $ 9.180 $ 9.300 $ 10.020
TOTAL RETURN B, C 1.39% (2.43)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 30,178 $ 35,652 $ 14,954
(000 omitted)
Ratio of expenses to average 1.68% A 1.69% 1.75% A, F
net assets
Ratio of net investment 5.24% A 4.91% 4.74% A
income to average net assets
Portfolio turnover rate 124% A 174% 243%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.270 $ 10.000 $ 9.650 $ 9.480 $ 9.670
period
Income from Investment
Operations
Net investment income .284 D .567 D .570 D .580 D .604 D
Net realized and unrealized (.121) (.720) .352 .165 (.180)
gain (loss)
Total from investment .163 (.153) .922 .745 .424
operations
Less Distributions
From net investment income (.293) (.577) (.572) (.575) (.614)
Net asset value, end of period $ 9.140 $ 9.270 $ 10.000 $ 9.650 $ 9.480
TOTAL RETURN B, C 1.80% (1.55)% 9.86% 8.18% 4.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 21,316 $ 22,636 $ 25,582 $ 20,366 $ 27,660
(000 omitted)
Ratio of expenses to average .66% A .68% .75% F .75% F .75% F
net assets
Ratio of net investment 6.26% A 5.92% 5.84% 6.12% 6.43%
income to aver- age net
assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.560
period
Income from Investment
Operations
Net investment income .197
Net realized and unrealized .108
gain (loss)
Total from investment .305
operations
Less Distributions
From net investment income (.195)
Net asset value, end of period $ 9.670
TOTAL RETURN B, C 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,588
(000 omitted)
Ratio of expenses to average .75% A, F
net assets
Ratio of net investment 6.48% A
income to aver- age net
assets
Portfolio turnover rate 261%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $208,113,479 and $269,850,782, 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 annualized 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 and
Service Plans with respect to each class of shares (collectively
referred to as "the Plans"). Under certain of the Plans, the class
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. A portion of this fee may be reallowed
to securities dealers, banks and other financial institutions for the
distribution of each class of shares and providing shareholder support
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
services. For the period, this fee was based on the following annual
rates of the average net assets of each applicable class:
CLASS A .15%
CLASS T .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 $ 10,150 $ 110
CLASS T 242,692 3,467
CLASS B 369,808 268,329
CLASS C 164,694 98,323
$ 787,344 $ 370,229
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 $ 31,779 $ 7,492
CLASS T 88,434 26,040
CLASS B 185,735 185,735*
CLASS C 16,989 16,989*
$ 322,937 $ 236,256
* 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 $ 13,050 .19
CLASS T 182,701 .19
CLASS B 72,362 .18
CLASS C 27,249 .17
INSTITUTIONAL CLASS 17,007 .16
$ 312,369
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
maintains the fund's accounting records and administers the security
lending program. The security lending fee is based on the number and
duration of lending transactions. The accounting fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
6. 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
expenses. During the period, the fund's custodian fees were reduced by
$2,370 under this arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 418,483 $ 712,354
Class T 5,902,359 12,190,847
Class B 2,237,109 4,349,049
Class C 883,248 1,346,657
Institutional Class 699,074 1,498,502
Total $ 10,140,273 $ 20,097,409
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 436,519 4,350,590 $ 4,025,775
Reinvestment of distributions 35,162 56,426 322,738
Shares redeemed (803,753) (3,552,941) (7,408,865)
Net increase (decrease) (332,072) 854,075 $ (3,060,352)
CLASS T Shares sold 5,861,611 17,547,111 $ 53,825,288
Reinvestment of distributions 552,228 1,053,527 5,067,783
Shares redeemed (10,185,161) (16,736,818) (93,300,407)
Net increase (decrease) (3,771,322) 1,863,820 $ (34,407,336)
CLASS B Shares sold 1,674,273 7,298,446 $ 15,420,459
Reinvestment of distributions 175,996 342,261 1,613,831
Shares redeemed (3,808,397) (4,835,159) (34,937,220)
Net increase (decrease) (1,958,128) 2,805,548 $ (17,902,930)
CLASS C Shares sold 810,043 4,078,555 $ 7,447,783
Reinvestment of distributions 62,117 83,356 569,782
Shares redeemed (1,416,069) (1,822,180) (12,996,021)
Net increase (decrease) (543,909) 2,339,731 $ (4,978,456)
INSTITUTIONAL CLASS Shares 1,282,315 894,248 $ 11,761,261
sold
Reinvestment of distributions 62,864 129,392 574,706
Shares redeemed (1,454,925) (1,140,602) (13,345,404)
Net increase (decrease) (109,746) (116,962) $ (1,009,437)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 41,844,902
Reinvestment of distributions 538,689
Shares redeemed (34,104,460)
Net increase (decrease) $ 8,279,131
CLASS T Shares sold $ 169,027,264
Reinvestment of distributions 10,087,686
Shares redeemed (160,930,470)
Net increase (decrease) $ 18,184,480
CLASS B Shares sold $ 70,320,373
Reinvestment of distributions 3,271,123
Shares redeemed (46,429,578)
Net increase (decrease) $ 27,161,918
CLASS C Shares sold $ 39,397,472
Reinvestment of distributions 792,733
Shares redeemed (17,548,890)
Net increase (decrease) $ 22,641,315
INSTITUTIONAL CLASS Shares $ 8,576,171
sold
Reinvestment of distributions 1,237,833
Shares redeemed (10,901,278)
Net increase (decrease) $ (1,087,274)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Stanley N. Griffith, Assistant Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor 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-SANN-0600 104539
1.703567.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
GOVERNMENT INVESTMENT
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(2_FIDELITY_LOGOS)(registered trademark)
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over
time.
FUND TALK 7 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 10 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 11 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 15 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY 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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.80% 1.06% 34.58% 99.27%
INST CL
LB Government Bond 2.25% 1.99% 39.08% 116.62%
General US Government Funds 1.33% 0.19% 32.51% 98.85%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Lehman Brothers Government Bond Index - a
market value-weighted index of U.S. government and government agency
securities (other than mortgage securities) with maturities of one
year or more. To measure how Institutional Class' performance stacked
up against its peers, you can compare it to the general U.S.
government funds average, which reflects the performance of mutual
funds with similar objectives tracked by Lipper Inc. The past six
months average represents a peer group of 188 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV GOVERNMENT INV - 1.06% 6.12% 7.14%
INST CL
LB Government Bond 1.99% 6.82% 8.04%
General US Government Funds 0.19% 5.78% 7.09%
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
1990/04/30 10000.00 10000.00
1990/05/31 10293.01 10278.87
1990/06/30 10441.27 10441.60
1990/07/31 10567.83 10575.18
1990/08/31 10500.26 10427.91
1990/09/30 10570.06 10527.93
1990/10/31 10676.25 10699.93
1990/11/30 10862.40 10937.07
1990/12/31 11002.50 11106.20
1991/01/31 11123.22 11225.44
1991/02/28 11215.84 11289.69
1991/03/31 11260.92 11347.10
1991/04/30 11354.49 11471.63
1991/05/31 11414.08 11516.23
1991/06/30 11407.60 11499.89
1991/07/31 11529.88 11636.34
1991/08/31 11708.71 11906.16
1991/09/30 11920.33 12155.88
1991/10/31 12026.82 12262.31
1991/11/30 12096.34 12385.29
1991/12/31 12482.42 12807.24
1992/01/31 12313.11 12607.86
1992/02/29 12369.74 12657.10
1992/03/31 12284.89 12583.13
1992/04/30 12356.87 12662.40
1992/05/31 12583.70 12896.00
1992/06/30 12757.90 13080.81
1992/07/31 12973.32 13410.47
1992/08/31 13084.99 13535.44
1992/09/30 13206.56 13726.87
1992/10/31 13047.32 13528.81
1992/11/30 13080.34 13505.41
1992/12/31 13291.76 13732.83
1993/01/31 13519.41 14024.51
1993/02/28 13773.11 14305.37
1993/03/31 13852.07 14353.28
1993/04/30 13956.43 14463.68
1993/05/31 13978.42 14447.78
1993/06/30 14253.57 14768.38
1993/07/31 14324.16 14858.47
1993/08/31 14557.71 15190.11
1993/09/30 14584.42 15248.18
1993/10/31 14682.24 15305.81
1993/11/30 14457.65 15138.00
1993/12/31 14535.50 15196.51
1994/01/31 14788.94 15404.50
1994/02/28 14446.44 15078.38
1994/03/31 14009.83 14739.24
1994/04/30 13870.05 14623.32
1994/05/31 13884.51 14604.55
1994/06/30 13837.22 14570.99
1994/07/31 14138.90 14838.82
1994/08/31 14130.65 14841.69
1994/09/30 13932.12 14632.59
1994/10/31 13908.55 14621.55
1994/11/30 13882.04 14594.83
1994/12/31 13976.00 14683.59
1995/01/31 14226.90 14956.94
1995/02/28 14537.78 15278.87
1995/03/31 14634.14 15374.70
1995/04/30 14807.45 15575.62
1995/05/31 15383.36 16203.80
1995/06/30 15491.34 16328.11
1995/07/31 15438.13 16268.05
1995/08/31 15616.99 16459.26
1995/09/30 15764.42 16617.80
1995/10/31 15998.85 16870.83
1995/11/30 16231.60 17133.80
1995/12/31 16452.60 17376.68
1996/01/31 16542.00 17483.33
1996/02/29 16207.31 17127.18
1996/03/31 16063.11 16984.10
1996/04/30 15962.75 16875.69
1996/05/31 15931.59 16847.43
1996/06/30 16119.95 17064.91
1996/07/31 16155.79 17107.09
1996/08/31 16121.09 17068.89
1996/09/30 16380.26 17352.17
1996/10/31 16730.89 17733.94
1996/11/30 17012.60 18042.39
1996/12/31 16836.36 17858.25
1997/01/31 16849.80 17878.12
1997/02/28 16857.07 17902.63
1997/03/31 16693.08 17713.18
1997/04/30 16925.07 17968.87
1997/05/31 17050.65 18123.87
1997/06/30 17247.50 18327.22
1997/07/31 17721.99 18847.43
1997/08/31 17549.85 18661.07
1997/09/30 17821.48 18941.71
1997/10/31 18098.72 19269.38
1997/11/30 18167.49 19368.07
1997/12/31 18350.36 19570.55
1998/01/31 18646.84 19863.33
1998/02/28 18575.55 19809.45
1998/03/31 18607.96 19865.53
1998/04/30 18675.74 19954.96
1998/05/31 18862.94 20159.86
1998/06/30 19069.85 20389.05
1998/07/31 19103.17 20420.62
1998/08/31 19487.63 20951.87
1998/09/30 19989.03 21516.67
1998/10/31 19882.57 21443.36
1998/11/30 19894.38 21450.65
1998/12/31 19910.72 21498.56
1999/01/31 20046.64 21623.32
1999/02/28 19549.31 21109.07
1999/03/31 19645.43 21191.94
1999/04/30 19717.99 21239.96
1999/05/31 19504.70 21053.65
1999/06/30 19433.40 21010.80
1999/07/31 19365.13 20980.35
1999/08/31 19336.20 20980.07
1999/09/30 19557.46 21150.45
1999/10/31 19575.22 21184.37
1999/11/30 19569.39 21155.17
1999/12/31 19477.52 21018.24
2000/01/31 19408.72 21047.66
2000/02/29 19700.75 21347.22
2000/03/31 19977.38 21722.00
2000/04/28 19927.14 21661.90
IMATRL PRASUN SHR__CHT 20000430 20000523 093234 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Government Investment Fund -
Institutional Class on April 30, 1990. As the chart shows, by April
30, 2000, the value of the investment would have grown to $19,927 - a
99.27% 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 $21,662
- a 116.62% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday
is no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.20% 5.75% 6.23% 6.39% 6.54% 2.08%
Capital returns -1.40% -7.30% 3.63% 1.79% -1.96% 1.15%
Total returns 1.80% -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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.68(cents) 29.28(cents) 57.15(cents)
Annualized dividend rate 6.17% 6.40% 6.17%
30-day annualized yield 6.47% - -
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 $9.23 over the past one
month, $9.17 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(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 six-month period that ended April 30, 2000, the fund's
Institutional Class shares provided a total return of 1.80%. To get a
sense of how the fund did relative to its competitors, the general
U.S. government funds average returned 1.33% for the same six-month
period, according to Lipper Inc. Additionally, the Lehman Brothers
Government Bond Index - which tracks the types of securities in which
the fund invests - returned 2.25% for the same six-month period. For
the 12-month period that ended April 30, 2000, the fund's
Institutional Class shares provided a total return of 1.06%, while the
U.S. government funds average returned 0.19% and the Lehman Brothers
index returned 1.99%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST
SIX MONTHS?
A. The fund's holdings in U.S. Treasury securities - particularly
those with long maturities - performed relatively well as the U.S.
government bought back older, high-interest Treasury bonds and scaled
back its number of auctions of new debt in response to a swelling
federal budget surplus. Fortunately, we held more longer-term
Treasuries than many of our peers. That said, 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 30% of its investments
in mortgage securities, which are not included in the index. While
agency and mortgage securities underperformed Treasuries on a price
basis, they generated far more income for the fund than Treasuries
did, which was a plus.
Q. WHAT OTHER FACTORS CAUSED AGENCY AND MORTGAGE SECURITIES TO PERFORM
POORLY?
A. First off, agency and mortgage securities suffered from a
deteriorating supply and demand backdrop. While the Treasury curtailed
issuance and bought back outstanding debt, many agencies increased
their issuance activity. A second problem was proposals to change the
relationship between agencies and the U.S. government. In a surprising
development, a senior Treasury official shook up the market when he
urged Congress to cut off longstanding but never-used lines of credit
that give some agencies - particularly mortgage security issuers
Fannie Mae and Freddie Mac - implicit government backing. He also
asked Congress to curtail the amount of agency securities that
commercial banks could own. Although it remained unclear whether those
recommendations would translate into actual policy, investors
generally avoided agency and mortgage debt in favor of Treasury
securities.
Q. WHAT CHANGES DID YOU MAKE IN RESPONSE TO ALL THESE SHIFTS?
A. I sold some longer-term Treasury securities to lock in their very
strong performance and replaced them with agency securities, which I
felt were much more attractively priced. As a key indicator of
agencies' cheapness, they offered 120 basis points (1.20 percentage
points) more in yield than 30-year Treasuries at the end of April.
That disparity is wider than it has been over the past decade.
Q. WHERE ELSE DID YOU FIND OPPORTUNITIES DURING THE PAST SIX MONTHS?
A. At various points during the period, I identified opportunities to
swap between mortgage securities and callable agency securities. On
some occasions, mortgage securities that carried an interest rate of
6.5%, which currently make up the bulk of the mortgage securities
market, were more cheaply priced. On other occasions, agency
securities issued by Fannie Mae with a 10-year maturity, which are
callable in three years, offered the better value. Callable means that
the security can be bought back by the issuing agency before maturity.
Because the two securities carry the same interest-rate sensitivity,
they theoretically should experience similar gains and losses as
interest rates move down and up. But that wasn't always the case, so I
was able to exploit various price inefficiencies that occur, buying
the security that was cheapest and selling the one that looked rich.
Q. WHAT'S YOUR OUTLOOK?
A. The current yield advantage offered by mortgage and agency
securities helps position them to perform better than Treasuries, in
my view, and I plan to keep relatively large weightings in them. Both
of the spread securities are positioned to do well to the extent that
their spread relationship relative to Treasuries returns to more
normal levels. Their yield advantage over Treasuries also positions
them to outpace Treasuries even if spreads remain constant.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a high level of
current income by investing
in U.S. government securities
and instruments related to
U.S. government securities
START DATE: January 7, 1987
SIZE: as of April 30, 2000;
more than $316 million
MANAGER: Tom Silvia, since
1998; joined Fidelity in
1993
TOM SILVIA ON RECENT
DEVELOPMENTS IN THE
MORTGAGE SECURITIES MARKET:
"Fannie Mae and Freddie Mac are
government-sponsored
enterprises (GSEs) and, as such,
enjoy certain benefits, including a
$4.5 billion line of credit from the
U.S. Treasury. They purchase home
loans from originators such as banks,
thrifts and mortgage banks, which
they hold for their own investment
portfolios. They also pool home loans
into mortgage securities. Whether
they hold mortgages for their
own portfolios or whether they
package them as securities, the
effect is that cash is freed up so that
originators can make new loans. As
a result, Fannie Mae and Freddie
Mac securities make up a
fast-growing share of the government
debt markets at a time when the
Treasury is limiting its issuance.
"Although its emergency line of credit
from the U.S. Treasury has never been
tapped, it carries symbolic
significance because it traditionally
has allowed Fannie Mae and
Freddie Mac to borrow at interest
rates close to the U.S. government's
rate. Renewed government
interest in curbing Fannie's and
Freddie's line of credit and
limiting how much of their
securities commercial banks can
own have caused these securities
to perform poorly recently."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Zero coupon bonds 1.3 1.1
5 - 5.99% 14.4 16.0
6 - 6.99% 26.6 28.1
7 - 7.99% 27.4 18.8
8 - 8.99% 21.6 24.6
9 - 9.99% 3.7 3.8
10% and over 2.4 5.5
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 9.5 9.7
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 APRIL 30, 2000
6 MONTHS AGO
Years 5.3 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 APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 30.2% Mortgage Securities 19.6%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 3.6% Related Securities 2.1%
U.S. Treasury Obligations 18.5% U.S. Treasury Obligations 24.9%
U.S. Government Agency U.S. Government Agency
Obligations 45.0% Obligations 51.2%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.7% Net Other Assets 2.2%
Row: 1, Col: 1, Value: 30.2 Row: 1, Col: 1, Value: 19.6
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 3.6 Row: 1, Col: 3, Value: 2.1
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 18.5 Row: 1, Col: 5, Value: 24.9
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 45.0 Row: 1, Col: 7, Value: 51.2
Row: 1, Col: 8, Value: 2.7 Row: 1, Col: 8, Value: 2.2
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 63.5%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 45.0%
Fannie Mae:
5.125% 2/13/04 $ 12,000,000 $ 11,169,360
5.25% 1/15/09 8,000,000 6,942,480
5.45% 2/4/02 5,000,000 4,807,600
6.5% 8/15/04 2,900,000 2,819,786
6.5% 4/29/09 17,250,000 15,959,010
7.125% 1/15/30 23,100,000 22,865,304
Federal Home Loan Bank 5.83% 7,000,000 6,554,870
8/25/05
Financing Corp. - coupon 4,500,000 4,224,735
STRIPS 0% 4/6/01
Freddie Mac:
6.25% 7/15/04 8,000,000 7,711,280
7% 2/15/03 5,000,000 4,978,100
Government Loan Trusts 908,145 941,664
(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 3,120,865 3,172,578
Class 2-E, 9.4% 5/15/02 457,418 465,725
Class 3-T, 9.625% 5/15/02 226,278 228,541
Guaranteed Export Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank):
Series 1993-C, 5.2% 10/15/04 191,200 182,119
Series 1993-D, 5.23% 5/15/05 218,936 207,229
Series 1994-A, 7.12% 4/15/06 9,862,285 9,811,988
Series 1994-F, 8.187% 12/15/04 3,864,423 3,909,351
Series 1995-A, 6.28% 6/15/04 1,858,235 1,814,461
Guaranteed Trade Trust
Certificates (assets of
Trust guaranteed by U.S.
Government through Export-
Import Bank):
Series 1994-A, 7.39% 6/26/06 4,875,000 4,886,212
Series 1994-B, 7.5% 1/26/06 187,811 187,754
Series 1997-A, 6.104% 7/15/03 2,333,333 2,286,433
Israel Export Trust 187,059 186,479
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% 1,501,625 1,466,847
8/15/04 (callable)
Series 1996-A1, 6.726% 1,826,087 1,790,917
9/15/10 (callable)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Private Export Funding Corp.
secured:
5.31% 11/15/03 (a) $ 1,700,000 $ 1,599,173
5.65% 3/15/03 514,500 503,973
5.82% 6/15/03 (a) 8,600,000 8,140,760
6.86% 4/30/04 806,000 796,936
State of Israel (guaranteed 8,000,000 7,740,960
by U.S. Government through
Agency for International
Development) 6.6% 2/15/08
U.S. Department of Housing
and Urban Development
government guaranteed
participation certificates
Series 1999-A:
5.75% 8/1/06 2,100,000 1,936,620
5.96% 8/1/09 1,800,000 1,694,358
U.S. Trade Trust Certificates 420,000 429,114
(assets of Trust guaranteed
by U.S. Government through
Export-Import Bank) 8.17%
1/15/07
TOTAL U.S. GOVERNMENT AGENCY 142,412,717
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
18.5%
U.S. Treasury Bonds:
6.5% 11/15/26 3,000,000 3,109,230
8.75% 5/15/17 30,345,000 37,926,397
8.875% 8/15/17 9,411,000 11,906,421
14% 11/15/11 4,200,000 5,800,578
TOTAL U.S. TREASURY 58,742,626
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 201,155,343
GOVERNMENT AGENCY OBLIGATIONS
(Cost $206,518,847)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 30.2%
FANNIE MAE - 23.7%
5.5% 7/1/09 1,945,305 1,828,840
6% 9/1/08 to 6/1/14 9,046,030 8,574,160
6.5% 6/1/07 to 8/1/29 15,367,234 14,422,341
7% 4/1/26 to 9/1/29 20,844,627 19,961,426
7.5% 3/1/09 to 3/1/30 20,690,974 20,342,154
8% 7/1/29 to 4/1/30 3,988,799 3,982,536
8.25% 12/1/01 658,146 659,174
8.5% 9/1/16 to 1/1/17 77,081 78,376
9% 11/1/11 to 5/1/14 3,234,498 3,270,642
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
9.25% 9/1/16 $ 32,830 $ 34,119
9.5% 11/1/06 to 5/1/20 1,446,627 1,510,717
11.5% 6/1/19 278,960 307,536
12.5% 8/1/15 11,913 13,335
74,985,356
FREDDIE MAC - 4.3%
6.5% 5/1/08 to 8/1/11 3,112,151 3,013,541
6.775% 11/15/03 4,628,888 4,526,365
8.5% 8/1/09 to 2/1/10 209,607 211,595
8.5% 5/1/30 (b) 3,640,000 3,694,600
9% 10/1/08 to 10/1/20 711,328 727,953
9.5% 5/1/21 to 7/1/21 470,190 491,325
10.5% 1/1/16 to 12/1/20 313,496 333,290
11% 7/1/13 to 5/1/14 304,948 325,291
12.5% 2/1/10 to 6/1/19 344,204 382,981
13,706,941
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.2%
7.5% 9/15/06 to 1/15/08 1,409,971 1,412,367
8% 12/15/23 4,688,544 4,710,486
9% 5/15/01 to 12/15/09 180,364 182,622
10.5% 8/15/16 to 1/20/18 433,680 467,295
13.5% 7/15/11 37,211 42,569
6,815,339
TOTAL U.S. GOVERNMENT AGENCY 95,507,636
- MORTGAGE SECURITIES
(Cost $97,479,304)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.9%
U.S. GOVERNMENT AGENCY - 2.9%
Fannie Mae REMIC planned
amortization class:
Series 1993-134 Class GA, 2,730,000 2,680,519
6.5% 2/25/07
Series 1993-160 Class PK, 5,413,000 5,176,181
6.5% 11/25/22
Freddie Mac REMIC planned 1,446,803 1,486,590
amortization class Series
1141 Class G, 9% 9/15/21
TOTAL COLLATERALIZED MORTGAGE 9,343,290
OBLIGATIONS
(Cost $9,304,983)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
PRINCIPAL AMOUNT VALUE (NOTE 1)
Fannie Mae ACES REMIC $ 2,189,315 $ 2,155,791
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
(Cost $2,208,603)
CASH EQUIVALENTS - 2.7%
MATURITY AMOUNT
Investments in repurchase $ 8,444,119 8,440,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $8,440,000)
TOTAL INVESTMENT PORTFOLIO - 316,602,060
100.0%
(Cost $323,951,737)
NET OTHER ASSETS - 0.0% 106,076
NET ASSETS - 100% $ 316,708,136
</TABLE>
LEGEND
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $9,739,933 or 3.1% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $324,049,995. Net unrealized depreciation
aggregated $7,447,935, of which $899,879 related to appreciated
investment securities and $8,347,814 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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 316,602,060
value (including repurchase
agreements of $8,440,000)
(cost $323,951,737) - See
accompanying schedule
Cash 10,361
Receivable for investments 150,139
sold
Receivable for fund shares 563,371
sold
Interest receivable 5,071,075
TOTAL ASSETS 322,397,006
LIABILITIES
Payable for investments $ 3,720,282
purchased on a delayed
delivery basis
Payable for fund shares 1,389,045
redeemed
Distributions payable 273,699
Accrued management fee 113,107
Distribution fees payable 121,263
Other payables and accrued 71,474
expenses
TOTAL LIABILITIES 5,688,870
NET ASSETS $ 316,708,136
Net Assets consist of:
Paid in capital $ 341,048,773
Undistributed net investment 244,047
income
Accumulated undistributed net (17,235,007)
realized gain (loss) on
investments
Net unrealized appreciation (7,349,677)
(depreciation) on investments
NET ASSETS $ 316,708,136
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $9.18
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($12,018,504 (divided by)
1,308,880 shares)
Maximum offering price per $9.64
share (100/95.25 of $9.18)
CLASS T: NET ASSET VALUE and $9.18
redemption price per share
($177,565,528 (divided by)
19,345,505 shares)
Maximum offering price per $9.51
share (100/96.50 of $9.18)
CLASS B: NET ASSET VALUE and $9.17
offering price per share
($75,630,319 (divided by)
8,246,467 shares) A
CLASS C: NET ASSET VALUE and $9.18
offering price per share
($30,178,058 (divided by)
3,288,506 shares) A
INSTITUTIONAL CLASS: NET $9.14
ASSET VALUE, offering price
and redemption price per
share ($21,315,727 (divided
by) 2,331,264 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 11,850,430
Interest
Security lending 14,307
TOTAL INCOME 11,864,737
EXPENSES
Management fee $ 734,562
Transfer agent fees 312,369
Distribution fees 787,344
Accounting and security 50,885
lending fees
Non-interested trustees' 525
compensation
Custodian fees and expenses 12,152
Registration fees 46,316
Audit 21,391
Legal 3,303
Miscellaneous 1,248
Total expenses before 1,970,095
reductions
Expense reductions (2,370) 1,967,725
NET INVESTMENT INCOME 9,897,012
REALIZED AND UNREALIZED GAIN (7,964,201)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized 2,752,314
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (5,211,887)
NET INCREASE (DECREASE) IN $ 4,685,125
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
(UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,897,012 $ 19,798,129
income
Net realized gain (loss) (7,964,201) (9,202,613)
Change in net unrealized 2,752,314 (17,582,000)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,685,125 (6,986,484)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (10,140,273) (20,097,409)
from net investment income
Share transactions - net (61,358,511) 75,179,570
increase (decrease)
TOTAL INCREASE (DECREASE) (66,813,659) 48,095,677
IN NET ASSETS
NET ASSETS
Beginning of period 383,521,795 335,426,118
End of period (including $ 316,708,136 $ 383,521,795
undistributed net investment
income of $244,047 and
$487,308, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.310 $ 10.020 $ 9.670 $ 9.490 $ 9.250
of period
Income from Investment
Operations
Net investment income D .279 .545 .545 .552 .090
Net realized and unrealized (.124) (.696) .368 .187 .241
gain (loss)
Total from investment .155 (.151) .913 .739 .331
operations
Less Distributions
From net investment income (.285) (.559) (.563) (.559) (.091)
Net asset value, end of $ 9.180 $ 9.310 $ 10.020 $ 9.670 $ 9.490
period
TOTAL RETURN B, C 1.70% (1.53)% 9.74% 8.09% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 12,019 $ 15,273 $ 7,884 $ 1,582 $ 223
(000 omitted)
Ratio of expenses to average .85% A .87% .90% F .90% F .90% A, F
net assets
Ratio of net investment 6.07% A 5.73% 5.65% 5.98% 6.28% A
income to average net assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30,2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.020 $ 9.670 $ 9.490 $ 9.670
period
Income from Investment
Operations
Net investment income .274 D .541 D .546 D .558 D .586 D
Net realized and unrealized (.115) (.710) .351 .171 (.180)
gain (loss)
Total from investment .159 (.169) .897 .729 .406
operations
Less Distributions
From net investment income (.279) (.551) (.547) (.549) (.586)
Net asset value, end of $ 9.180 $ 9.300 $ 10.020 $ 9.670 $ 9.490
period
TOTAL RETURN B, C 1.75% (1.71)% 9.56% 7.97% 4.38%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 177,566 $ 215,089 $ 212,933 $ 144,948 $ 217,883
(000 omitted)
Ratio of expenses to average .95% A .96% 1.00% E 1.00% E 1.00%
net assets
Ratio of expenses to average .95% A .95% F 1.00% 1.00% .99% F
net assets after expense
reductions
Ratio of net investment 5.97% A 5.65% 5.59% 5.88% 6.19%
income to average net assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 8.960
period
Income from Investment
Operations
Net investment income .594
Net realized and unrealized .701
gain (loss)
Total from investment 1.295
operations
Less Distributions
From net investment income (.585)
Net asset value, end of $ 9.670
period
TOTAL RETURN B, C 14.91%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 208,620
(000 omitted)
Ratio of expenses to average .89% E
net assets
Ratio of expenses to average .89%
net assets after expense
reductions
Ratio of net investment 6.34%
income to average net assets
Portfolio turnover rate 261%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670 $ 8.950
period
Income from Investment
Operations
Net investment income .245 D .479 D .475 D .494 D .520 D .542
Net realized and unrealized (.125) (.699) .359 .166 (.177) .693
gain (loss)
Total from investment .120 (.220) .834 .660 .343 1.235
operations
Less Distributions
From net investment income (.250) (.490) (.484) (.490) (.523) (.515)
Net asset value, end of period $ 9.170 $ 9.300 $ 10.010 $ 9.660 $ 9.490 $ 9.670
TOTAL RETURN B, C 1.32% (2.24)% 8.87% 7.20% 3.69% 14.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 75,630 $ 94,871 $ 74,073 $ 18,782 $ 17,355 $ 11,766
(000 omitted)
Ratio of expenses to average 1.59% A 1.59% 1.65% E 1.65% E 1.67% E 1.65% E
net assets
Ratio of net investment 5.33% A 5.01% 4.92% 5.24% 5.51% 5.58%
income to average net
assets
Portfolio turnover rate 124% A 174% 243% 136% 153% 261%
</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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.300 $ 10.020 $ 9.640
period
Income from Investment
Operations
Net investment income D .240 .468 .450
Net realized and unrealized (.114) (.708) .398
gain (loss)
Total from investment .126 (.240) .848
operations
Less Distributions
From net investment income (.246) (.480) (.468)
Net asset value, end of period $ 9.180 $ 9.300 $ 10.020
TOTAL RETURN B, C 1.39% (2.43)% 9.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 30,178 $ 35,652 $ 14,954
(000 omitted)
Ratio of expenses to average 1.68% A 1.69% 1.75% A, F
net assets
Ratio of net investment 5.24% A 4.91% 4.74% A
income to average net assets
Portfolio turnover rate 124% A 174% 243%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.270 $ 10.000 $ 9.650 $ 9.480 $ 9.670
period
Income from Investment
Operations
Net investment income .284 D .567 D .570 D .580 D .604 D
Net realized and unrealized (.121) (.720) .352 .165 (.180)
gain (loss)
Total from investment .163 (.153) .922 .745 .424
operations
Less Distributions
From net investment income (.293) (.577) (.572) (.575) (.614)
Net asset value, end of period $ 9.140 $ 9.270 $ 10.000 $ 9.650 $ 9.480
TOTAL RETURN B, C 1.80% (1.55)% 9.86% 8.18% 4.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 21,316 $ 22,636 $ 25,582 $ 20,366 $ 27,660
(000 omitted)
Ratio of expenses to average .66% A .68% .75% F .75% F .75% F
net assets
Ratio of net investment 6.26% A 5.92% 5.84% 6.12% 6.43%
income to average net
assets
Portfolio turnover rate 124% A 174% 243% 136% 153%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.560
period
Income from Investment
Operations
Net investment income .197
Net realized and unrealized .108
gain (loss)
Total from investment .305
operations
Less Distributions
From net investment income (.195)
Net asset value, end of period $ 9.670
TOTAL RETURN B, C 3.23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,588
(000 omitted)
Ratio of expenses to average .75% A, F
net assets
Ratio of net investment 6.48% A
income to aver- age net
assets
Portfolio turnover rate 261%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
commitments, the fund identifies securities as segregated in its
records with a value at least equal to the amount of the commitment.
Losses may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $208,113,479 and $269,850,782, 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 annualized 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 and
Service Plans with respect to each class of shares (collectively
referred to as "the Plans"). Under certain of the Plans, the class
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. A portion of this fee may be reallowed
to securities dealers, banks and other financial institutions for the
distribution of each class of shares and providing shareholder support
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
services. For the period, this fee was based on the following annual
rates of the average net assets of each applicable class:
CLASS A .15%
CLASS T .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 $ 10,150 $ 110
CLASS T 242,692 3,467
CLASS B 369,808 268,329
CLASS C 164,694 98,323
$ 787,344 $ 370,229
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 $ 31,779 $ 7,492
CLASS T 88,434 26,040
CLASS B 185,735 185,735*
CLASS C 16,989 16,989*
$ 322,937 $ 236,256
* 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 $ 13,050 .19
CLASS T 182,701 .19
CLASS B 72,362 .18
CLASS C 27,249 .17
INSTITUTIONAL CLASS 17,007 .16
$ 312,369
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
maintains the fund's accounting records and administers the security
lending program. The security lending fee is based on the number and
duration of lending transactions. The accounting fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
6. 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
expenses. During the period, the fund's custodian fees were reduced by
$2,370 under this arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 418,483 $ 712,354
Class T 5,902,359 12,190,847
Class B 2,237,109 4,349,049
Class C 883,248 1,346,657
Institutional Class 699,074 1,498,502
Total $ 10,140,273 $ 20,097,409
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 436,519 4,350,590 $ 4,025,775
Reinvestment of distributions 35,162 56,426 322,738
Shares redeemed (803,753) (3,552,941) (7,408,865)
Net increase (decrease) (332,072) 854,075 $ (3,060,352)
CLASS T Shares sold 5,861,611 17,547,111 $ 53,825,288
Reinvestment of distributions 552,228 1,053,527 5,067,783
Shares redeemed (10,185,161) (16,736,818) (93,300,407)
Net increase (decrease) (3,771,322) 1,863,820 $ (34,407,336)
CLASS B Shares sold 1,674,273 7,298,446 $ 15,420,459
Reinvestment of distributions 175,996 342,261 1,613,831
Shares redeemed (3,808,397) (4,835,159) (34,937,220)
Net increase (decrease) (1,958,128) 2,805,548 $ (17,902,930)
CLASS C Shares sold 810,043 4,078,555 $ 7,447,783
Reinvestment of distributions 62,117 83,356 569,782
Shares redeemed (1,416,069) (1,822,180) (12,996,021)
Net increase (decrease) (543,909) 2,339,731 $ (4,978,456)
INSTITUTIONAL CLASS Shares 1,282,315 894,248 $ 11,761,261
sold
Reinvestment of distributions 62,864 129,392 574,706
Shares redeemed (1,454,925) (1,140,602) (13,345,404)
Net increase (decrease) (109,746) (116,962) $ (1,009,437)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 41,844,902
Reinvestment of distributions 538,689
Shares redeemed (34,104,460)
Net increase (decrease) $ 8,279,131
CLASS T Shares sold $ 169,027,264
Reinvestment of distributions 10,087,686
Shares redeemed (160,930,470)
Net increase (decrease) $ 18,184,480
CLASS B Shares sold $ 70,320,373
Reinvestment of distributions 3,271,123
Shares redeemed (46,429,578)
Net increase (decrease) $ 27,161,918
CLASS C Shares sold $ 39,397,472
Reinvestment of distributions 792,733
Shares redeemed (17,548,890)
Net increase (decrease) $ 22,641,315
INSTITUTIONAL CLASS Shares $ 8,576,171
sold
Reinvestment of distributions 1,237,833
Shares redeemed (10,901,278)
Net increase (decrease) $ (1,087,274)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Stanley N. Griffith, Assistant Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor Latin America Fund
Fidelity Advisor 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-SANN-0600 104540
1.703568.102
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
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
SEMIANNUAL REPORT
APRIL 30, 2000
(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 16 The manager's review of fund
performance, strategy and
outlook.
INVESTMENT CHANGES 19 A summary of major shifts in
the fund's investments over
the past six months.
INVESTMENTS 20 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 33 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 42 Notes to the financial
statements.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL A 5.10% 5.37%
FIDELITY ADV HIGH INCOME - CL 0.11% 0.36%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master II 0.25% -0.73%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months or 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.
$10,000 OVER LIFE OF FUND
FA High Income CL A ML High Yield Master II
00374 ML012
1999/09/07 9525.00 10000.00
1999/09/30 9509.89 9956.60
1999/10/31 9549.21 9902.56
1999/11/30 9723.42 10031.69
1999/12/31 9853.79 10092.24
2000/01/31 9959.68 10053.60
2000/02/29 10122.21 10075.09
2000/03/31 10034.20 9927.21
2000/04/28 10036.27 9927.35
IMATRL PRASUN SHR__CHT 20000430 20000518 145043 R00000000000011
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Income Fund - Class A on September
7, 1999, when the fund started, and the current 4.75% sales charge was
paid. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $10,036 - a 0.36% 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 decreased to $9,927 - a 0.73%
decrease.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
2000 1999
Dividend returns 4.09% 1.05%
Capital returns 1.01% -0.80%
Total returns 5.10% 0.25%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share 7.21(cents) 40.28(cents) 50.81(cents)
Annualized dividend rate 8.76% 7.99% 7.80%
30-day annualized yield - - -
DIVIDENDS per share show the income paid by the class for a set
period. The annual dividend rate is based on an average share price of
$10.01 over the past one month, $10.11 over the past six months and
$10.08 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 returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL T 4.92% 5.16%
FIDELITY ADV HIGH INCOME - CL 1.25% 1.48%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master II 0.25% -0.73%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months or 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.
$10,000 OVER LIFE OF FUND
FA High Income CL T ML High Yield Master II
00378 ML012
1999/09/07 9650.00 10000.00
1999/09/30 9634.11 9956.60
1999/10/31 9672.56 9902.56
1999/11/30 9845.08 10031.69
1999/12/31 9976.50 10092.24
2000/01/31 10073.12 10053.60
2000/02/29 10236.90 10075.09
2000/03/31 10147.02 9927.21
2000/04/28 10148.22 9927.35
IMATRL PRASUN SHR__CHT 20000430 20000518 150122 R00000000000011
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Income Fund - Class T on September
7, 1999, when the fund started, and the current 3.50% sales charge was
paid. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $10,148 - a 1.48% 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 decreased to $9,927 - a 0.73%
decrease.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
2000 1999
Dividend returns 4.01% 1.03%
Capital returns 0.91% -0.80%
Total returns 4.92% 0.23%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share 7.12(cents) 39.50(cents) 49.82(cents)
Annualized dividend rate 8.66% 7.84% 7.65%
30-day annualized yield - - -
DIVIDENDS per share show the income paid by the class for a set
period. The annual dividend rate is based on an average share price of
of $10.00 over the past one month, $10.11 over the past six months and
$10.07 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 returns and dividends would have been lower. Class B shares'
contingent deferred sales charges included in the past six months and
life of fund total return figures are 5% and 5%, respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL B 4.47% 4.67%
FIDELITY ADV HIGH INCOME - CL -0.53% -0.33%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II 0.25% -0.73%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months or 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.
$10,000 OVER LIFE OF FUND
FA High Income CL B ML High Yield Master II
00375 ML012
1999/09/07 10000.00 10000.00
1999/09/30 9984.45 9956.60
1999/10/31 10019.40 9902.56
1999/11/30 10181.85 10031.69
1999/12/31 10312.13 10092.24
2000/01/31 10406.29 10053.60
2000/02/29 10580.53 10075.09
2000/03/31 10471.47 9927.21
2000/04/28 9967.00 9927.35
IMATRL PRASUN SHR__CHT 20000430 20000518 152519 R00000000000011
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Income Fund - Class B on September
7, 1999, when the fund started. As the chart shows, by April 30, 2000,
the value of the investment, including the effect of the applicable
contingent deferred sales charge, would have grown to $9,967 - a 0.33%
decrease 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 decreased to
$9,927 - a 0.73% decrease.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
2000 1999
Dividend returns 3.66% 0.99%
Capital returns 0.81% -0.80%
Total returns 4.47% 0.19%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share 6.60(cents) 36.14(cents) 46.07(cents)
Annualized dividend rate 8.04% 7.18% 7.08%
30-day annualized yield - - -
DIVIDENDS per share show the income paid by the class for a set
period. The annual dividend rate is based on an average share price of
$9.99 over the past one month, $10.10 over the past six months and
$10.07 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 returns and dividends would have been lower. Class C's
contingent deferred sales charges included in the past six months and
life of fund total return figures are 1% and 1%, respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS LIFE OF FUND
FIDELITY ADV HIGH INCOME - CL C 4.51% 4.60%
FIDELITY ADV HIGH INCOME - CL 3.51% 3.60%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II 0.25% -0.73%
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months or 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.
$10,000 OVER LIFE OF FUND
FA High Income CL C ML High Yield Master II
00376 ML012
1999/09/07 10000.00 10000.00
1999/09/30 9984.36 9956.60
1999/10/31 10007.74 9902.56
1999/11/30 10178.73 10031.69
1999/12/31 10307.89 10092.24
2000/01/31 10401.21 10053.60
2000/02/29 10574.50 10075.09
2000/03/31 10464.61 9927.21
2000/04/28 10360.00 9927.35
IMATRL PRASUN SHR__CHT 20000430 20000518 154148 R00000000000011
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Income Fund - Class C on September
7, 1999, when the fund started. As the chart shows, by April 30, 2000,
the value of the investment, including the effect of the contingent
deferred sales charge, would have grown to $10,360 - a 3.60% 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 decreased to $9,927
- a 0.73% decrease.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
(COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
2000 1999
Dividend returns 3.60% 0.98%
Capital returns 0.91% -0.90%
Total returns 4.51% 0.08%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share 6.52(cents) 35.55(cents) 45.32(cents)
Annualized dividend rate 7.94% 7.06% 6.96%
30-day annualized yield - - -
DIVIDENDS per share show the income paid by the class for a set
period. The annual dividend rate is based on an average share price of
$9.99 over the past one month, $10.10 over the past six months and
$10.07 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
The high-yield bond market eked out
a positive return over the past six
months ending April 30, 2000,
despite facing numerous obstacles
along the way, including widening
credit spreads, competition from the
high-flying NASDAQ market and
negative outflows from high-yield
mutual funds. For the six-month
period ending April 30, 2000, the
Merrill Lynch High Yield Master II
Index - a broad measure of the
high-yield market - had a marginal
gain of 0.25%. A short-lived rally in
the fourth quarter of 1999 was
responsible for the majority of this
positive performance, as investor
sentiment was geared toward more
aggressive investment opportunities.
Still, the high-yield sector lost a good
portion of its inflows to the
technology-rich NASDAQ market's
double- and triple-digit gains during
the period. And when the NASDAQ
faltered in March and April of 2000,
the high-yield market tumbled as well.
Restrictive monetary policy by the
Federal Reserve Board, which hiked
interest rates three times during the
six-month period, also put a damper
on high-yield bond performance, as
did widening credit spreads, or the
premium that investors demand for
higher perceived levels of risk versus
Treasury securities. For the period,
the high-yield sector trailed the
performance of the overall U.S.
taxable bond market, as measured
by the Lehman Brothers Aggregate
Bond Index, which gained 1.42%
during the past six months.
(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. For the six months that ended April 30, 2000, the fund's Class A,
Class T, Class B and Class C shares had total returns of 5.10%, 4.92%,
4.47% and 4.51%, respectively. The high-yield market, as measured by
the Merrill Lynch High Yield Master II Index, returned 0.25%. Since
the fund's inception on September 7, 1999, the fund's Class A, Class
T, Class B and Class C shares returned 5.37%, 5.16%, 4.67% and 4.60%,
respectively, while the Merrill Lynch index returned -0.73%.We will be
able to use a comparison to the high current yield funds average
tracked by Lipper Inc. in our next report six months from now, after
the fund has been in existence for more than one year.
Q. WHAT HELPED THE FUND BEAT THE INDEX?
A. The fund was more insulated than the index against several negative
influences: higher interest rates, shrinking liquidity in global
credit markets, increased default rates and net outflows from
high-yield mutual funds. Specifically, the fund focused on high-yield
bonds with relatively short maturities - which made them less
susceptible to the price declines brought on by higher rates - and on
issuers with relatively higher credit quality. In addition, the fund
benefited from its modest position in the leveraged equities of
high-yield companies, investments that provided strong performance
over the period.
Q. DID YOU CHANGE YOUR STRATEGY WITH THE CORE HIGH-YIELD PORTION OF
THE PORTFOLIO OVER THE COURSE OF THE SIX-MONTH PERIOD?
A. Yes, I did. Late in the period, junk bond prices fell to very
attractive levels. As a result, I became more willing to expand my
focus beyond my core investments in order to invest in values offered
by lesser-quality credits that met our analytical scrutiny. In terms
of sectors, there weren't many changes to how I allocated the fund,
with the exception of limiting our position in cable companies. The
fundamentals for this industry deteriorated due to the competition
posed by satellite, DSL - digital subscriber lines, which can carry
telephone and Internet services simultaneously over the same line -
and other formats that consumers are increasingly favoring over cable
delivery of communications, Internet and entertainment content. Beyond
that, the fund maintained a significant stake in telecommunications
and satellite issuers.
Q. WHAT SORT OF APPROACH DID YOU TAKE WITH THE FUND'S INVESTMENTS
BEYOND HIGH YIELD?
A. The fund continued to own little distressed debt. Opportunities
were few and far between in an area characterized by poorly run
companies with bad balance sheets and poor prospects. Leveraged
equities - common stocks of companies that have high-yield bonds
outstanding - continued to be a small but important part of the fund.
Q. WHICH INVESTMENTS WERE PARTICULARLY HELPFUL FOR PERFORMANCE? WHAT
ABOUT DISAPPOINTMENTS?
A. Large positions in several short-maturity names - Specialty Foods,
listed in the financial statements as SFC New Holdings, U.S. Home and
Dictaphone - provided strong double-digit returns over the past six
months, with little credit risk. And our investment in Arcadia
Financial worked out well - reflecting the quality of the research
done by our team of analysts - as the company was acquired by
Associates First Capital, an investment-grade consumer finance
company. On the down side, the fund's large position in Pathmark
suffered because the Federal Trade Commission killed the company's
plans to be acquired by Ahold, an investment-grade supermarket
company. Nevertheless, Pathmark's business continued to do well and
its balance sheet appeared fixable, so I maintained the fund's stake
in the company.
Q. WHAT'S YOUR OUTLOOK?
A. All of the conditions that led to a poor backdrop for the market
could persist for some time. Regardless of the backdrop, I do know
that 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. Equities, on the other hand, have no future
set price. If I do my credit work well, the bonds I choose for the
fund will eventually be paid off at par - or face value - after having
paid very attractive coupons - or interest. Currently, there are many
bonds of good companies selling well below par. Provided the
companies' businesses continue to do well, their bonds should
appreciate significantly as they approach maturity, when they must be
paid at par. Therefore, I believe a well-managed high-yield fund that
capitalizes on these opportunities and does its credit research could
earn very good returns over the next year or two.
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 April 30, 2000,
more than $34 million
MANAGER: David Glancy,
since inception; joined
Fidelity in 1990
DAVID GLANCY ON HIS
APPROACH TOWARD BUYING
AND SELLING:
"In the high-yield market, it
helps to be a buyer when everyone
is selling, and to be a seller when
everyone is buying. Behind this
approach is the high-yield market's
tendency to offer technical buying
opportunities every 12 to 18 months
when conditions arise that affect
the supply and demand of
high-yield bonds. Recent examples
of technical buying opportunities
driven by shrinking demand include
the international financial crisis
in 1998 and concerns related to
Y2K in late 1999. Liquidity shrank
because people didn't want to own
high-yield bonds for one reason or
another and looked to sell them in
order to raise cash. It's precisely at
times like these that I like to step
in and buy bonds at significant
discounts to par. That's why the
fund sometimes carries a cash
position of as much as 10%, so I
can have money at my disposal to
go on a shopping spree."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 2000
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
International Cabletel, Inc. 6.3 1.9
Century Communications Corp. 5.8 0.0
NEXTLINK Communications, Inc. 5.4 2.7
U.S. Home Corp 5.3 0.0
Adelphia Communications Corp. 3.5 1.9
26.3 6.5
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Media & Leisure 35.1 17.5
Utilities 22.9 26.1
Technology 10.2 4.6
Construction & Real Estate 6.7 0.0
Finance 6.0 3.0
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 2.1 0.0
Baa 0.4 0.0
Ba 5.4 10.4
B 65.9 46.0
Caa, Ca, C 10.5 4.6
Not Rated 1.7 4.6
</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 APRIL
30, 2000 AND OCTOBER 31, 1999 ACCOUNT FOR 1.7% AND 4.6%, RESPECTIVELY,
OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Nonconvertible Bonds 81.9% Nonconvertible Bonds 65.4%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 8.0% Stocks 3.0%
Common Stocks 4.1% Common Stocks 0.4%
Other Investments 3.7% Other Investments 0.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.3% Net Other Assets 31.2%
* FOREIGN INVESTMENTS 8.7% ** FOREIGN INVESTMENTS 8.9%
Row: 1, Col: 1, Value: 81.90000000000001 Row: 1, Col: 1, Value: 65.40000000000001
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 8.0 Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.1 Row: 1, Col: 5, Value: 0.4
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 3.7 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.3 Row: 1, Col: 8, Value: 31.2
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 82.8%
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.9%
HEALTH - 0.8%
MEDICAL FACILITIES MANAGEMENT
- 0.8%
Tenet Healthcare Corp. 6% B1 $ 140,000 $ 114,800
12/1/05
Total Renal Care Holdings,
Inc.:
7% 5/15/09 B1 110,000 60,500
7% 5/15/09 (d) B3 160,000 89,600
264,900
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5% 5/15/06 Ba2 40,000 30,200
TOTAL CONVERTIBLE BONDS 295,100
NONCONVERTIBLE BONDS - 81.9%
BASIC INDUSTRIES - 2.7%
CHEMICALS & PLASTICS - 1.6%
Huntsman Corp. 9.5% 7/1/07 (d) B2 600,000 546,000
METALS & MINING - 0.5%
Kaiser Aluminum & Chemical B1 175,000 168,000
Corp. 9.875% 2/15/02
PACKAGING & CONTAINERS - 0.2%
Gaylord Container Corp. Caa2 100,000 78,000
9.875% 2/15/08
PAPER & FOREST PRODUCTS - 0.4%
Container Corp. of America B2 100,000 102,000
gtd. 11.25% 5/1/04
Crown Paper Co. 11% 9/1/05 (b) Ca 50,000 14,000
116,000
TOTAL BASIC INDUSTRIES 908,000
CONSTRUCTION & REAL ESTATE -
6.5%
BUILDING MATERIALS - 0.7%
Building Materials Corp. of Ba3 45,000 38,138
America 8% 12/1/08
Nortek, Inc. 9.875% 3/1/04 B3 175,000 165,375
Numatics, Inc. 9.625% 4/1/08 B3 52,000 41,210
244,723
CONSTRUCTION - 5.4%
Lennar Corp. 9.95% 5/1/10 (d) Ba1 45,000 41,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
CONSTRUCTION - CONTINUED
U.S. Home Corp.:
8.875% 2/15/09 B1 $ 1,765,000 $ 1,800,300
8.88% 8/15/07 B1 10,000 10,175
1,852,016
REAL ESTATE - 0.4%
LNR Property Corp. 9.375% B1 145,000 126,875
3/15/08
TOTAL CONSTRUCTION & REAL 2,223,614
ESTATE
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
St. John Knits International, B3 40,000 37,400
Inc. 12.5% 7/1/09
ENERGY - 0.2%
OIL & GAS - 0.2%
Benton Oil & Gas Co. 11.625% B3 25,000 17,000
5/1/03
Gothic Production Corp. B3 50,000 42,250
11.125% 5/1/05
59,250
FINANCE - 5.0%
CREDIT & OTHER FINANCE - 4.6%
AMRESCO, Inc. 9.875% 3/15/05 Caa3 140,000 96,600
Arcadia Financial Ltd.:
11.5% 3/15/07 A1 660,000 712,800
Delta Financial Corp. 9.5% B3 255,000 140,250
8/1/04
GS Escrow Corp.:
6.75% 8/1/01 Ba1 300,000 287,499
7% 8/1/03 Ba1 40,000 36,237
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 10,000 7,500
7.875% 8/1/03 Ba2 95,000 71,250
Metris Companies, Inc. 10% Ba3 210,000 196,350
11/1/04
1,548,486
INSURANCE - 0.4%
Reliance Group Holdings, Inc. Ba2 165,000 150,150
9% 11/15/00
TOTAL FINANCE 1,698,636
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - 1.6%
MEDICAL FACILITIES MANAGEMENT
- 1.6%
Fountain View, Inc. 11.25% Caa1 $ 120,000 $ 66,000
4/15/08
Oxford Health Plans, Inc. 11% Caa1 175,000 178,500
5/15/05
Tenet Healthcare Corp.:
8.125% 12/1/08 Ba3 50,000 46,250
8.625% 1/15/07 Ba3 20,000 19,100
Unilab Corp. 12.75% 10/1/09 B3 233,000 232,418
542,268
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 0.9%
Loral Space & Communications B1 445,000 304,825
Ltd. 9.5% 1/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Thermadyne Holdings Corp. 0% Caa1 25,000 10,000
6/1/08 (c)
Thermadyne Manufacturing LLC B3 110,000 86,900
9.875% 6/1/08
96,900
POLLUTION CONTROL - 2.0%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 175,000 136,500
10% 8/1/09 B2 610,000 417,850
Browning-Ferris Industries, Ba3 160,000 132,800
Inc. 6.1% 1/15/03
687,150
TOTAL INDUSTRIAL MACHINERY & 1,088,875
EQUIPMENT
MEDIA & LEISURE - 32.0%
BROADCASTING - 27.7%
ACME Television LLC/ACME B3 465,000 425,475
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp. B1 1,190,000 1,178,100
9.25% 10/1/02
Century Communications Corp.:
0% 3/15/03 B1 30,000 21,975
9.5% 8/15/00 B1 300,000 300,750
9.5% 3/1/05 B1 125,000 120,938
9.75% 2/15/02 B1 1,505,000 1,497,475
Diamond Cable Communications
PLC:
0% 2/15/07 (c) B3 20,000 15,400
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Diamond Cable Communications
PLC: - continued
yankee:
0% 12/15/05 (c) B3 $ 200,000 $ 187,500
13.25% 9/30/04 B3 315,000 334,688
EchoStar DBS Corp.:
9.25% 2/1/06 B2 200,000 192,000
9.375% 2/1/09 B2 140,000 134,750
Golden Sky DBS, Inc. 0% Caa1 300,000 199,500
3/1/07 (c)
Golden Sky Systems, Inc. B3 150,000 163,500
12.375% 8/1/06
Impsat Fiber Networks, Inc. B3 200,000 186,000
13.75% 2/15/05 (d)
International Cabletel, Inc.:
Series A, 12.75% 4/15/05 B3 170,000 171,700
0% 2/1/06 (c) B3 2,130,000 1,980,886
Knology Holding, Inc. 0% - 45,000 27,900
10/15/07 (c)
NorthPoint Communication Caa1 190,000 169,100
Holdings, Inc. 12.875%
2/15/10 (d)
Pegasus Communications Corp.:
9.625% 10/15/05 B3 35,000 34,300
9.75% 12/1/06 B3 50,000 49,000
Pegasus Media & B3 300,000 312,000
Communications, Inc. 12.5%
7/1/05
Satelites Mexicanos SA de CV:
10.03% 6/30/04 (d)(e) B1 420,000 392,700
10.125% 11/1/04 B3 500,000 370,000
Telewest PLC 0% 10/1/07 (c) B1 414,000 382,950
United International B3 275,000 184,938
Holdings, Inc. 0% 2/15/08
(c)
United Pan-Europe
Communications NV:
0% 2/1/10 (c)(d) B2 200,000 95,000
10.875% 11/1/07 (d) B2 110,000 100,650
10.875% 8/1/09 B2 50,000 45,500
11.25% 2/1/10 (d) B2 75,000 69,000
11.5% 2/1/10 (d) B2 100,000 92,500
9,436,175
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.6%
Alliance Gaming Corp. 10% Caa1 $ 250,000 $ 110,000
8/1/07
AMC Entertainment, Inc. 9.5% B3 190,000 104,500
3/15/09
214,500
LEISURE DURABLES & TOYS - 0.0%
Hedstrom Corp. 10% 6/1/07 (b) Caa3 85,000 3,400
LODGING & GAMING - 2.9%
Courtyard by Marriott II B- 290,000 282,750
LP/Courtyard II Finance Co.
10.75% 2/1/08
Florida Panthers Holdings, B2 220,000 200,200
Inc. 9.875% 4/15/09
Hollywood Casino Corp. 11.25% B3 170,000 172,125
5/1/07
ITT Corp. 6.25% 11/15/00 Ba1 85,000 83,725
Station Casinos, Inc. 9.75% B1 250,000 250,000
4/15/07
988,800
PUBLISHING - 0.4%
American Lawyer Media B1 155,000 143,763
Holdings, Inc. 9.75%
12/15/07
RESTAURANTS - 0.4%
Domino's, Inc. 10.375% 1/15/09 B3 155,000 143,375
TOTAL MEDIA & LEISURE 10,930,013
NONDURABLES - 1.6%
FOODS - 1.4%
Chiquita Brands B1 150,000 120,750
International, Inc. 10%
6/15/09
SFC New Holdings, Inc. Caa1 350,000 349,563
12.125% 10/1/02
470,313
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Caa1 100,000 71,000
Corp. 8.125% 2/1/06
TOTAL NONDURABLES 541,313
RETAIL & WHOLESALE - 1.4%
GENERAL MERCHANDISE STORES -
0.4%
Kmart Corp. 8.375% 12/1/04 Baa3 135,000 131,288
GROCERY STORES - 0.8%
Pathmark Stores, Inc.:
9.625% 5/1/03 (b) Caa3 385,000 273,350
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Pathmark Stores, Inc.: -
continued
11.625% 6/15/02 Ca $ 20,000 $ 5,600
12.625% 6/15/02 Ca 50,000 14,000
292,950
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.2%
J. Crew Operating Corp. Caa1 5,000 4,300
10.375% 10/15/07
National Vision Association Ca 200,000 64,000
Ltd. 12.75% 10/15/05
68,300
TOTAL RETAIL & WHOLESALE 492,538
TECHNOLOGY - 8.6%
COMPUTER SERVICES & SOFTWARE
- 7.0%
Amazon.com, Inc. 0% 5/1/08 (c) Caa1 147,000 85,995
Colo.com 13.875% 3/15/10 unit - 100,000 102,000
(d)
Concentric Network Corp. B- 160,000 169,600
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (c) B3 168,000 103,320
12% 2/15/10 (d) B3 280,000 265,300
12.5% 2/15/09 B3 215,000 209,088
Exodus Communications, Inc. B- 300,000 300,000
10.75% 12/15/09
Federal Data Corp. 10.125% B3 250,000 162,500
8/1/05
PSINet, Inc.:
10% 2/15/05 B3 290,000 255,200
10.5% 12/1/06 B3 145,000 129,050
11% 8/1/09 B3 305,000 272,975
Verio, Inc.:
10.625% 11/15/09 (d) B3 325,000 312,000
11.25% 12/1/08 B3 30,000 29,700
2,396,728
COMPUTERS & OFFICE EQUIPMENT
- 1.2%
Dictaphone Corp. 11.75% 8/1/05 Caa1 170,000 170,850
Globix Corp. 12.5% 2/1/10 (d) - 260,000 227,500
398,350
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.4%
Telecommunications Techniques B3 $ 145,000 $ 133,038
Co. LLC 9.75% 5/15/08
TOTAL TECHNOLOGY 2,928,116
TRANSPORTATION - 0.4%
AIR TRANSPORTATION - 0.4%
US Air, Inc. 9.625% 2/1/01 B3 150,000 146,250
UTILITIES - 18.6%
CELLULAR - 4.1%
AirGate PCS, Inc. 0% 10/1/09 Caa1 100,000 58,000
(c)
Clearnet Communications, Inc. B3 100,000 100,250
yankee 0% 12/15/05 (c)
Globalstar LP/Globalstar
Capital Corp.:
10.75% 11/1/04 Caa1 40,000 13,900
11.375% 2/15/04 Caa1 330,000 116,325
11.5% 6/1/05 Caa1 45,000 15,750
Leap Wireless International,
Inc.:
0% 4/15/10 unit (c)(d) Caa2 105,000 48,300
12.5% 4/15/10 unit (d) Caa2 100,000 94,000
McCaw International Ltd. 0% Caa1 103,000 75,705
4/15/07 (c)
Microcell Telecommunications, B3 40,000 24,900
Inc. 0% 6/1/09 (c)
Millicom International Caa1 100,000 84,500
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 2/15/08 (c) B1 165,000 114,675
9.375% 11/15/09 B1 205,000 195,263
Nextel International, Inc. 0% Caa1 135,000 85,725
4/15/08 (c)
Nextel Partners, Inc. 11% B3 100,000 98,250
3/15/10 (d)
Orion Network Systems, Inc. B2 45,000 25,875
11.25% 1/15/07
PageMart Nationwide, Inc. 15% B3 15,000 14,850
2/1/05
US Unwired, Inc. 0% 11/1/09 Caa1 190,000 106,875
(c)(d)
USA Mobile Communication, B3 120,000 108,000
Inc. II 14% 11/1/04
Voicestream Wireless B2 15,000 9,188
Corp./Voicestream Wireless
Holding Co. 0% 11/15/09
(c)(d)
1,390,331
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 14.5%
360networks, Inc. 13% 5/1/08 B3 $ 270,000 $ 265,950
(d)
Allegiance Telecom, Inc. 0% B3 105,000 73,238
2/15/08 (c)
FirstWorld Communications, - 70,000 30,450
Inc. 0% 4/15/08 (c)
Flag Telecom Holdings Ltd. B2 100,000 93,000
11.625% 3/30/10 (d)
Focal Communications Corp. B3 250,000 250,625
11.875% 1/15/10 (d)
Globenet Communication Group Caa1 95,000 95,475
Ltd. 13% 7/15/07
Hyperion Telecommunications, B3 285,000 297,113
Inc. 12.25% 9/1/04
ICG Holdings, Inc. 0% 9/15/05 B3 315,000 297,675
(c)
ICG Services, Inc. 0% 5/1/08 B3 460,000 227,700
(c)
Intermedia Communications,
Inc.:
0% 5/15/06 (c) B2 450,000 423,000
0% 7/15/07 (c) B2 100,000 75,750
0% 3/1/09 (c) B3 25,000 14,563
Level 3 Communications, Inc.:
0% 12/1/08 (c) B3 50,000 28,500
11% 3/15/08 (d) B3 275,000 266,063
McLeodUSA, Inc.:
0% 3/1/07 (c) B1 360,000 285,300
8.375% 3/15/08 B1 15,000 13,613
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 10,000 9,550
10% 12/15/09 B2 330,000 315,150
NEXTLINK Communications LLC B2 20,000 20,700
12.5% 4/15/06
NEXTLINK Communications, Inc.:
0% 4/15/08 (c) B2 267,000 163,538
0% 6/1/09 (c) B2 211,000 123,435
0% 12/1/09 (c)(d) B2 105,000 57,225
10.75% 11/15/08 B3 45,000 43,988
10.75% 6/1/09 B2 405,000 396,900
Rhythms NetConnections, Inc. B3 165,000 143,963
14% 2/15/10 (d)
Rochester Telephone Corp.:
8.77% 4/16/01 Ba2 100,000 99,500
9% 7/19/00 Ba2 50,000 50,063
9.07% 7/5/00 Ba2 50,000 50,063
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Rochester Telephone Corp.: -
continued
9.1% 7/5/00 Ba2 $ 50,000 $ 50,063
Teligent, Inc. 11.5% 12/1/07 Caa1 125,000 106,250
WinStar Communications, Inc.:
12.5% 4/15/08 (d) B3 25,000 24,438
12.75% 4/15/10 (d) B3 430,000 409,575
Worldwide Fiber, Inc. 12% B3 145,000 134,850
8/1/09
4,937,266
TOTAL UTILITIES 6,327,597
TOTAL NONCONVERTIBLE BONDS 27,923,870
TOTAL CORPORATE BONDS 28,218,970
(Cost $29,023,832)
COMMERCIAL MORTGAGE
SECURITIES - 0.9%
Mortgage Capital Funding, Ba1 400,000 315,424
Inc. Series 1998-MC3 Class
F, 7.3178% 11/18/31 (d)(e)
(Cost $314,219)
</TABLE>
COMMON STOCKS - 4.1%
SHARES
BASIC INDUSTRIES - 0.0%
CHEMICALS & PLASTICS - 0.0%
Sterling Chemicals Holdings, 1,000 5,250
Inc. (a)
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
American Standard Companies, 1,500 61,500
Inc. (a)
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.1%
Associates First Capital 10,800 972
Corp. (a)
Delta Financial Corp. (a) 14,200 27,513
28,485
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 0.1%
American Financial Group, 1,200 $ 30,525
Inc.
TOTAL FINANCE 59,010
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- 0.2%
Oxford Health Plans, Inc. (a) 3,000 57,000
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Loral Space & Communications 1,400 13,738
Ltd. (a)
POLLUTION CONTROL - 0.0%
Allied Waste Industries, Inc. 1,600 9,800
(a)
TOTAL INDUSTRIAL MACHINERY & 23,538
EQUIPMENT
MEDIA & LEISURE - 2.4%
BROADCASTING - 2.2%
EchoStar Communications Corp. 12,200 776,988
Class A (a)
LODGING & GAMING - 0.2%
Hollywood Casino Corp. (a) 15,000 63,750
TOTAL MEDIA & LEISURE 840,738
NONDURABLES - 0.5%
HOUSEHOLD PRODUCTS - 0.5%
Carson, Inc. Class A (a) 37,500 164,063
SERVICES - 0.0%
Cendant Corp. (a) 1,100 16,981
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE
- 0.1%
PSINet, Inc. (a) 1,200 27,825
ELECTRONIC INSTRUMENTS - 0.3%
Dynatech Corp. (a) 12,000 106,500
TOTAL TECHNOLOGY 134,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
FirstCom Corp. (a) 1,300 $ 26,975
TOTAL COMMON STOCKS 1,389,380
(Cost $1,274,805)
PREFERRED STOCKS - 7.1%
CONVERTIBLE PREFERRED STOCKS
- 0.3%
ENERGY - 0.1%
OIL & GAS - 0.1%
Chesapeake Energy Corp. $3.50 1,000 49,750
(a)
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Loral Space & Communications 2,000 61,000
Ltd. $3.00 (d)
TOTAL CONVERTIBLE PREFERRED 110,750
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 6.8%
FINANCE - 0.8%
CREDIT & OTHER FINANCE - 0.8%
American Annuity Group 12,400 257,300
Capital Trust I $2.3125
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.6%
CSC Holdings, Inc. 11.125% 2,112 222,288
pay-in-kind
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- 1.2%
Concentric Network Corp. 413 415,065
13.5% pay-in-kind
UTILITIES - 4.2%
CELLULAR - 0.9%
Nextel Communications, Inc.:
11.125% pay-in-kind 287 276,955
Series D, 13% pay-in-kind 25 26,125
303,080
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 3.3%
Intermedia Communications, 106 $ 100,170
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 21,424 1,028,352
14% pay-in-kind
1,128,522
TOTAL UTILITIES 1,431,602
TOTAL NONCONVERTIBLE 2,326,255
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 2,437,005
(Cost $2,539,609)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 2.8%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT
Synthetic Industries, Inc. - $ 200,000 198,000
term loan 13% 12/13/00 (e)
U.S. Office Products Co. term Caa1 1,000,000 740,000
loan 8.63% 6/9/06 (e)
TOTAL PURCHASED BANK DEBT 938,000
(Cost $924,286)
</TABLE>
CASH EQUIVALENTS - 2.9%
MATURITY AMOUNT
Investments in repurchase $ 994,471 994,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.69%,
dated 4/28/00 due 5/1/00
(Cost $994,000)
TOTAL INVESTMENT PORTFOLIO - 34,292,779
100.6%
(Cost $35,070,751)
NET OTHER ASSETS - (0.6)% (192,582)
NET ASSETS - 100% $ 34,100,197
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 $4,932,767 or 14.5% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) 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 2.1% AAA, AA, A 0.0%
Baa 0.4% BBB 0.4%
Ba 5.4% BB 16.9%
B 63.7% B 51.1%
Caa 10.2% CCC 10.5%
Ca, C 0.3% CC, C 0.9%
D 0.2%
The percentage not rated by Moody's or S&P amounted to 1.7%. FMR has
determined that unrated debt securities that are lower quality account
for 1.7% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $35,070,751. Net unrealized depreciation
aggregated $777,972, of which $556,106 related to appreciated
investment securities and $1,334,078 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $7,000 all of which will expire on October 31, 2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 34,292,779
value (including repurchase
agreements of $994,000)
(cost $35,070,751) - See
accompanying schedule
Cash 329
Receivable for investments 13,652
sold
Receivable for fund shares 88,556
sold
Interest receivable 607,610
Other receivables 11,460
Prepaid expenses 30,956
Receivable from investment 1,024
adviser for expense
reductions
TOTAL ASSETS 35,046,366
LIABILITIES
Payable for investments $ 768,848
purchased
Payable for fund shares 55,423
redeemed
Distributions payable 74,236
Distribution fees payable 13,652
Other payables and accrued 34,010
expenses
TOTAL LIABILITIES 946,169
NET ASSETS $ 34,100,197
Net Assets consist of:
Paid in capital $ 34,353,425
Undistributed net investment 120,396
income
Accumulated undistributed net 404,348
realized gain (loss) on
investments
Net unrealized appreciation (777,972)
(depreciation) on investments
NET ASSETS $ 34,100,197
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.02
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($7,417,418 (divided by)
740,549 shares)
Maximum offering price per $10.52
share (100/95.25 of $10.02)
CLASS T: NET ASSET VALUE and $10.01
redemption price per share
($7,754,221 (divided by)
774,580 shares)
Maximum offering price per $10.37
share (100/96.50 of $10.01)
CLASS B: NET ASSET VALUE and $10.00
offering price per share
($9,069,367 (divided by)
906,487 shares) A
CLASS C: NET ASSET VALUE and $10.00
offering price per share
($5,081,664 (divided by)
507,979 shares) A
INSTITUTIONAL CLASS: NET $10.02
ASSET VALUE, offering price
and redemption price per
share ($4,777,527 (divided
by) 476,902 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 130,476
Dividends
Interest 1,167,872
TOTAL INCOME 1,298,348
EXPENSES
Management fee $ 75,158
Transfer agent fees 26,004
Distribution fees 66,270
Accounting fees and expenses 30,003
Non-interested trustees' 32
compensation
Custodian fees and expenses 3,915
Registration fees 89,628
Audit 16,870
Legal 76
Total expenses before 307,956
reductions
Expense reductions (133,178) 174,778
NET INVESTMENT INCOME 1,123,570
REALIZED AND UNREALIZED GAIN 410,651
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (734,748)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (324,097)
NET INCREASE (DECREASE) IN $ 799,473
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
2000 (UNAUDITED) (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 1,123,570 $ 59,140
income
Net realized gain (loss) 410,651 (6,153)
Change in net unrealized (734,748) (43,224)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 799,473 9,763
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,005,782) (56,682)
from net investment income
Share transactions - net 26,483,985 7,869,440
increase (decrease)
TOTAL INCREASE (DECREASE) 26,277,676 7,822,521
IN NET ASSETS
NET ASSETS
Beginning of period 7,822,521 -
End of period (including $ 34,100,197 $ 7,822,521
undistributed net investment
income of $120,396 and
$2,608, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .440 .116
Net realized and unrealized .063 H (.091)
gain (loss)
Total from investment .503 .025
operations
Less Distributions
From net investment income (.403) (.105)
Net asset value, end of period $ 10.020 $ 9.920
TOTAL RETURN B, C 5.10% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,417 $ 739
(000 omitted)
Ratio of expenses to average 1.00% A, F 1.00% A, F
net assets
Ratio of expenses to average .99% A, G 1.00% A
net assets after expense
reductions
Ratio of net investment 9.02% A 7.92% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .445 .112
Net realized and unrealized .040 H (.089)
gain (loss)
Total from investment .485 .023
operations
Less Distributions
From net investment income (.395) (.103)
Net asset value, end of period $ 10.010 $ 9.920
TOTAL RETURN B, C 4.92% .23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,754 $ 2,422
(000 omitted)
Ratio of expenses to average 1.10% A, F 1.10% A, F
net assets
Ratio of expenses to average 1.09% A, G 1.10% A
net assets after expense
reductions
Ratio of net investment 8.92% A 7.82% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .411 .102
Net realized and unrealized .030 H (.083)
gain (loss)
Total from investment .441 .019
operations
Less Distributions
From net investment income (.361) (.099)
Net asset value, end of period $ 10.000 $ 9.920
TOTAL RETURN B, C 4.47% .19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,069 $ 2,089
(000 omitted)
Ratio of expenses to average 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.74% A, G 1.75% A
net assets after expense
reductions
Ratio of net investment 8.27% A 7.17% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.910 $ 10.000
period
Income from Investment
Operations
Net investment income D .406 .101
Net realized and unrealized .040 H (.093)
gain (loss)
Total from investment .446 .008
operations
Less Distributions
From net investment income (.356) (.098)
Net asset value, end of period $ 10.000 $ 9.910
TOTAL RETURN B, C 4.51% .08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,082 $ 1,854
(000 omitted)
Ratio of expenses to average 1.85% A, F 1.85% A, F
net assets
Ratio of expenses to average 1.84% A, G 1.85% A
net assets after expense
reductions
Ratio of net investment 8.17% A 7.07% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .442 .118
Net realized and unrealized .070 H (.091)
gain (loss)
Total from investment .512 .027
operations
Less Distributions
From net investment income (.412) (.107)
Net asset value, end of period $ 10.020 $ 9.920
TOTAL RETURN B, C 5.20% .28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,778 $ 719
(000 omitted)
Ratio of expenses to average .85% A, F .85% A, F
net assets
Ratio of expenses to average .84% A, G .85% A
net assets after expense
reductions
Ratio of net investment 9.17% A 8.07% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
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 settlement date on purchases and sales of securities. The effects
of changes in foreign currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. 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.
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, Federal Agency,
or other obligations found to be satisfactory by FMR 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).
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 $938,000 or 2.8% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $48,842,716 and $20,855,902, 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 .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.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted separate Distribution and
Service 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 $ 2,547 $ 410
CLASS T 11,616 703
CLASS B 31,286 23,301
CLASS C 20,821 17,149
$ 66,270 $ 41,563
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 12,445 $ 4,409
CLASS T 21,678 8,803
CLASS B 17,565 17,565*
CLASS C 774 774*
$ 52,462 $ 31,551
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $ 3,332 .20*
CLASS T 8,466 .18*
CLASS B 6,267 .18*
CLASS C 4,647 .22*
INSTITUTIONAL CLASS 3,292 .29*
$ 26,004
* ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
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 $172 for the period.
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 1.00% $ 17,043
CLASS T 1.10% 46,085
CLASS B 1.75% 34,543
CLASS C 1.85% 21,593
INSTITUTIONAL CLASS 0.85% 12,564
$ 131,828
FMR has also 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 $48 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 $1,302 under the custodian arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
approximately 9% of the total outstanding shares of the fund. In
addition, two unaffiliated shareholders were each record owner of more
than 10% of the total outstanding shares of the fund, totaling 30%.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, 2000 SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
FROM NET INVESTMENT INCOME
CLASS A $ 137,712 $ 7,152
CLASS T 366,116 17,710
CLASS B 253,663 10,995
CLASS C 148,699 13,464
INSTITUTIONAL CLASS 99,592 7,361
TOTAL $ 1,005,782 $ 56,682
</TABLE>
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999 SIX MONTHS ENDED APRIL 30,
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
2000 1999 2000
CLASS A Shares sold 73,796 $ 7,470,355
738,007
Reinvestment of distributions 10,279 661 103,785
Shares redeemed (82,194) - (829,233)
Net increase (decrease) 666,092 74,457 $ 6,744,907
CLASS T Shares sold 1,013,143 242,680 $ 10,163,665
Reinvestment of distributions 17,477 1,481 176,613
Shares redeemed (500,151) (50) (4,979,380)
Net increase (decrease) 530,469 244,111 $ 5,360,898
CLASS B Shares sold 795,764 214,251 $ 8,012,177
Reinvestment of distributions 12,277 851 123,965
Shares redeemed (112,188) (4,468) (1,134,406)
Net increase (decrease) 695,853 210,634 $ 7,001,736
CLASS C Shares sold 426,343 185,931 $ 4,298,645
Reinvestment of distributions 8,794 1,090 88,784
Shares redeemed (114,179) - (1,152,412)
Net increase (decrease) 320,958 187,021 $ 3,235,017
INSTITUTIONAL CLASS Shares 402,217 71,695 $ 4,119,230
sold
Reinvestment of distributions 9,212 737 92,974
Shares redeemed (6,959) - (70,777)
Net increase (decrease) 404,470 72,432 $ 4,141,427
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
1999
CLASS A Shares sold $ 737,552
Reinvestment of distributions 6,564
Shares redeemed -
Net increase (decrease) $ 744,116
CLASS T Shares sold $ 2,421,256
Reinvestment of distributions 14,699
Shares redeemed (500)
Net increase (decrease) $ 2,435,455
CLASS B Shares sold $ 2,135,658
Reinvestment of distributions 8,451
Shares redeemed (44,468)
Net increase (decrease) $ 2,099,641
CLASS C Shares sold $ 1,855,443
Reinvestment of distributions 10,817
Shares redeemed -
Net increase (decrease) $ 1,866,260
INSTITUTIONAL CLASS Shares $ 716,650
sold
Reinvestment of distributions 7,318
Shares redeemed -
Net increase (decrease) $ 723,968
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
David L. Glancy, Vice President
David L. Murphy, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications and 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 Dynamic Capital Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AHI-SANN-0600 104109
1.741814.100
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
SEMIANNUAL REPORT
APRIL 30, 2000
(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 33 Notes to the financial
statements.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS LIFE OF FUND
FIDELITY ADV HIGH INCOME - 5.20% 5.49%
INST CL
ML High Yield Master II 0.25% -0.73%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months or 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.
$10,000 OVER LIFE OF FUND
FA High Income CL I ML High Yield Master II
00377 ML012
1999/09/07 10000.00 10000.00
1999/09/30 9985.10 9956.60
1999/10/31 10027.55 9902.56
1999/11/30 10202.11 10031.69
1999/12/31 10350.68 10092.24
2000/01/31 10463.33 10053.60
2000/02/29 10636.17 10075.09
2000/03/31 10545.13 9927.21
2000/04/28 10548.68 9927.35
IMATRL PRASUN SHR__CHT 20000430 20000518 155832 R00000000000011
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Income Fund - Institutional Class on
September 7, 1999, when the fund started. As the chart shows, by April
30, 2000, the value of the investment would have grown to $10,549 - a
5.49% 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 decreased to
$9,927 - a 0.73% decrease.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
2000 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
Dividend returns 4.19% 1.08%
Capital returns 1.01% -0.80%
Total returns 5.20% 0.28%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS LIFE OF CLASS
Dividends per share 7.34(cents) 41.21(cents) 51.95(cents)
Annualized dividend rate 8.92% 8.17% 7.97%
30-day annualized yield - - -
DIVIDENDS per share show the income paid by the class for a set
period. The annual dividend rate is based on an average share price of
$10.01 over the past one month, $10.11 over the past six months and
$10.08 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
The high-yield bond market eked out
a positive return over the past six
months ending April 30, 2000,
despite facing numerous obstacles
along the way, including widening
credit spreads, competition from the
high-flying NASDAQ market and
negative outflows from high-yield
mutual funds. For the six-month
period ending April 30, 2000, the
Merrill Lynch High Yield Master II
Index - a broad measure of the
high-yield market - had a marginal
gain of 0.25%. A short-lived rally in
the fourth quarter of 1999 was
responsible for the majority of this
positive performance, as investor
sentiment was geared toward more
aggressive investment opportunities.
Still, the high-yield sector lost a good
portion of its inflows to the
technology-rich NASDAQ market's
double- and triple-digit gains during
the period. And when the NASDAQ
faltered in March and April of 2000,
the high-yield market tumbled as well.
Restrictive monetary policy by the
Federal Reserve Board, which hiked
interest rates three times during the
six-month period, also put a damper
on high-yield bond performance, as
did widening credit spreads, or the
premium that investors demand for
higher perceived levels of risk versus
Treasury securities. For the period,
the high-yield sector trailed the
performance of the overall U.S.
taxable bond market, as measured
by the Lehman Brothers Aggregate
Bond Index, which gained 1.42%
during the past six months.
(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. For the six months that ended April 30, 2000, the fund's
Institutional Class shares returned 5.20%. The high-yield market, as
measured by the Merrill Lynch High Yield Master II Index, returned
0.25%. Since the fund's inception on September 7, 1999, the fund's
Institutional Class shares returned 5.49%, while the Merrill Lynch
index returned -0.73%. We will be able to use a comparison to the high
current yield funds average tracked by Lipper Inc. in our next report
six months from now, after the fund has been in existence for more
than one year.
Q. WHAT HELPED THE FUND BEAT THE INDEX?
A. The fund was more insulated than the index against several negative
influences: higher interest rates, shrinking liquidity in global
credit markets, increased default rates and net outflows from
high-yield mutual funds. Specifically, the fund focused on high-yield
bonds with relatively short maturities - which made them less
susceptible to the price declines brought on by higher rates - and on
issuers with relatively higher credit quality. In addition, the fund
benefited from its modest position in the leveraged equities of
high-yield companies, investments that provided strong performance
over the period.
Q. DID YOU CHANGE YOUR STRATEGY WITH THE CORE HIGH-YIELD PORTION OF
THE PORTFOLIO OVER THE COURSE OF THE SIX-MONTH PERIOD?
A. Yes, I did. Late in the period, junk bond prices fell to very
attractive levels. As a result, I became more willing to expand my
focus beyond my core investments in order to invest in values offered
by lesser-quality credits that met our analytical scrutiny. In terms
of sectors, there weren't many changes to how I allocated the fund,
with the exception of limiting our position in cable companies. The
fundamentals for this industry deteriorated due to the competition
posed by satellite, DSL - digital subscriber lines, which can carry
telephone and Internet services simultaneously over the same line -
and other formats that consumers are increasingly favoring over cable
delivery of communications, Internet and entertainment content. Beyond
that, the fund maintained a significant stake in telecommunications
and satellite issuers.
Q. WHAT SORT OF APPROACH DID YOU TAKE WITH THE FUND'S INVESTMENTS
BEYOND HIGH YIELD?
A. The fund continued to own little distressed debt. Opportunities
were few and far between in an area characterized by poorly run
companies with bad balance sheets and poor prospects. Leveraged
equities - common stocks of companies that have high-yield bonds
outstanding - continued to be a small but important part of the fund.
Q. WHICH INVESTMENTS WERE PARTICULARLY HELPFUL FOR PERFORMANCE? WHAT
ABOUT DISAPPOINTMENTS?
A. Large positions in several short-maturity names - Specialty Foods,
listed in the financial statements as SFC New Holdings, U.S. Home and
Dictaphone - provided strong double-digit returns over the past six
months, with little credit risk. And our investment in Arcadia
Financial worked out well - reflecting the quality of the research
done by our team of analysts - as the company was acquired by
Associates First Capital, an investment-grade consumer finance
company. On the down side, the fund's large position in Pathmark
suffered because the Federal Trade Commission killed the company's
plans to be acquired by Ahold, an investment-grade supermarket
company. Nevertheless, Pathmark's business continued to do well and
its balance sheet appeared fixable, so I maintained the fund's stake
in the company.
Q. WHAT'S YOUR OUTLOOK?
A. All of the conditions that led to a poor backdrop for the market
could persist for some time. Regardless of the backdrop, I do know
that 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. Equities, on the other hand, have no future
set price. If I do my credit work well, the bonds I choose for the
fund will eventually be paid off at par - or face value - after having
paid very attractive coupons - or interest. Currently, there are many
bonds of good companies selling well below par. Provided the
companies' businesses continue to do well, their bonds should
appreciate significantly as they approach maturity, when they must be
paid at par. Therefore, I believe a well-managed high-yield fund that
capitalizes on these opportunities and does its credit research could
earn very good returns over the next year or two.
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 April 30, 2000,
more than $34 million
MANAGER: David Glancy,
since inception; joined
Fidelity in 1990
DAVID GLANCY ON HIS
APPROACH TOWARD BUYING
AND SELLING:
"In the high-yield market, it
helps to be a buyer when everyone
is selling, and to be a seller when
everyone is buying. Behind this
approach is the high-yield market's
tendency to offer technical buying
opportunities every 12 to 18 months
when conditions arise that affect
the supply and demand of
high-yield bonds. Recent examples
of technical buying opportunities
driven by shrinking demand include
the international financial crisis
in 1998 and concerns related to
Y2K in late 1999. Liquidity shrank
because people didn't want to own
high-yield bonds for one reason or
another and looked to sell them in
order to raise cash. It's precisely at
times like these that I like to step
in and buy bonds at significant
discounts to par. That's why the
fund sometimes carries a cash
position of as much as 10%, so I
can have money at my disposal to
go on a shopping spree."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 2000
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
International Cabletel, Inc. 6.3 1.9
Century Communications Corp. 5.8 0.0
NEXTLINK Communications, Inc. 5.4 2.7
U.S. Home Corp 5.3 0.0
Adelphia Communications Corp. 3.5 1.9
26.3 6.5
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Media & Leisure 35.1 17.5
Utilities 22.9 26.1
Technology 10.2 4.6
Construction & Real Estate 6.7 0.0
Finance 6.0 3.0
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 2.1 0.0
Baa 0.4 0.0
Ba 5.4 10.4
B 65.9 46.0
Caa, Ca, C 10.5 4.6
Not Rated 1.7 4.6
</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 APRIL 30, 2000
AND OCTOBER 31, 1999 ACCOUNT FOR 1.7% AND 4.6%, RESPECTIVELY, OF THE
FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Nonconvertible Bonds 81.9% Nonconvertible Bonds 65.4%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 8.0% Stocks 3.0%
Common Stocks 4.1% Common Stocks 0.4%
Other Investments 3.7% Other Investments 0.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.3% Net Other Assets 31.2%
* FOREIGN INVESTMENTS 8.7% ** FOREIGN INVESTMENTS 8.9%
Row: 1, Col: 1, Value: 81.90000000000001 Row: 1, Col: 1, Value: 65.40000000000001
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 8.0 Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.1 Row: 1, Col: 5, Value: 0.4
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 3.7 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.3 Row: 1, Col: 8, Value: 31.2
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 82.8%
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.9%
HEALTH - 0.8%
MEDICAL FACILITIES MANAGEMENT
- 0.8%
Tenet Healthcare Corp. 6% B1 $ 140,000 $ 114,800
12/1/05
Total Renal Care Holdings,
Inc.:
7% 5/15/09 B1 110,000 60,500
7% 5/15/09 (d) B3 160,000 89,600
264,900
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Hilton Hotels Corp. 5% 5/15/06 Ba2 40,000 30,200
TOTAL CONVERTIBLE BONDS 295,100
NONCONVERTIBLE BONDS - 81.9%
BASIC INDUSTRIES - 2.7%
CHEMICALS & PLASTICS - 1.6%
Huntsman Corp. 9.5% 7/1/07 (d) B2 600,000 546,000
METALS & MINING - 0.5%
Kaiser Aluminum & Chemical B1 175,000 168,000
Corp. 9.875% 2/15/02
PACKAGING & CONTAINERS - 0.2%
Gaylord Container Corp. Caa2 100,000 78,000
9.875% 2/15/08
PAPER & FOREST PRODUCTS - 0.4%
Container Corp. of America B2 100,000 102,000
gtd. 11.25% 5/1/04
Crown Paper Co. 11% 9/1/05 (b) Ca 50,000 14,000
116,000
TOTAL BASIC INDUSTRIES 908,000
CONSTRUCTION & REAL ESTATE -
6.5%
BUILDING MATERIALS - 0.7%
Building Materials Corp. of Ba3 45,000 38,138
America 8% 12/1/08
Nortek, Inc. 9.875% 3/1/04 B3 175,000 165,375
Numatics, Inc. 9.625% 4/1/08 B3 52,000 41,210
244,723
CONSTRUCTION - 5.4%
Lennar Corp. 9.95% 5/1/10 (d) Ba1 45,000 41,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
CONSTRUCTION - CONTINUED
U.S. Home Corp.:
8.875% 2/15/09 B1 $ 1,765,000 $ 1,800,300
8.88% 8/15/07 B1 10,000 10,175
1,852,016
REAL ESTATE - 0.4%
LNR Property Corp. 9.375% B1 145,000 126,875
3/15/08
TOTAL CONSTRUCTION & REAL 2,223,614
ESTATE
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
St. John Knits International, B3 40,000 37,400
Inc. 12.5% 7/1/09
ENERGY - 0.2%
OIL & GAS - 0.2%
Benton Oil & Gas Co. 11.625% B3 25,000 17,000
5/1/03
Gothic Production Corp. B3 50,000 42,250
11.125% 5/1/05
59,250
FINANCE - 5.0%
CREDIT & OTHER FINANCE - 4.6%
AMRESCO, Inc. 9.875% 3/15/05 Caa3 140,000 96,600
Arcadia Financial Ltd.:
11.5% 3/15/07 A1 660,000 712,800
Delta Financial Corp. 9.5% B3 255,000 140,250
8/1/04
GS Escrow Corp.:
6.75% 8/1/01 Ba1 300,000 287,499
7% 8/1/03 Ba1 40,000 36,237
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 10,000 7,500
7.875% 8/1/03 Ba2 95,000 71,250
Metris Companies, Inc. 10% Ba3 210,000 196,350
11/1/04
1,548,486
INSURANCE - 0.4%
Reliance Group Holdings, Inc. Ba2 165,000 150,150
9% 11/15/00
TOTAL FINANCE 1,698,636
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - 1.6%
MEDICAL FACILITIES MANAGEMENT
- 1.6%
Fountain View, Inc. 11.25% Caa1 $ 120,000 $ 66,000
4/15/08
Oxford Health Plans, Inc. 11% Caa1 175,000 178,500
5/15/05
Tenet Healthcare Corp.:
8.125% 12/1/08 Ba3 50,000 46,250
8.625% 1/15/07 Ba3 20,000 19,100
Unilab Corp. 12.75% 10/1/09 B3 233,000 232,418
542,268
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 0.9%
Loral Space & Communications B1 445,000 304,825
Ltd. 9.5% 1/15/06
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Thermadyne Holdings Corp. 0% Caa1 25,000 10,000
6/1/08 (c)
Thermadyne Manufacturing LLC B3 110,000 86,900
9.875% 6/1/08
96,900
POLLUTION CONTROL - 2.0%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 175,000 136,500
10% 8/1/09 B2 610,000 417,850
Browning-Ferris Industries, Ba3 160,000 132,800
Inc. 6.1% 1/15/03
687,150
TOTAL INDUSTRIAL MACHINERY & 1,088,875
EQUIPMENT
MEDIA & LEISURE - 32.0%
BROADCASTING - 27.7%
ACME Television LLC/ACME B3 465,000 425,475
Financial Corp. 0% 9/30/04
(c)
Adelphia Communications Corp. B1 1,190,000 1,178,100
9.25% 10/1/02
Century Communications Corp.:
0% 3/15/03 B1 30,000 21,975
9.5% 8/15/00 B1 300,000 300,750
9.5% 3/1/05 B1 125,000 120,938
9.75% 2/15/02 B1 1,505,000 1,497,475
Diamond Cable Communications
PLC:
0% 2/15/07 (c) B3 20,000 15,400
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Diamond Cable Communications
PLC: - continued
yankee:
0% 12/15/05 (c) B3 $ 200,000 $ 187,500
13.25% 9/30/04 B3 315,000 334,688
EchoStar DBS Corp.:
9.25% 2/1/06 B2 200,000 192,000
9.375% 2/1/09 B2 140,000 134,750
Golden Sky DBS, Inc. 0% Caa1 300,000 199,500
3/1/07 (c)
Golden Sky Systems, Inc. B3 150,000 163,500
12.375% 8/1/06
Impsat Fiber Networks, Inc. B3 200,000 186,000
13.75% 2/15/05 (d)
International Cabletel, Inc.:
Series A, 12.75% 4/15/05 B3 170,000 171,700
0% 2/1/06 (c) B3 2,130,000 1,980,886
Knology Holding, Inc. 0% - 45,000 27,900
10/15/07 (c)
NorthPoint Communication Caa1 190,000 169,100
Holdings, Inc. 12.875%
2/15/10 (d)
Pegasus Communications Corp.:
9.625% 10/15/05 B3 35,000 34,300
9.75% 12/1/06 B3 50,000 49,000
Pegasus Media & B3 300,000 312,000
Communications, Inc. 12.5%
7/1/05
Satelites Mexicanos SA de CV:
10.03% 6/30/04 (d)(e) B1 420,000 392,700
10.125% 11/1/04 B3 500,000 370,000
Telewest PLC 0% 10/1/07 (c) B1 414,000 382,950
United International B3 275,000 184,938
Holdings, Inc. 0% 2/15/08
(c)
United Pan-Europe
Communications NV:
0% 2/1/10 (c)(d) B2 200,000 95,000
10.875% 11/1/07 (d) B2 110,000 100,650
10.875% 8/1/09 B2 50,000 45,500
11.25% 2/1/10 (d) B2 75,000 69,000
11.5% 2/1/10 (d) B2 100,000 92,500
9,436,175
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.6%
Alliance Gaming Corp. 10% Caa1 $ 250,000 $ 110,000
8/1/07
AMC Entertainment, Inc. 9.5% B3 190,000 104,500
3/15/09
214,500
LEISURE DURABLES & TOYS - 0.0%
Hedstrom Corp. 10% 6/1/07 (b) Caa3 85,000 3,400
LODGING & GAMING - 2.9%
Courtyard by Marriott II B- 290,000 282,750
LP/Courtyard II Finance Co.
10.75% 2/1/08
Florida Panthers Holdings, B2 220,000 200,200
Inc. 9.875% 4/15/09
Hollywood Casino Corp. 11.25% B3 170,000 172,125
5/1/07
ITT Corp. 6.25% 11/15/00 Ba1 85,000 83,725
Station Casinos, Inc. 9.75% B1 250,000 250,000
4/15/07
988,800
PUBLISHING - 0.4%
American Lawyer Media B1 155,000 143,763
Holdings, Inc. 9.75%
12/15/07
RESTAURANTS - 0.4%
Domino's, Inc. 10.375% 1/15/09 B3 155,000 143,375
TOTAL MEDIA & LEISURE 10,930,013
NONDURABLES - 1.6%
FOODS - 1.4%
Chiquita Brands B1 150,000 120,750
International, Inc. 10%
6/15/09
SFC New Holdings, Inc. Caa1 350,000 349,563
12.125% 10/1/02
470,313
HOUSEHOLD PRODUCTS - 0.2%
Revlon Consumer Products Caa1 100,000 71,000
Corp. 8.125% 2/1/06
TOTAL NONDURABLES 541,313
RETAIL & WHOLESALE - 1.4%
GENERAL MERCHANDISE STORES -
0.4%
Kmart Corp. 8.375% 12/1/04 Baa3 135,000 131,288
GROCERY STORES - 0.8%
Pathmark Stores, Inc.:
9.625% 5/1/03 (b) Caa3 385,000 273,350
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - CONTINUED
Pathmark Stores, Inc.: -
continued
11.625% 6/15/02 Ca $ 20,000 $ 5,600
12.625% 6/15/02 Ca 50,000 14,000
292,950
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.2%
J. Crew Operating Corp. Caa1 5,000 4,300
10.375% 10/15/07
National Vision Association Ca 200,000 64,000
Ltd. 12.75% 10/15/05
68,300
TOTAL RETAIL & WHOLESALE 492,538
TECHNOLOGY - 8.6%
COMPUTER SERVICES & SOFTWARE
- 7.0%
Amazon.com, Inc. 0% 5/1/08 (c) Caa1 147,000 85,995
Colo.com 13.875% 3/15/10 unit - 100,000 102,000
(d)
Concentric Network Corp. B- 160,000 169,600
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (c) B3 168,000 103,320
12% 2/15/10 (d) B3 280,000 265,300
12.5% 2/15/09 B3 215,000 209,088
Exodus Communications, Inc. B- 300,000 300,000
10.75% 12/15/09
Federal Data Corp. 10.125% B3 250,000 162,500
8/1/05
PSINet, Inc.:
10% 2/15/05 B3 290,000 255,200
10.5% 12/1/06 B3 145,000 129,050
11% 8/1/09 B3 305,000 272,975
Verio, Inc.:
10.625% 11/15/09 (d) B3 325,000 312,000
11.25% 12/1/08 B3 30,000 29,700
2,396,728
COMPUTERS & OFFICE EQUIPMENT
- 1.2%
Dictaphone Corp. 11.75% 8/1/05 Caa1 170,000 170,850
Globix Corp. 12.5% 2/1/10 (d) - 260,000 227,500
398,350
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.4%
Telecommunications Techniques B3 $ 145,000 $ 133,038
Co. LLC 9.75% 5/15/08
TOTAL TECHNOLOGY 2,928,116
TRANSPORTATION - 0.4%
AIR TRANSPORTATION - 0.4%
US Air, Inc. 9.625% 2/1/01 B3 150,000 146,250
UTILITIES - 18.6%
CELLULAR - 4.1%
AirGate PCS, Inc. 0% 10/1/09 Caa1 100,000 58,000
(c)
Clearnet Communications, Inc. B3 100,000 100,250
yankee 0% 12/15/05 (c)
Globalstar LP/Globalstar
Capital Corp.:
10.75% 11/1/04 Caa1 40,000 13,900
11.375% 2/15/04 Caa1 330,000 116,325
11.5% 6/1/05 Caa1 45,000 15,750
Leap Wireless International,
Inc.:
0% 4/15/10 unit (c)(d) Caa2 105,000 48,300
12.5% 4/15/10 unit (d) Caa2 100,000 94,000
McCaw International Ltd. 0% Caa1 103,000 75,705
4/15/07 (c)
Microcell Telecommunications, B3 40,000 24,900
Inc. 0% 6/1/09 (c)
Millicom International Caa1 100,000 84,500
Cellular SA 0% 6/1/06 (c)
Nextel Communications, Inc.:
0% 2/15/08 (c) B1 165,000 114,675
9.375% 11/15/09 B1 205,000 195,263
Nextel International, Inc. 0% Caa1 135,000 85,725
4/15/08 (c)
Nextel Partners, Inc. 11% B3 100,000 98,250
3/15/10 (d)
Orion Network Systems, Inc. B2 45,000 25,875
11.25% 1/15/07
PageMart Nationwide, Inc. 15% B3 15,000 14,850
2/1/05
US Unwired, Inc. 0% 11/1/09 Caa1 190,000 106,875
(c)(d)
USA Mobile Communication, B3 120,000 108,000
Inc. II 14% 11/1/04
Voicestream Wireless B2 15,000 9,188
Corp./Voicestream Wireless
Holding Co. 0% 11/15/09
(c)(d)
1,390,331
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 14.5%
360networks, Inc. 13% 5/1/08 B3 $ 270,000 $ 265,950
(d)
Allegiance Telecom, Inc. 0% B3 105,000 73,238
2/15/08 (c)
FirstWorld Communications, - 70,000 30,450
Inc. 0% 4/15/08 (c)
Flag Telecom Holdings Ltd. B2 100,000 93,000
11.625% 3/30/10 (d)
Focal Communications Corp. B3 250,000 250,625
11.875% 1/15/10 (d)
Globenet Communication Group Caa1 95,000 95,475
Ltd. 13% 7/15/07
Hyperion Telecommunications, B3 285,000 297,113
Inc. 12.25% 9/1/04
ICG Holdings, Inc. 0% 9/15/05 B3 315,000 297,675
(c)
ICG Services, Inc. 0% 5/1/08 B3 460,000 227,700
(c)
Intermedia Communications,
Inc.:
0% 5/15/06 (c) B2 450,000 423,000
0% 7/15/07 (c) B2 100,000 75,750
0% 3/1/09 (c) B3 25,000 14,563
Level 3 Communications, Inc.:
0% 12/1/08 (c) B3 50,000 28,500
11% 3/15/08 (d) B3 275,000 266,063
McLeodUSA, Inc.:
0% 3/1/07 (c) B1 360,000 285,300
8.375% 3/15/08 B1 15,000 13,613
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 10,000 9,550
10% 12/15/09 B2 330,000 315,150
NEXTLINK Communications LLC B2 20,000 20,700
12.5% 4/15/06
NEXTLINK Communications, Inc.:
0% 4/15/08 (c) B2 267,000 163,538
0% 6/1/09 (c) B2 211,000 123,435
0% 12/1/09 (c)(d) B2 105,000 57,225
10.75% 11/15/08 B3 45,000 43,988
10.75% 6/1/09 B2 405,000 396,900
Rhythms NetConnections, Inc. B3 165,000 143,963
14% 2/15/10 (d)
Rochester Telephone Corp.:
8.77% 4/16/01 Ba2 100,000 99,500
9% 7/19/00 Ba2 50,000 50,063
9.07% 7/5/00 Ba2 50,000 50,063
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (F) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Rochester Telephone Corp.: -
continued
9.1% 7/5/00 Ba2 $ 50,000 $ 50,063
Teligent, Inc. 11.5% 12/1/07 Caa1 125,000 106,250
WinStar Communications, Inc.:
12.5% 4/15/08 (d) B3 25,000 24,438
12.75% 4/15/10 (d) B3 430,000 409,575
Worldwide Fiber, Inc. 12% B3 145,000 134,850
8/1/09
4,937,266
TOTAL UTILITIES 6,327,597
TOTAL NONCONVERTIBLE BONDS 27,923,870
TOTAL CORPORATE BONDS 28,218,970
(Cost $29,023,832)
COMMERCIAL MORTGAGE
SECURITIES - 0.9%
Mortgage Capital Funding, Ba1 400,000 315,424
Inc. Series 1998-MC3 Class
F, 7.3178% 11/18/31 (d)(e)
(Cost $314,219)
</TABLE>
COMMON STOCKS - 4.1%
SHARES
BASIC INDUSTRIES - 0.0%
CHEMICALS & PLASTICS - 0.0%
Sterling Chemicals Holdings, 1,000 5,250
Inc. (a)
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
American Standard Companies, 1,500 61,500
Inc. (a)
FINANCE - 0.2%
CREDIT & OTHER FINANCE - 0.1%
Associates First Capital 10,800 972
Corp. (a)
Delta Financial Corp. (a) 14,200 27,513
28,485
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 0.1%
American Financial Group, 1,200 $ 30,525
Inc.
TOTAL FINANCE 59,010
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- 0.2%
Oxford Health Plans, Inc. (a) 3,000 57,000
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Loral Space & Communications 1,400 13,738
Ltd. (a)
POLLUTION CONTROL - 0.0%
Allied Waste Industries, Inc. 1,600 9,800
(a)
TOTAL INDUSTRIAL MACHINERY & 23,538
EQUIPMENT
MEDIA & LEISURE - 2.4%
BROADCASTING - 2.2%
EchoStar Communications Corp. 12,200 776,988
Class A (a)
LODGING & GAMING - 0.2%
Hollywood Casino Corp. (a) 15,000 63,750
TOTAL MEDIA & LEISURE 840,738
NONDURABLES - 0.5%
HOUSEHOLD PRODUCTS - 0.5%
Carson, Inc. Class A (a) 37,500 164,063
SERVICES - 0.0%
Cendant Corp. (a) 1,100 16,981
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE
- 0.1%
PSINet, Inc. (a) 1,200 27,825
ELECTRONIC INSTRUMENTS - 0.3%
Dynatech Corp. (a) 12,000 106,500
TOTAL TECHNOLOGY 134,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
FirstCom Corp. (a) 1,300 $ 26,975
TOTAL COMMON STOCKS 1,389,380
(Cost $1,274,805)
PREFERRED STOCKS - 7.1%
CONVERTIBLE PREFERRED STOCKS
- 0.3%
ENERGY - 0.1%
OIL & GAS - 0.1%
Chesapeake Energy Corp. $3.50 1,000 49,750
(a)
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Loral Space & Communications 2,000 61,000
Ltd. $3.00 (d)
TOTAL CONVERTIBLE PREFERRED 110,750
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 6.8%
FINANCE - 0.8%
CREDIT & OTHER FINANCE - 0.8%
American Annuity Group 12,400 257,300
Capital Trust I $2.3125
MEDIA & LEISURE - 0.6%
BROADCASTING - 0.6%
CSC Holdings, Inc. 11.125% 2,112 222,288
pay-in-kind
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE
- 1.2%
Concentric Network Corp. 413 415,065
13.5% pay-in-kind
UTILITIES - 4.2%
CELLULAR - 0.9%
Nextel Communications, Inc.:
11.125% pay-in-kind 287 276,955
Series D, 13% pay-in-kind 25 26,125
303,080
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 3.3%
Intermedia Communications, 106 $ 100,170
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 21,424 1,028,352
14% pay-in-kind
1,128,522
TOTAL UTILITIES 1,431,602
TOTAL NONCONVERTIBLE 2,326,255
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 2,437,005
(Cost $2,539,609)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 2.8%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT
Synthetic Industries, Inc. - $ 200,000 198,000
term loan 13% 12/13/00 (e)
U.S. Office Products Co. term Caa1 1,000,000 740,000
loan 8.63% 6/9/06 (e)
TOTAL PURCHASED BANK DEBT 938,000
(Cost $924,286)
</TABLE>
CASH EQUIVALENTS - 2.9%
MATURITY AMOUNT
Investments in repurchase $ 994,471 994,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.69%,
dated 4/28/00 due 5/1/00
(Cost $994,000)
TOTAL INVESTMENT PORTFOLIO - 34,292,779
100.6%
(Cost $35,070,751)
NET OTHER ASSETS - (0.6)% (192,582)
NET ASSETS - 100% $ 34,100,197
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 $4,932,767 or 14.5% of net assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) 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 2.1% AAA, AA, A 0.0%
Baa 0.4% BBB 0.4%
Ba 5.4% BB 16.9%
B 63.7% B 51.1%
Caa 10.2% CCC 10.5%
Ca, C 0.3% CC, C 0.9%
D 0.2%
The percentage not rated by Moody's or S&P amounted to 1.7%. FMR has
determined that unrated debt securities that are lower quality account
for 1.7% of the total value of investment in securities.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $35,070,751. Net unrealized depreciation
aggregated $777,972, of which $556,106 related to appreciated
investment securities and $1,334,078 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $7,000 all of which will expire on October 31, 2007.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 34,292,779
value (including repurchase
agreements of $994,000)
(cost $35,070,751) - See
accompanying schedule
Cash 329
Receivable for investments 13,652
sold
Receivable for fund shares 88,556
sold
Interest receivable 607,610
Other receivables 11,460
Prepaid expenses 30,956
Receivable from investment 1,024
adviser for expense
reductions
TOTAL ASSETS 35,046,366
LIABILITIES
Payable for investments $ 768,848
purchased
Payable for fund shares 55,423
redeemed
Distributions payable 74,236
Distribution fees payable 13,652
Other payables and accrued 34,010
expenses
TOTAL LIABILITIES 946,169
NET ASSETS $ 34,100,197
Net Assets consist of:
Paid in capital $ 34,353,425
Undistributed net investment 120,396
income
Accumulated undistributed net 404,348
realized gain (loss) on
investments
Net unrealized appreciation (777,972)
(depreciation) on investments
NET ASSETS $ 34,100,197
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.02
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($7,417,418 (divided by)
740,549 shares)
Maximum offering price per $10.52
share (100/95.25 of $10.02)
CLASS T: NET ASSET VALUE and $10.01
redemption price per share
($7,754,221 (divided by)
774,580 shares)
Maximum offering price per $10.37
share (100/96.50 of $10.01)
CLASS B: NET ASSET VALUE and $10.00
offering price per share
($9,069,367 (divided by)
906,487 shares) A
CLASS C: NET ASSET VALUE and $10.00
offering price per share
($5,081,664 (divided by)
507,979 shares) A
INSTITUTIONAL CLASS: NET $10.02
ASSET VALUE, offering price
and redemption price per
share ($4,777,527 (divided
by) 476,902 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 130,476
Dividends
Interest 1,167,872
TOTAL INCOME 1,298,348
EXPENSES
Management fee $ 75,158
Transfer agent fees 26,004
Distribution fees 66,270
Accounting fees and expenses 30,003
Non-interested trustees' 32
compensation
Custodian fees and expenses 3,915
Registration fees 89,628
Audit 16,870
Legal 76
Total expenses before 307,956
reductions
Expense reductions (133,178) 174,778
NET INVESTMENT INCOME 1,123,570
REALIZED AND UNREALIZED GAIN 410,651
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (734,748)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (324,097)
NET INCREASE (DECREASE) IN $ 799,473
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999
2000 (UNAUDITED) (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31,
1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 1,123,570 $ 59,140
income
Net realized gain (loss) 410,651 (6,153)
Change in net unrealized (734,748) (43,224)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 799,473 9,763
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,005,782) (56,682)
from net investment income
Share transactions - net 26,483,985 7,869,440
increase (decrease)
TOTAL INCREASE (DECREASE) 26,277,676 7,822,521
IN NET ASSETS
NET ASSETS
Beginning of period 7,822,521 -
End of period (including $ 34,100,197 $ 7,822,521
undistributed net investment
income of $120,396 and
$2,608, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .440 .116
Net realized and unrealized .063 H (.091)
gain (loss)
Total from investment .503 .025
operations
Less Distributions
From net investment income (.403) (.105)
Net asset value, end of period $ 10.020 $ 9.920
TOTAL RETURN B, C 5.10% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,417 $ 739
(000 omitted)
Ratio of expenses to average 1.00% A, F 1.00% A, F
net assets
Ratio of expenses to average .99% A, G 1.00% A
net assets after expense
reductions
Ratio of net investment 9.02% A 7.92% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .445 .112
Net realized and unrealized .040 H (.089)
gain (loss)
Total from investment .485 .023
operations
Less Distributions
From net investment income (.395) (.103)
Net asset value, end of period $ 10.010 $ 9.920
TOTAL RETURN B, C 4.92% .23%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 7,754 $ 2,422
(000 omitted)
Ratio of expenses to average 1.10% A, F 1.10% A, F
net assets
Ratio of expenses to average 1.09% A, G 1.10% A
net assets after expense
reductions
Ratio of net investment 8.92% A 7.82% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .411 .102
Net realized and unrealized .030 H (.083)
gain (loss)
Total from investment .441 .019
operations
Less Distributions
From net investment income (.361) (.099)
Net asset value, end of period $ 10.000 $ 9.920
TOTAL RETURN B, C 4.47% .19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,069 $ 2,089
(000 omitted)
Ratio of expenses to average 1.75% A, F 1.75% A, F
net assets
Ratio of expenses to average 1.74% A, G 1.75% A
net assets after expense
reductions
Ratio of net investment 8.27% A 7.17% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.910 $ 10.000
period
Income from Investment
Operations
Net investment income D .406 .101
Net realized and unrealized .040 H (.093)
gain (loss)
Total from investment .446 .008
operations
Less Distributions
From net investment income (.356) (.098)
Net asset value, end of period $ 10.000 $ 9.910
TOTAL RETURN B, C 4.51% .08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,082 $ 1,854
(000 omitted)
Ratio of expenses to average 1.85% A, F 1.85% A, F
net assets
Ratio of expenses to average 1.84% A, G 1.85% A
net assets after expense
reductions
Ratio of net investment 8.17% A 7.07% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</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 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.920 $ 10.000
period
Income from Investment
Operations
Net investment income D .442 .118
Net realized and unrealized .070 H (.091)
gain (loss)
Total from investment .512 .027
operations
Less Distributions
From net investment income (.412) (.107)
Net asset value, end of period $ 10.020 $ 9.920
TOTAL RETURN B, C 5.20% .28%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,778 $ 719
(000 omitted)
Ratio of expenses to average .85% A, F .85% A, F
net assets
Ratio of expenses to average .84% A, G .85% A
net assets after expense
reductions
Ratio of net investment 9.17% A 8.07% A
income to average net assets
Portfolio turnover rate 191% A 331% A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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.
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 AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING
OF SALES AND REPURCHASES OF CLASS SHARES IN RELATION TO FLUCTUATING
MARKET VALUES OF THE INVESTMENTS OF THE FUND.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
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 settlement date on purchases and sales of securities. The effects
of changes in foreign currency
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
FOREIGN CURRENCY TRANSLATION - CONTINUED
exchange rates on investments in securities are included with the net
realized and unrealized gain or loss on investment securities.
INCOME TAXES. 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.
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, Federal Agency,
or other obligations found to be satisfactory by FMR 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).
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 $938,000 or 2.8% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $48,842,716 and $20,855,902, 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 .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.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted separate Distribution and
Service 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 $ 2,547 $ 410
CLASS T 11,616 703
CLASS B 31,286 23,301
CLASS C 20,821 17,149
$ 66,270 $ 41,563
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 12,445 $ 4,409
CLASS T 21,678 8,803
CLASS B 17,565 17,565*
CLASS C 774 774*
$ 52,462 $ 31,551
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $ 3,332 .20*
CLASS T 8,466 .18*
CLASS B 6,267 .18*
CLASS C 4,647 .22*
INSTITUTIONAL CLASS 3,292 .29*
$ 26,004
* ANNUALIZED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
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 $172 for the period.
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 1.00% $ 17,043
CLASS T 1.10% 46,085
CLASS B 1.75% 34,543
CLASS C 1.85% 21,593
INSTITUTIONAL CLASS 0.85% 12,564
$ 131,828
FMR has also 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 $48 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 $1,302 under the custodian arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, FMR and its affiliates were record owners of
approximately 9% of the total outstanding shares of the fund. In
addition, two unaffiliated shareholders were each record owner of more
than 10% of the total outstanding shares of the fund, totaling 30%.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30, 2000 SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1999
FROM NET INVESTMENT INCOME
CLASS A $ 137,712 $ 7,152
CLASS T 366,116 17,710
CLASS B 253,663 10,995
CLASS C 148,699 13,464
INSTITUTIONAL CLASS 99,592 7,361
TOTAL $ 1,005,782 $ 56,682
</TABLE>
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, SEPTEMBER 7, 1999 SIX MONTHS ENDED APRIL 30,
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
2000 1999 2000
CLASS A Shares sold 73,796 $ 7,470,355
738,007
Reinvestment of distributions 10,279 661 103,785
Shares redeemed (82,194) - (829,233)
Net increase (decrease) 666,092 74,457 $ 6,744,907
CLASS T Shares sold 1,013,143 242,680 $ 10,163,665
Reinvestment of distributions 17,477 1,481 176,613
Shares redeemed (500,151) (50) (4,979,380)
Net increase (decrease) 530,469 244,111 $ 5,360,898
CLASS B Shares sold 795,764 214,251 $ 8,012,177
Reinvestment of distributions 12,277 851 123,965
Shares redeemed (112,188) (4,468) (1,134,406)
Net increase (decrease) 695,853 210,634 $ 7,001,736
CLASS C Shares sold 426,343 185,931 $ 4,298,645
Reinvestment of distributions 8,794 1,090 88,784
Shares redeemed (114,179) - (1,152,412)
Net increase (decrease) 320,958 187,021 $ 3,235,017
INSTITUTIONAL CLASS Shares 402,217 71,695 $ 4,119,230
sold
Reinvestment of distributions 9,212 737 92,974
Shares redeemed (6,959) - (70,777)
Net increase (decrease) 404,470 72,432 $ 4,141,427
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
SEPTEMBER 7, 1999
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31,
1999
CLASS A Shares sold $ 737,552
Reinvestment of distributions 6,564
Shares redeemed -
Net increase (decrease) $ 744,116
CLASS T Shares sold $ 2,421,256
Reinvestment of distributions 14,699
Shares redeemed (500)
Net increase (decrease) $ 2,435,455
CLASS B Shares sold $ 2,135,658
Reinvestment of distributions 8,451
Shares redeemed (44,468)
Net increase (decrease) $ 2,099,641
CLASS C Shares sold $ 1,855,443
Reinvestment of distributions 10,817
Shares redeemed -
Net increase (decrease) $ 1,866,260
INSTITUTIONAL CLASS Shares $ 716,650
sold
Reinvestment of distributions 7,318
Shares redeemed -
Net increase (decrease) $ 723,968
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
David L. Glancy, Vice President
David L. Murphy, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, Deputy Treasurer
John H. Costello, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications and 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 Dynamic Capital Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AHII-SANN-0600 104110
1.741815.100
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
SEMIANNUAL REPORT
APRIL 30, 2000
(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.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 past one year,
past five year, and past 10 year total returns and dividends would
have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.66% 2.25% 38.75% 114.31%
SECURITIES - INST CL
LB Mortgage 1.26% 1.85% 39.51% 116.20%
US Mortgage Funds Average 1.15% 1.19% 33.82% 101.21%
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to the performance of the Lehman Brothers Mortgage-Backed
Securities Index - a market value-weighted index of fixed-rate
securities that represent interests in pools of mortgage loans with
original terms of 15 and 30 years that are issued by the Government
National Mortgage Association (GNMA), the Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corp. (FHLMC),
and balloon mortgages with fixed-rate coupons. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the U.S. mortgage funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 62 mutual
funds. These benchmarks reflect reinvestment of dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 2.25% 6.77% 7.92%
SECURITIES - INST CL
LB Mortgage 1.85% 6.89% 8.02%
US Mortgage Funds Average 1.19% 5.99% 7.24%
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
Mortgage Secs -Initial CL LB Mortgage Backed Secs
00040 LB006
1990/04/30 10000.00 10000.00
1990/05/31 10290.72 10310.28
1990/06/30 10439.91 10473.31
1990/07/31 10591.63 10655.05
1990/08/31 10563.61 10541.83
1990/09/30 10620.01 10628.33
1990/10/31 10728.80 10748.84
1990/11/30 10963.56 10974.07
1990/12/31 11152.68 11158.00
1991/01/31 11268.40 11327.60
1991/02/28 11340.55 11423.09
1991/03/31 11416.83 11500.84
1991/04/30 11540.41 11606.77
1991/05/31 11600.41 11708.82
1991/06/30 11629.42 11719.27
1991/07/31 11796.46 11917.54
1991/08/31 12021.89 12134.27
1991/09/30 12209.56 12361.69
1991/10/31 12353.89 12566.51
1991/11/30 12429.41 12657.63
1991/12/31 12670.86 12912.02
1992/01/31 12609.91 12762.83
1992/02/29 12735.38 12883.59
1992/03/31 12647.37 12801.47
1992/04/30 12765.94 12927.33
1992/05/31 12976.65 13160.34
1992/06/30 13114.14 13315.60
1992/07/31 13091.63 13431.98
1992/08/31 13176.31 13606.92
1992/09/30 13259.03 13712.86
1992/10/31 13127.19 13592.58
1992/11/30 13190.64 13635.10
1992/12/31 13361.81 13811.26
1993/01/31 13483.72 13992.76
1993/02/28 13599.20 14134.66
1993/03/31 13688.01 14220.42
1993/04/30 13783.56 14293.80
1993/05/31 13824.38 14375.20
1993/06/30 13993.02 14485.26
1993/07/31 14069.94 14543.09
1993/08/31 14096.14 14611.61
1993/09/30 14126.93 14624.24
1993/10/31 14152.06 14666.52
1993/11/30 14122.48 14637.85
1993/12/31 14258.78 14756.42
1994/01/31 14390.10 14902.69
1994/02/28 14314.21 14798.70
1994/03/31 14151.99 14413.34
1994/04/30 14090.00 14307.17
1994/05/31 14209.94 14363.78
1994/06/30 14282.67 14332.68
1994/07/31 14510.99 14619.63
1994/08/31 14576.01 14665.79
1994/09/30 14418.02 14457.08
1994/10/31 14447.29 14448.82
1994/11/30 14432.88 14403.63
1994/12/31 14535.64 14518.55
1995/01/31 14810.45 14829.31
1995/02/28 15142.01 15207.86
1995/03/31 15206.27 15279.54
1995/04/30 15446.01 15496.76
1995/05/31 15932.00 15985.37
1995/06/30 16053.54 16076.24
1995/07/31 16090.01 16103.94
1995/08/31 16288.55 16270.62
1995/09/30 16456.93 16413.73
1995/10/31 16640.00 16559.76
1995/11/30 16824.23 16749.03
1995/12/31 17009.58 16958.23
1996/01/31 17148.84 17086.04
1996/02/29 17039.58 16944.14
1996/03/31 16977.76 16882.91
1996/04/30 16942.37 16835.29
1996/05/31 16876.77 16786.21
1996/06/30 17109.68 17017.28
1996/07/31 17170.77 17079.72
1996/08/31 17166.99 17079.48
1996/09/30 17438.68 17365.45
1996/10/31 17761.35 17706.10
1996/11/30 18035.75 17959.52
1996/12/31 17934.05 17865.49
1997/01/31 18046.29 17998.15
1997/02/28 18105.12 18058.17
1997/03/31 17935.36 17888.09
1997/04/30 18214.97 18173.34
1997/05/31 18394.66 18351.19
1997/06/30 18610.09 18565.25
1997/07/31 18946.68 18915.13
1997/08/31 18925.74 18870.18
1997/09/30 19131.09 19109.51
1997/10/31 19335.27 19321.38
1997/11/30 19398.97 19384.79
1997/12/31 19569.77 19561.44
1998/01/31 19758.03 19756.06
1998/02/28 19802.46 19797.85
1998/03/31 19869.06 19881.67
1998/04/30 19986.23 19994.17
1998/05/31 20120.61 20127.07
1998/06/30 20221.04 20223.05
1998/07/31 20301.26 20325.58
1998/08/31 20475.51 20510.00
1998/09/30 20669.49 20757.59
1998/10/31 20493.87 20730.86
1998/11/30 20647.06 20834.12
1998/12/31 20717.10 20922.56
1999/01/31 20833.57 21071.51
1999/02/28 20776.24 20988.17
1999/03/31 20932.02 21129.11
1999/04/30 21008.54 21226.61
1999/05/31 20932.75 21107.95
1999/06/30 20858.25 21033.67
1999/07/31 20745.74 20890.98
1999/08/31 20735.06 20890.23
1999/09/30 21043.84 21229.32
1999/10/31 21137.14 21351.41
1999/11/30 21128.77 21363.07
1999/12/31 21107.69 21310.81
2000/01/31 20996.21 21126.11
2000/02/29 21255.31 21371.14
2000/03/31 21497.08 21604.91
2000/04/28 21489.25 21619.76
IMATRL PRASUN SHR__CHT 20000430 20000524 095339 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Institutional
Class on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have grown to $21,431 - a 114.31%
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 $21,620 - a 116.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
2000 1999 1998 1997
Dividend returns 3.57% 6.14% 6.13% 4.30%
Capital returns -1.91% -3.05% -0.27% 2.43%
Total returns 1.66% 3.09% 5.86% 6.73%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains paid
by the class are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.59(cents) 36.95(cents) 68.86(cents)
Annualized dividend rate 6.57% 7.17% 6.61%
30-day annualized yield 6.72% - -
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.35 over the past one month, $10.33 over the past six months,
and $10.41 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 2000, the fund's
Institutional Class shares provided a total return of 1.66%. To get a
sense of how the fund did relative to its competitors, the U.S.
mortgage funds average returned 1.15% for the same six-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 1.26% for the same
six-month period. For the 12-month period that ended April 30, 2000,
the fund returned 2.25%, while the U.S. mortgage funds average
returned 1.19% and the Lehman Brothers index returned 1.85%.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS?
A. The main contributor to the fund's performance was its
larger-than-average stake in commercial mortgage securities (CMS),
which made up about 17% of the fund's net assets at the end of the
period and outperformed most other mortgage securities during the past
six months. Commercial mortgage securities are bonds that are
collateralized by mortgage loans on commercial real estate - such as
office buildings, shopping malls, hotels and apartment buildings.
Their recent strong performance mainly was due to improvement in the
overall credit quality of the sector in response to the strength of
the U.S. economy and good commercial real estate fundamentals. In
contrast to other fixed-income securities, rising interest rates also
bolstered CMS by limiting issuance of new securities. Finally,
proposed changes to pension-fund regulations were expected to broaden
the demand for these securities.
Q. PREPAYMENT ACTIVITY, WHICH WAS A BIG NEGATIVE FOR THE MORTGAGE
MARKET DURING MUCH OF 1999, HAS ALL BUT DISAPPEARED SO FAR IN 2000.
WHY, THEN, DIDN'T MORTGAGE SECURITIES PERFORM BETTER?
A. Rising interest rates - which pushed mortgage securities' yields
higher and their prices lower - were the main culprit behind their
lackluster performance. But another very critical factor was the
Treasury market rally, which came at the expense of mortgage
securities and most other fixed-income investments as well. As the
Federal Reserve Board raised interest rates, long-term Treasury bond
yields actually fell as the U.S. Treasury scaled back its auctions and
announced plans to re-purchase $30 billion of its outstanding Treasury
bonds to cut financing costs. Three successful re-purchases during the
first four months of 2000 supported the idea that Treasury supply
would become increasingly scarce. Those developments also helped firm
demand for intermediate- and short-term Treasuries, which experienced
rising yields but to a lesser extent than mortgage securities. As one
measure of the scope of the performance disparity between Treasuries
and mortgages, the spread - or difference in yield - between a 10-year
Treasury and 10-year mortgage security was over 155 basis points
(1.55% percentage points) at the end of April, compared to about 125
basis points just six months earlier.
Q. WERE THERE ANY OTHER DISAPPOINTMENTS DURING THE PERIOD?
A. Yes, there were. The fund had a relatively small stake in
securities issued by Ginnie Mae, which outperformed securities issued
by Fannie Mae and Freddie Mac. In a surprising development, a senior
Treasury official shook up the mortgage market when he urged Congress
to cut off longstanding but never-used lines of credit that give
Fannie Mae and Freddie Mac securities implicit government backing. He
also asked Congress to repeal "exceptions that let banks hold so much"
of those securities. Although it remained unclear whether those
recommendations would translate into actual policy, investors reacted
to his comments by selling Fannie Mae and Freddie Mac securities,
allowing Ginnie Maes to outperform.
Q. WHAT DID YOU DO IN RESPONSE TO THAT DEVELOPMENT?
A. To lock in their relatively strong performance, I sold some of the
fund's Ginnie Mae holdings. I replaced them with additional Freddie
Mac and Fannie Mae securities, which I felt had been unduly punished
by those developments and offered attractive yields at relatively
cheap prices as a result. By the end of the period, Fannie Mae and
Freddie Mac securities offered yields as much as 15 basis points
(0.15%) more than their Ginnie Mae counterparts.
Q. WHAT'S YOUR OUTLOOK?
A. While I don't believe that any legislation altering the
debt-issuing ability of Fannie Mae and Freddie Mac will be enacted
before the presidential election in November, I believe that spread
volatility between mortgage securities and Treasuries is likely to
continue. Even so, I think that the mortgage securities market offers
some very attractive values at current levels, offering yields well in
excess of U.S. Treasury securities.
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 gains
START DATE: December 31, 1984
SIZE: as of April 30, 2000,
more than $428 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON PROPOSED
MOVES TO ALTER THE BACKING
OF MORTGAGE SECURITIES:
"Fannie Mae and Freddie Mac are
government-sponsored enterprises
(GSE) and, as such, enjoy certain
benefits including a $4.5 billion line
of credit from the U.S. Treasury.
They purchase home loans from
originators such as banks, thrifts
and mortgage banks, which they
hold for their own investment
portfolios. They also pool home
loans into mortgage securities.
Whether they hold mortgages for
their own portfolios or whether
they package them as securities,
the effect is that cash is freed up so
that originators can make new
loans. As a result, Fannie Mae and
Freddie Mac securities make up a
fast-growing share of the
government debt markets at a time
when the Treasury is limiting its
issuance.
"Although its emergency line of credit
from the U.S. Treasury has never been
tapped, it carries symbolic significance
because it traditionally has allowed
Fannie Mae and Freddie Mac to
borrow at interest rates close to the
U.S. government's rate. Renewed
government interest in curbing
these two GSE's line of credit and
limiting how much of their securities
commercial banks can own have
caused these securities to perform
poorly recently. The spread
between agency securities and
Treasuries - which is the key
barometer and the market's view of
the creditworthiness of Fannie Mae
and Freddie Mac - jumped sharply
during the past six months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 0.5
6 - 6.99% 45.0 47.0
7 - 7.99% 38.4 36.4
8 - 8.99% 9.9 7.8
9% and over 4.2 6.9
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 8.0 8.0
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 APRIL 30, 2000
6 MONTHS AGO
Years 4.7 4.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 77.1% Mortgage Securities 76.9%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.8% Related Securities 21.0%
U.S. Government Agency U.S. Government Agency
Obligations 3.9% Obligations 0.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets (2.8)%* Net Other Assets 2.1%
Row: 1, Col: 1, Value: 77.09999999999999 Row: 1, Col: 1, Value: 76.90000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 21.8 Row: 1, Col: 3, Value: 21.0
Row: 1, Col: 4, Value: 21.8 Row: 1, Col: 4, Value: 21.0
Row: 1, Col: 5, Value: 3.9 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: 0.0 Row: 1, Col: 8, Value: 2.1
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
Fannie Mae 6.5% 4/29/09 (Cost $ 18,100,000 $ 16,745,396
$16,755,170)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 77.1%
FANNIE MAE - 51.6%
6% 2/1/14 to 1/1/15 746,709 699,344
6.5% 9/1/10 to 5/1/30 114,294,343 106,929,040
6.5% 5/1/30 (b) 3,000,000 2,798,438
7% 3/1/19 to 4/1/30 69,946,624 67,032,036
7% 5/1/30 (b) 11,000,000 10,518,750
7.5% 3/1/22 to 3/1/30 9,859,778 9,663,998
8% 1/1/07 to 5/1/30 13,667,823 13,647,556
8.25% 1/1/13 71,647 72,282
8.5% 6/1/16 to 11/1/23 3,268,454 3,317,929
8.75% 11/1/08 to 7/1/09 130,237 132,117
9% 1/1/08 to 2/1/13 537,030 548,914
9.5% 5/1/03 to 8/1/22 3,584,805 3,707,128
11% 12/1/02 to 8/1/10 1,035,641 1,112,645
12.25% 5/1/13 to 6/1/15 149,609 166,456
12.5% 11/1/14 to 3/1/16 309,193 346,101
12.75% 2/1/14 to 6/1/15 58,776 65,080
13.5% 9/1/13 to 12/1/14 131,651 150,041
14% 11/1/14 41,336 47,523
220,955,378
FREDDIE MAC - 14.9%
5% 7/1/10 2,267,214 2,044,743
6% 2/1/29 to 7/1/29 4,788,503 4,339,232
6.5% 1/1/24 to 9/1/24 21,278,710 20,059,565
7% 7/1/29 to 9/1/29 12,711,685 12,167,370
7.5% 6/1/26 to 8/1/28 2,932,733 2,877,933
8% 10/1/07 to 4/1/21 599,746 597,861
8.5% 11/1/03 to 1/1/20 1,498,214 1,515,124
8.5% 5/1/30 (b) 9,375,000 9,515,625
9% 9/1/08 to 5/1/21 6,195,628 6,337,155
10% 1/1/09 to 5/1/19 1,063,089 1,110,436
10.5% 8/1/10 to 12/1/20 1,104,924 1,173,296
11.5% 4/1/12 59,101 63,930
12.25% 6/1/14 to 7/1/15 141,607 156,758
12.5% 5/1/12 to 12/1/14 572,665 631,273
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - CONTINUED
12.75% 6/1/05 to 3/1/15 $ 59,744 $ 64,771
13% 1/1/11 to 6/1/15 941,125 1,053,920
63,708,992
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 10.6%
6.5% 5/15/28 to 1/15/29 4,239,404 3,971,578
7% 1/15/26 to 5/1/30 17,357,994 16,696,649
7.5% 7/15/05 to 9/15/27 13,484,005 13,345,988
8% 4/15/02 to 12/15/25 8,743,665 8,785,665
8.5% 7/15/16 to 6/15/18 1,734,302 1,776,514
9% 9/20/16 to 4/20/18 64,471 66,355
9.5% 8/15/09 to 12/15/24 73,596 78,248
10.5% 8/15/00 to 2/20/18 579,901 618,388
13% 10/15/13 57,889 66,084
13.5% 7/15/11 to 10/15/14 58,238 66,731
45,472,200
TOTAL U.S. GOVERNMENT AGENCY 330,136,570
- MORTGAGE SECURITIES
(Cost $340,585,284)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.5%
U.S. GOVERNMENT AGENCY - 4.5%
Fannie Mae REMIC planned
amortization class:
Series 1999-1 Class PJ, 6.5% 10,049,260 8,924,999
2/25/29
Series 1999-51 Class LK, 6.5% 10,000,000 9,000,000
8/25/29
Freddie Mac REMIC planned 1,553,188 1,583,273
amortization class Series
70 Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 19,508,272
OBLIGATIONS
(Cost $19,834,372)
COMMERCIAL MORTGAGE
SECURITIES - 17.3%
Bankers Trust II Series 5,000,000 5,003,125
1999-S1A Class D, 8.0675%
2/28/14 (a)(c)
Bankers Trust REMIC Trust 959,113 959,574
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (c)
CBM Funding Corp. sequential 2,300,000 2,246,813
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage $ 2,000,000 $ 1,846,250
Securities Corp. Series
1997-C2 Class D, 7.27%
1/17/35
Deutsche Mortgage & Asset 10,200,000 9,066,844
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 2,877,831 2,845,905
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,374,875
6.9698% 4/13/31 (a)(c)
Series 1999-GSFL II Class F, 4,500,000 4,440,235
7.6634% 11/13/13 (a)(c)
Nomura Asset Securities Corp. 15,000,000 13,509,375
Series 1998-D6 Class A4,
7.1288% 3/17/28 (c)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.9038% 2/15/34 7,900,000 7,639,547
(a)(c)
Class A-5, 7.2538% 2/15/34 5,278,196 5,067,068
(a)(c)
Structured Asset Securities 3,192,522 2,976,528
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 16,960,837
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 73,936,976
SECURITIES
(Cost $78,065,657)
CASH EQUIVALENTS - 2.0%
MATURITY AMOUNT
Investments in repurchase $ 8,728,258 8,724,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $8,724,000)
TOTAL INVESTMENT PORTFOLIO - 449,051,214
104.8%
(Cost $463,964,483)
NET OTHER ASSETS - (4.8)% (20,617,199)
NET ASSETS - 100% $ 428,434,015
</TABLE>
LEGEND
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $40,485,687 or 9.4% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $464,042,874. Net unrealized depreciation
aggregated $14,991,660, of which $1,347,147 related to appreciated
investment securities and $16,338,807 related to depreciated
investment securities.
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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 449,051,214
value (including repurchase
agreements of $8,724,000)
(cost $463,964,483) - See
accompanying schedule
Commitment to sell securities $ (15,380,000)
on a delayed delivery basis
Receivable for securities 15,560,000 180,000
sold on a delayed delivery
basis
Receivable for investments 216,711
sold, regular delivery
Cash 35,249
Receivable for fund shares 355,108
sold
Interest receivable 2,900,904
TOTAL ASSETS 452,739,186
LIABILITIES
Payable for investments 23,049,492
purchased on a delayed
delivery basis
Payable for fund shares 580,408
redeemed
Distributions payable 394,203
Accrued management fee 154,072
Distribution fees payable 20,022
Other payables and accrued 106,974
expenses
TOTAL LIABILITIES 24,305,171
NET ASSETS $ 428,434,015
Net Assets consist of:
Paid in capital $ 450,641,604
Undistributed net investment 636,970
income
Accumulated undistributed net (8,111,290)
realized gain (loss) on
investments
Net unrealized appreciation (14,733,269)
(depreciation) on investments
NET ASSETS $ 428,434,015
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.27
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($4,150,788 (divided by)
403,999 shares)
Maximum offering price per $10.78
share (100/95.25 of $10.27)
CLASS T: NET ASSET VALUE and $10.28
redemption price per share
($25,695,229 (divided by)
2,499,316 shares)
Maximum offering price per $10.65
share (100/96.50 of $10.28)
CLASS B: NET ASSET VALUE and $10.27
offering price per share
($18,878,803 (divided by)
1,837,824 shares) A
INITIAL CLASS: NET ASSET $10.29
VALUE, offering price and
redemption price per share
($369,689,756 (divided by)
35,943,993 shares)
INSTITUTIONAL CLASS: NET $10.27
ASSET VALUE, offering price
and redemption price per
share ($10,019,439 (divided
by) 975,903 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 16,480,715
Interest
EXPENSES
Management fee $ 963,261
Transfer agent fees 393,883
Distribution fees 122,685
Accounting fees and expenses 74,577
Non-interested trustees' 691
compensation
Custodian fees and expenses 34,263
Registration fees 69,434
Audit 25,540
Legal 4,127
Miscellaneous 1,806
Total expenses before 1,690,267
reductions
Expense reductions (9,106) 1,681,161
NET INVESTMENT INCOME 14,799,554
REALIZED AND UNREALIZED GAIN (2,941,058)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (4,884,058)
Delayed delivery commitments 180,000 (4,704,058)
NET GAIN (LOSS) (7,645,116)
NET INCREASE (DECREASE) IN $ 7,154,438
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 14,799,554 $ 30,638,885
income
Net realized gain (loss) (2,941,058) (5,620,586)
Change in net unrealized (4,704,058) (10,190,965)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 7,154,438 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (16,064,557) (30,183,549)
From net investment income
From net realized gain - (6,924,572)
TOTAL DISTRIBUTIONS (16,064,557) (37,108,121)
Share transactions - net (36,159,462) (14,273,306)
increase (decrease)
TOTAL INCREASE (DECREASE) (45,069,581) (36,554,093)
IN NET ASSETS
NET ASSETS
Beginning of period 473,503,596 510,057,689
End of period (including $ 428,434,015 $ 473,503,596
undistributed net investment
income of $636,970 and
$1,901,973, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .328 .646 .669 .170 .268
Net realized and unrealized (.177) (.336) (.061) .048 .224
gain (loss)
Total from investment .151 .310 .608 .218 .492
operations
Less Distributions
From net investment income (.361) (.640) (.638) (.168) (.272)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.361) (.790) (.668) (.248) (.272)
Net asset value, end of $ 10.270 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.48% 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,151 $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, E .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.43% A 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 88% A 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 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> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .326 .637 .665 .167 .255
Net realized and unrealized (.171) (.338) (.063) .048 .233
gain (loss)
Total from investment .155 .299 .602 .215 .488
operations
Less Distributions
From net investment income (.355) (.629) (.632) (.165) (.268)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.355) (.779) (.662) (.245) (.268)
Net asset value, end of $ 10.280 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.51% 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 25,695 $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, E 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 6.33% A 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 88% A 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 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 T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.950 $ 11.020 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .294 .567 .584 .142 .234
Net realized and unrealized (.180) (.324) (.064) .065 .214
gain (loss)
Total from investment .114 .243 .520 .207 .448
operations
Less Distributions
From net investment income (.324) (.563) (.560) (.147) (.238)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.324) (.713) (.590) (.227) (.238)
Net asset value, end of $ 10.270 $ 10.480 $ 10.950 $ 11.020 $ 11.040
period
TOTAL RETURN B, C 1.11% 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,879 $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.61% A 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.72% A 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 88% A 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>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1999 1998 1997 F 1997 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780
period
Income from Investment
Operations
Net investment income .342 D .674 D .700 D .176 D .678 D
Net realized and unrealized (.172) (.342) (.056) .047 .391
gain (loss)
Total from investment .170 .332 .644 .223 1.069
operations
Less Distributions
From net investment income (.370) (.662) (.664) (.173) (.689)
From net realized gain - (.150) (.030) (.080) (.110)
In excess of net realized gain - - - - -
Total distributions (.370) (.812) (.694) (.253) (.799)
Net asset value, end of period $ 10.290 $ 10.490 $ 10.970 $ 11.020 $ 11.050
TOTAL RETURN B, C 1.67% 3.14% 5.99% 2.05% 10.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 369,690 $ 406,839 $ 459,212 $ 494,304 $ 506,113
(000 omitted)
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets after expense
reductions
Ratio of net investment 6.64% A 6.29% 6.34% 6.36% A 6.26%
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .729 .772
Net realized and unrealized (.015) .325
gain (loss)
Total from investment .714 1.097
operations
Less Distributions
From net investment income (.724) (.737)
From net realized gain (.100) -
In excess of net realized gain - (.050)
Total distributions (.824) (.787)
Net asset value, end of period $ 10.780 $ 10.890
TOTAL RETURN B, C 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .74% .77%
net assets
Ratio of expenses to average .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.75% 7.37%
income to average net assets
Portfolio turnover rate 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 FOR THE THREE MONTHS ENDED OCTOBER 31
G FOR THE YEAR ENDED JULY 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 H 1997G
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.470 $ 10.950 $ 11.010 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .340 .669 .693 .172 .263
Net realized and unrealized (.170) (.343) (.063) .050 .226
gain (loss)
Total from investment .170 .326 .630 .222 .489
operations
Less Distributions
From net investment income (.370) (.656) (.660) (.172) (.279)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.370) (.806) (.690) (.252) (.279)
Net asset value, end of $ 10.270 $ 10.470 $ 10.950 $ 11.010 $ 11.040
period
TOTAL RETURN B, C 1.66% 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,019 $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .74% A .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .73% A, F .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.60% A 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities 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, 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. 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, 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $200,462,044 and $231,485,190, respectively, of which U.S.
government and government agency obligations aggregated $188,439,822
and $213,483,079, 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 annualized 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 and
Service Plans with respect to each class of shares (collectively
referred to as "the Plans"). Under certain of the Plans, the class
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. A portion of this fee may be reallowed
to securities dealers, banks and other
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
financial institutions for the distribution of each class of shares
and providing shareholder support services. For the period, this fee
was based on the following annual rates of the average net assets of
each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .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 $ 2,547 $ 0
CLASS T 34,244 1,580
CLASS B 85,894 62,156
$ 122,685 $ 63,736
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 11,799 $ 2,734
CLASS T 19,343 6,877
CLASS B 41,401 41,401*
$ 72,543 $ 51,012
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 Shares. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class Shares.
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 $ 4,116 .24
CLASS T 34,562 .25
CLASS B 17,846 .19
INITIAL CLASS 319,867 .17
INSTITUTIONAL CLASS 17,492 .21
$ 393,883
* ANNUALIZED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, 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% $ 296
CLASS T 1.00% 3,641
$ 3,937
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 $5,169 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 118,171 $ 153,223
Class T 942,284 1,450,107
Class B 599,674 724,614
Initial Class 13,820,612 26,727,640
Institutional Class 583,816 1,127,965
Total $ 16,064,557 $ 30,183,549
FROM NET REALIZED GAIN
Class A $ - $ 26,293
Class T - 278,709
Class B - 132,050
Initial Class - 6,182,269
Institutional Class - 305,251
Total $ - $ 6,924,572
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 233,326 $ 1,556,559
150,089
Reinvestment of distributions 8,606 11,952 88,693
Shares redeemed (49,692) (120,472) (512,298)
Net increase (decrease) 109,003 124,806 $ 1,132,954
CLASS T Shares sold 497,899 2,003,369 $ 5,147,178
Reinvestment of distributions 81,508 148,336 840,877
Shares redeemed (851,733) (1,122,570) (8,780,957)
Net increase (decrease) (272,326) 1,029,135 $ (2,792,902)
CLASS B Shares sold 348,517 1,505,268 $ 3,610,689
Reinvestment of distributions 44,121 63,855 454,806
Shares redeemed (378,214) (461,420) (3,896,947)
Net increase (decrease) 14,424 1,107,703 $ 168,548
INITIAL CLASS Shares sold 1,600,812 3,914,002 $ 16,541,648
Reinvestment of distributions 1,079,535 2,515,203 11,140,746
Shares redeemed (5,534,245) (9,502,966) (57,155,406)
Net increase (decrease) (2,853,898) (3,073,761) $ (29,473,012)
INSTITUTIONAL CLASS Shares 735,644 667,600 $ 7,541,803
sold
Reinvestment of distributions 27,649 70,535 284,726
Shares redeemed (1,260,679) (1,277,677) (13,021,579)
Net increase (decrease) (497,386) (539,542) $ (5,195,050)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 2,488,784
Reinvestment of distributions 127,329
Shares redeemed (1,280,382)
Net increase (decrease) $ 1,335,731
CLASS T Shares sold $ 21,386,352
Reinvestment of distributions 1,582,559
Shares redeemed (11,947,707)
Net increase (decrease) $ 11,021,204
CLASS B Shares sold $ 16,049,817
Reinvestment of distributions 679,689
Shares redeemed (4,891,488)
Net increase (decrease) $ 11,838,018
INITIAL CLASS Shares sold $ 41,964,545
Reinvestment of distributions 26,913,754
Shares redeemed (101,601,425)
Net increase (decrease) $ (32,723,126)
INSTITUTIONAL CLASS Shares $ 7,141,162
sold
Reinvestment of distributions 754,625
Shares redeemed (13,640,920)
Net increase (decrease) $ (5,745,133)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investment Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications & 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AMORI-SANN-0600 103948
1.703542.102
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
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
SEMIANNUAL REPORT
APRIL 30, 2000
(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.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.48% 1.99% 37.98% 113.13%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -3.34% -2.85% 31.43% 103.00%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 1.26% 1.85% 39.51% 116.20%
US Mortgage Funds Average 1.15% 1.19% 33.82% 101.21%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class A's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 62 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.99% 6.65% 7.86%
SECURITIES - CL A
FIDELITY ADV MORTGAGE -2.85% 5.62% 7.34%
SECURITIES - CL A (INCL.
4.75% SALES CHARGE)
LB Mortgage 1.85% 6.89% 8.02%
US Mortgage Funds Average 1.19% 5.99% 7.24%
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
1990/04/30 9525.00 10000.00
1990/05/31 9801.91 10310.28
1990/06/30 9944.01 10473.31
1990/07/31 10088.53 10655.05
1990/08/31 10061.84 10541.83
1990/09/30 10115.55 10628.33
1990/10/31 10219.18 10748.84
1990/11/30 10442.79 10974.07
1990/12/31 10622.92 11158.00
1991/01/31 10733.15 11327.60
1991/02/28 10801.87 11423.09
1991/03/31 10874.53 11500.84
1991/04/30 10992.24 11606.77
1991/05/31 11049.39 11708.82
1991/06/30 11077.02 11719.27
1991/07/31 11236.13 11917.54
1991/08/31 11450.85 12134.27
1991/09/30 11629.61 12361.69
1991/10/31 11767.08 12566.51
1991/11/30 11839.01 12657.63
1991/12/31 12069.00 12912.02
1992/01/31 12010.94 12762.83
1992/02/29 12130.45 12883.59
1992/03/31 12046.62 12801.47
1992/04/30 12159.56 12927.33
1992/05/31 12360.26 13160.34
1992/06/30 12491.22 13315.60
1992/07/31 12469.78 13431.98
1992/08/31 12550.44 13606.92
1992/09/30 12629.23 13712.86
1992/10/31 12503.65 13592.58
1992/11/30 12564.08 13635.10
1992/12/31 12727.12 13811.26
1993/01/31 12843.24 13992.76
1993/02/28 12953.24 14134.66
1993/03/31 13037.82 14220.42
1993/04/30 13128.84 14293.80
1993/05/31 13167.72 14375.20
1993/06/30 13328.35 14485.26
1993/07/31 13401.62 14543.09
1993/08/31 13426.57 14611.61
1993/09/30 13455.90 14624.24
1993/10/31 13479.84 14666.52
1993/11/30 13451.66 14637.85
1993/12/31 13581.49 14756.42
1994/01/31 13706.57 14902.69
1994/02/28 13634.29 14798.70
1994/03/31 13479.77 14413.34
1994/04/30 13420.72 14307.17
1994/05/31 13534.97 14363.78
1994/06/30 13604.25 14332.68
1994/07/31 13821.72 14619.63
1994/08/31 13883.65 14665.79
1994/09/30 13733.16 14457.08
1994/10/31 13761.05 14448.82
1994/11/30 13747.32 14403.63
1994/12/31 13845.19 14518.55
1995/01/31 14106.95 14829.31
1995/02/28 14422.77 15207.86
1995/03/31 14483.97 15279.54
1995/04/30 14712.33 15496.76
1995/05/31 15175.23 15985.37
1995/06/30 15291.00 16076.24
1995/07/31 15325.73 16103.94
1995/08/31 15514.84 16270.62
1995/09/30 15675.22 16413.73
1995/10/31 15849.60 16559.76
1995/11/30 16025.08 16749.03
1995/12/31 16201.63 16958.23
1996/01/31 16334.27 17086.04
1996/02/29 16230.20 16944.14
1996/03/31 16171.32 16882.91
1996/04/30 16137.61 16835.29
1996/05/31 16075.12 16786.21
1996/06/30 16296.97 17017.28
1996/07/31 16355.16 17079.72
1996/08/31 16351.55 17079.48
1996/09/30 16610.34 17365.45
1996/10/31 16917.68 17706.10
1996/11/30 17179.05 17959.52
1996/12/31 17082.19 17865.49
1997/01/31 17189.09 17998.15
1997/02/28 17245.13 18058.17
1997/03/31 17080.63 17888.09
1997/04/30 17345.32 18173.34
1997/05/31 17514.16 18351.19
1997/06/30 17716.55 18565.25
1997/07/31 18034.17 18915.13
1997/08/31 17994.84 18870.18
1997/09/30 18203.84 19109.51
1997/10/31 18395.47 19321.38
1997/11/30 18454.20 19384.79
1997/12/31 18596.54 19561.44
1998/01/31 18783.92 19756.06
1998/02/28 18804.33 19797.85
1998/03/31 18863.05 19881.67
1998/04/30 18972.27 19994.17
1998/05/31 19097.44 20127.07
1998/06/30 19188.90 20223.05
1998/07/31 19262.38 20325.58
1998/08/31 19424.74 20510.00
1998/09/30 19605.11 20757.59
1998/10/31 19434.67 20730.86
1998/11/30 19578.63 20834.12
1998/12/31 19640.89 20922.56
1999/01/31 19747.73 21071.51
1999/02/28 19690.41 20988.17
1999/03/31 19834.48 21129.11
1999/04/30 19903.98 21226.61
1999/05/31 19828.41 21107.95
1999/06/30 19754.56 21033.67
1999/07/31 19644.23 20890.98
1999/08/31 19630.45 20890.23
1999/09/30 19919.85 21229.32
1999/10/31 20004.09 21351.41
1999/11/30 19993.92 21363.07
1999/12/31 19971.43 21310.81
2000/01/31 19863.71 21126.11
2000/02/29 20106.11 21371.14
2000/03/31 20330.59 21604.91
2000/04/28 20300.36 21619.76
IMATRL PRASUN SHR__CHT 20000430 20000524 092203 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class A on
April 30, 1990, and the current 4.75% sales charge was paid. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $20,300 - a 103.00% 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 $21,620 - a
116.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS A SHARES)
TO OCTOBER 31,
2000 1999 1998 1997
Dividend returns 3.48% 5.98% 5.92% 4.18%
Capital returns -2.00% -3.05% -0.27% 2.53%
Total returns 1.48% 2.93% 5.65% 6.71%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains paid
by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.46(cents) 36.13(cents) 67.21(cents)
Annualized dividend rate 6.41% 7.01% 6.45%
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 $10.36 over the past one month, $10.33 over the past six months,
and $10.42 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. Yield information will be reported once Class A has a longer,
more stable operating history.
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class T shares
took place on March 3, 1997. Class T shares bear a 0.25% 12b-1 fee.
Returns prior to March 3, 1997 are those of Initial Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
T shares' 12b-1 fee been reflected, returns prior to March 3, 1997
would have been lower. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.51% 1.88% 37.73% 112.74%
SECURITIES - CL T
FIDELITY ADV MORTGAGE -2.04% -1.69% 32.91% 105.29%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 1.26% 1.85% 39.51% 116.20%
US Mortgage Funds Average 1.15% 1.19% 33.82% 101.21%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class T's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 62 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.88% 6.61% 7.84%
SECURITIES - CL T
FIDELITY ADV MORTGAGE -1.69% 5.86% 7.46%
SECURITIES - CL T (INCL.
3.50% SALES CHARGE)
LB Mortgage 1.85% 6.89% 8.02%
US Mortgage Funds Average 1.19% 5.99% 7.24%
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
1990/04/30 9650.00 10000.00
1990/05/31 9930.55 10310.28
1990/06/30 10074.51 10473.31
1990/07/31 10220.92 10655.05
1990/08/31 10193.89 10541.83
1990/09/30 10248.30 10628.33
1990/10/31 10353.29 10748.84
1990/11/30 10579.84 10974.07
1990/12/31 10762.33 11158.00
1991/01/31 10874.01 11327.60
1991/02/28 10943.63 11423.09
1991/03/31 11017.24 11500.84
1991/04/30 11136.50 11606.77
1991/05/31 11194.39 11708.82
1991/06/30 11222.39 11719.27
1991/07/31 11383.58 11917.54
1991/08/31 11601.12 12134.27
1991/09/30 11782.23 12361.69
1991/10/31 11921.50 12566.51
1991/11/30 11994.38 12657.63
1991/12/31 12227.38 12912.02
1992/01/31 12168.56 12762.83
1992/02/29 12289.65 12883.59
1992/03/31 12204.71 12801.47
1992/04/30 12319.13 12927.33
1992/05/31 12522.47 13160.34
1992/06/30 12655.15 13315.60
1992/07/31 12633.43 13431.98
1992/08/31 12715.14 13606.92
1992/09/30 12794.97 13712.86
1992/10/31 12667.74 13592.58
1992/11/30 12728.96 13635.10
1992/12/31 12894.15 13811.26
1993/01/31 13011.79 13992.76
1993/02/28 13123.23 14134.66
1993/03/31 13208.92 14220.42
1993/04/30 13301.14 14293.80
1993/05/31 13340.52 14375.20
1993/06/30 13503.27 14485.26
1993/07/31 13577.49 14543.09
1993/08/31 13602.77 14611.61
1993/09/30 13632.49 14624.24
1993/10/31 13656.74 14666.52
1993/11/30 13628.19 14637.85
1993/12/31 13759.73 14756.42
1994/01/31 13886.44 14902.69
1994/02/28 13813.22 14798.70
1994/03/31 13656.67 14413.34
1994/04/30 13596.85 14307.17
1994/05/31 13712.59 14363.78
1994/06/30 13782.78 14332.68
1994/07/31 14003.11 14619.63
1994/08/31 14065.85 14665.79
1994/09/30 13913.38 14457.08
1994/10/31 13941.64 14448.82
1994/11/30 13927.73 14403.63
1994/12/31 14026.89 14518.55
1995/01/31 14292.08 14829.31
1995/02/28 14612.04 15207.86
1995/03/31 14674.05 15279.54
1995/04/30 14905.40 15496.76
1995/05/31 15374.38 15985.37
1995/06/30 15491.67 16076.24
1995/07/31 15526.86 16103.94
1995/08/31 15718.45 16270.62
1995/09/30 15880.94 16413.73
1995/10/31 16057.60 16559.76
1995/11/30 16235.39 16749.03
1995/12/31 16414.25 16958.23
1996/01/31 16548.63 17086.04
1996/02/29 16443.19 16944.14
1996/03/31 16383.54 16882.91
1996/04/30 16349.39 16835.29
1996/05/31 16286.08 16786.21
1996/06/30 16510.84 17017.28
1996/07/31 16569.80 17079.72
1996/08/31 16566.14 17079.48
1996/09/30 16828.32 17365.45
1996/10/31 17139.70 17706.10
1996/11/30 17404.50 17959.52
1996/12/31 17306.36 17865.49
1997/01/31 17414.67 17998.15
1997/02/28 17471.44 18058.17
1997/03/31 17303.49 17888.09
1997/04/30 17569.74 18173.34
1997/05/31 17739.20 18351.19
1997/06/30 17943.08 18565.25
1997/07/31 18263.87 18915.13
1997/08/31 18239.88 18870.18
1997/09/30 18433.34 19109.51
1997/10/31 18625.92 19321.38
1997/11/30 18683.84 19384.79
1997/12/31 18843.77 19561.44
1998/01/31 19019.97 19756.06
1998/02/28 19041.73 19797.85
1998/03/31 19117.74 19881.67
1998/04/30 19209.43 19994.17
1998/05/31 19334.65 20127.07
1998/06/30 19425.66 20223.05
1998/07/31 19498.54 20325.58
1998/08/31 19661.19 20510.00
1998/09/30 19842.14 20757.59
1998/10/31 19668.16 20730.86
1998/11/30 19828.17 20834.12
1998/12/31 19891.21 20922.56
1999/01/31 19997.94 21071.51
1999/02/28 19938.51 20988.17
1999/03/31 20064.06 21129.11
1999/04/30 20151.34 21226.61
1999/05/31 20073.22 21107.95
1999/06/30 19978.13 21033.67
1999/07/31 19883.78 20890.98
1999/08/31 19849.09 20890.23
1999/09/30 20159.16 21229.32
1999/10/31 20223.41 21351.41
1999/11/30 20229.78 21363.07
1999/12/31 20204.49 21310.81
2000/01/31 20073.90 21126.11
2000/02/29 20336.91 21371.14
2000/03/31 20542.26 21604.91
2000/04/28 20529.31 21619.76
IMATRL PRASUN SHR__CHT 20000430 20000524 092939 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class T on
April 30, 1990, and the current 3.50% sales charge was paid. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $20,529 - a 105.29% 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 $21,620 - a
116.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS T SHARES)
TO OCTOBER 31,
2000 1999 1998 1997
Dividend returns 3.42% 5.87% 5.87% 4.12%
Capital returns -1.91% -3.05% -0.27% 2.53%
Total returns 1.51% 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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.35(cents) 35.46(cents) 66.01(cents)
Annualized dividend rate 6.28% 6.88% 6.33%
30-day annualized yield 6.23% - -
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 $10.37 over the past one month, $10.34 over the past six months,
and $10.43 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class T's current 3.50% sales charge. If
Fidelity had not reimbursed certain class expenses, the yield would
have been 6.22%.
FIDELITY ADVISOR MORTGAGE SECURITIES FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on March 3, 1997. Class B shares bear a .90% 12b-1 fee.
Returns prior to March 3, 1997 are those of Initial Class, the
original class of the fund, which does not bear a 12b-1 fee. Had Class
B shares' 12b-1 fee been reflected, returns prior to March 3, 1997
would have been lower. Class B's contingent deferred sales charges
included in the past six month, past one year, past five year and past
10 year total return figures are 5%, 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.11% 1.27% 34.88% 108.34%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -3.79% -3.51% 32.95% 108.34%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 1.26% 1.85% 39.51% 116.20%
US Mortgage Funds Average 1.15% 1.19% 33.82% 101.21%
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to the performance
of the Lehman Brothers Mortgage-Backed Securities Index - a market
value-weighted index of fixed-rate securities that represent interests
in pools of mortgage loans with original terms of 15 and 30 years that
are issued by the Government National Mortgage Association (GNMA), the
Federal National Mortgage Association (FNMA), and the Federal Home
Loan Mortgage Corp. (FHLMC), and balloon mortgages with fixed-rate
coupons. To measure how Class B's performance stacked up against its
peers, you can compare it to the U.S. mortgage funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 62 mutual funds. These benchmarks reflect reinvestment of
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MORTGAGE 1.27% 6.17% 7.62%
SECURITIES - CL B
FIDELITY ADV MORTGAGE -3.51% 5.86% 7.62%
SECURITIES - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB Mortgage 1.85% 6.89% 8.02%
US Mortgage Funds Average 1.19% 5.99% 7.24%
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
1990/04/30 10000.00 10000.00
1990/05/31 10290.72 10310.28
1990/06/30 10439.91 10473.31
1990/07/31 10591.63 10655.05
1990/08/31 10563.61 10541.83
1990/09/30 10620.01 10628.33
1990/10/31 10728.80 10748.84
1990/11/30 10963.56 10974.07
1990/12/31 11152.68 11158.00
1991/01/31 11268.40 11327.60
1991/02/28 11340.55 11423.09
1991/03/31 11416.83 11500.84
1991/04/30 11540.41 11606.77
1991/05/31 11600.41 11708.82
1991/06/30 11629.42 11719.27
1991/07/31 11796.46 11917.54
1991/08/31 12021.89 12134.27
1991/09/30 12209.56 12361.69
1991/10/31 12353.89 12566.51
1991/11/30 12429.41 12657.63
1991/12/31 12670.86 12912.02
1992/01/31 12609.91 12762.83
1992/02/29 12735.38 12883.59
1992/03/31 12647.37 12801.47
1992/04/30 12765.94 12927.33
1992/05/31 12976.65 13160.34
1992/06/30 13114.14 13315.60
1992/07/31 13091.63 13431.98
1992/08/31 13176.31 13606.92
1992/09/30 13259.03 13712.86
1992/10/31 13127.19 13592.58
1992/11/30 13190.64 13635.10
1992/12/31 13361.81 13811.26
1993/01/31 13483.72 13992.76
1993/02/28 13599.20 14134.66
1993/03/31 13688.01 14220.42
1993/04/30 13783.56 14293.80
1993/05/31 13824.38 14375.20
1993/06/30 13993.02 14485.26
1993/07/31 14069.94 14543.09
1993/08/31 14096.14 14611.61
1993/09/30 14126.93 14624.24
1993/10/31 14152.06 14666.52
1993/11/30 14122.48 14637.85
1993/12/31 14258.78 14756.42
1994/01/31 14390.10 14902.69
1994/02/28 14314.21 14798.70
1994/03/31 14151.99 14413.34
1994/04/30 14090.00 14307.17
1994/05/31 14209.94 14363.78
1994/06/30 14282.67 14332.68
1994/07/31 14510.99 14619.63
1994/08/31 14576.01 14665.79
1994/09/30 14418.02 14457.08
1994/10/31 14447.29 14448.82
1994/11/30 14432.88 14403.63
1994/12/31 14535.64 14518.55
1995/01/31 14810.45 14829.31
1995/02/28 15142.01 15207.86
1995/03/31 15206.27 15279.54
1995/04/30 15446.01 15496.76
1995/05/31 15932.00 15985.37
1995/06/30 16053.54 16076.24
1995/07/31 16090.01 16103.94
1995/08/31 16288.55 16270.62
1995/09/30 16456.93 16413.73
1995/10/31 16640.00 16559.76
1995/11/30 16824.23 16749.03
1995/12/31 17009.58 16958.23
1996/01/31 17148.84 17086.04
1996/02/29 17039.58 16944.14
1996/03/31 16977.76 16882.91
1996/04/30 16942.37 16835.29
1996/05/31 16876.77 16786.21
1996/06/30 17109.68 17017.28
1996/07/31 17170.77 17079.72
1996/08/31 17166.99 17079.48
1996/09/30 17438.68 17365.45
1996/10/31 17761.35 17706.10
1996/11/30 18035.75 17959.52
1996/12/31 17934.05 17865.49
1997/01/31 18046.29 17998.15
1997/02/28 18105.12 18058.17
1997/03/31 17921.47 17888.09
1997/04/30 18189.15 18173.34
1997/05/31 18336.44 18351.19
1997/06/30 18554.03 18565.25
1997/07/31 18857.84 18915.13
1997/08/31 18821.77 18870.18
1997/09/30 19011.46 19109.51
1997/10/31 19217.05 19321.38
1997/11/30 19249.11 19384.79
1997/12/31 19403.44 19561.44
1998/01/31 19592.07 19756.06
1998/02/28 19604.76 19797.85
1998/03/31 19654.27 19881.67
1998/04/30 19755.62 19994.17
1998/05/31 19873.51 20127.07
1998/06/30 19938.34 20223.05
1998/07/31 20019.98 20325.58
1998/08/31 20175.80 20510.00
1998/09/30 20350.60 20757.59
1998/10/31 20142.44 20730.86
1998/11/30 20297.14 20834.12
1998/12/31 20350.03 20922.56
1999/01/31 20448.03 21071.51
1999/02/28 20375.97 20988.17
1999/03/31 20494.03 21129.11
1999/04/30 20572.93 21226.61
1999/05/31 20482.61 21107.95
1999/06/30 20375.28 21033.67
1999/07/31 20268.84 20890.98
1999/08/31 20242.81 20890.23
1999/09/30 20528.88 21229.32
1999/10/31 20603.87 21351.41
1999/11/30 20579.72 21363.07
1999/12/31 20543.97 21310.81
2000/01/31 20420.54 21126.11
2000/02/29 20657.69 21371.14
2000/03/31 20877.24 21604.91
2000/04/28 20833.56 21619.76
IMATRL PRASUN SHR__CHT 20000430 20000524 093730 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Mortgage Securities Fund - Class B on
April 30, 1990. As the chart shows, by April 30, 2000, the value of
the investment would have grown to $20,834 - a 108.34% 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 $21,620 a 116.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, MARCH 3, 1997 (COMMENCEMENT
OF SALE OF CLASS B SHARES)
TO OCTOBER 31,
2000 1999 1998 1997
Dividend returns 3.11% 5.25% 5.19% 3.66%
Capital returns -2.00% -2.96% -0.37% 2.52%
Total returns 1.11% 2.29% 4.82% 6.18%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains paid
by the class are reinvested, if any, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.84(cents) 32.38(cents) 59.75(cents)
Annualized dividend rate 5.68% 6.29% 5.73%
30-day annualized yield 5.84% - -
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 $10.36 over the past one month, $10.33 over the past six months,
and $10.42 over the past one year, you can compare the class' income
over these three periods. The 30-day annualized YIELD is a standard
formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 2000, the fund's
Class A, Class T and Class B shares provided total returns of 1.48%,
1.51% and 1.11%, respectively. To get a sense of how the fund
performed relative to its competitors, the U.S. mortgage funds average
returned 1.15% for the same six-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 1.26% for the same six-month period. For the 12-month period
that ended April 30, 2000, the fund's Class A, Class T and Class B
shares returned 1.99%, 1.88% and 1.27%, respectively. For the same
one-year period, the U.S. mortgage funds average returned 1.19% and
the Lehman Brothers index returned 1.85%.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS?
A. The main contributor to the fund's performance was its
larger-than-average stake in commercial mortgage securities (CMS),
which made up about 17% of the fund's net assets at the end of the
period and outperformed most other mortgage securities during the past
six months. Commercial mortgage securities are bonds that are
collateralized by mortgage loans on commercial real estate - such as
office buildings, shopping malls, hotels and apartment buildings.
Their recent strong performance mainly was due to improvement in the
overall credit quality of the sector in response to the strength of
the U.S. economy and good commercial real estate fundamentals. In
contrast to other fixed-income securities, rising interest rates also
bolstered CMS by limiting issuance of new securities. Finally,
proposed changes to pension-fund regulations were expected to broaden
the demand for these securities.
Q. PREPAYMENT ACTIVITY, WHICH WAS A BIG NEGATIVE FOR THE MORTGAGE
MARKET DURING MUCH OF 1999, HAS ALL BUT DISAPPEARED SO FAR IN 2000.
WHY, THEN, DIDN'T MORTGAGE SECURITIES PERFORM BETTER?
A. Rising interest rates - which pushed mortgage securities' yields
higher and their prices lower - were the main culprit behind their
lackluster performance. But another very critical factor was the
Treasury market rally, which came at the expense of mortgage
securities and most other fixed-income investments as well. As the
Federal Reserve Board raised interest rates, long-term Treasury bond
yields actually fell as the U.S. Treasury scaled back its auctions and
announced plans to re-purchase $30 billion of its outstanding Treasury
bonds to cut financing costs. Three successful re-purchases during the
first four months of 2000 supported the idea that Treasury supply
would become increasingly scarce. Those developments also helped firm
demand for intermediate- and short-term Treasuries, which experienced
rising yields but to a lesser extent than mortgage securities. As one
measure of the scope of the performance disparity between Treasuries
and mortgages, the spread - or difference in yield - between a 10-year
Treasury and 10-year mortgage security was over 155 basis points
(1.55% percentage points) at the end of April, compared to about 125
basis points just six months earlier.
Q. WERE THERE ANY OTHER DISAPPOINTMENTS DURING THE PERIOD?
A. Yes, there were. The fund had a relatively small stake in
securities issued by Ginnie Mae, which outperformed securities issued
by Fannie Mae and Freddie Mac. In a surprising development, a senior
Treasury official shook up the mortgage market when he urged Congress
to cut off longstanding but never-used lines of credit that give
Fannie Mae and Freddie Mac securities implicit government backing. He
also asked Congress to repeal "exceptions that let banks hold so much"
of those securities. Although it remained unclear whether those
recommendations would translate into actual policy, investors reacted
to his comments by selling Fannie Mae and Freddie Mac securities,
allowing Ginnie Maes to outperform.
Q. WHAT DID YOU DO IN RESPONSE TO THAT DEVELOPMENT?
A. To lock in their relatively strong performance, I sold some of the
fund's Ginnie Mae holdings. I replaced them with additional Freddie
Mac and Fannie Mae securities, which I felt had been unduly punished
by those developments and offered attractive yields at relatively
cheap prices as a result. By the end of the period, Fannie Mae and
Freddie Mac securities offered yields as much as 15 basis points
(0.15%) more than their Ginnie Mae counterparts.
Q. WHAT'S YOUR OUTLOOK?
A. While I don't believe that any legislation altering the
debt-issuing ability of Fannie Mae and Freddie Mac will be enacted
before the presidential election in November, I believe that spread
volatility between mortgage securities and Treasuries is likely to
continue. Even so, I think that the mortgage securities market offers
some very attractive values at current levels, offering yields well in
excess of U.S. Treasury securities.
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 gains
START DATE: December 31, 1984
SIZE: as of April 30, 2000,
more than $428 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON PROPOSED
MOVES TO ALTER THE BACKING
OF MORTGAGE SECURITIES:
"Fannie Mae and Freddie Mac are
government-sponsored enterprises
(GSE) and, as such, enjoy certain
benefits including a $4.5 billion line
of credit from the U.S. Treasury.
They purchase home loans from
originators such as banks, thrifts
and mortgage banks, which they
hold for their own investment
portfolios. They also pool home
loans into mortgage securities.
Whether they hold mortgages for
their own portfolios or whether
they package them as securities,
the effect is that cash is freed up so
that originators can make new
loans. As a result, Fannie Mae and
Freddie Mac securities make up a
fast-growing share of the
government debt markets at a time
when the Treasury is limiting its
issuance.
"Although its emergency line of credit
from the U.S. Treasury has never been
tapped, it carries symbolic significance
because it traditionally has allowed
Fannie Mae and Freddie Mac to
borrow at interest rates close to the
U.S. government's rate. Renewed
government interest in curbing
these two GSE's line of credit and
limiting how much of their securities
commercial banks can own have
caused these securities to perform
poorly recently. The spread
between agency securities and
Treasuries - which is the key
barometer and the market's view of
the creditworthiness of Fannie Mae
and Freddie Mac - jumped sharply
during the past six months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 0.5
6 - 6.99% 45.0 47.0
7 - 7.99% 38.4 36.4
8 - 8.99% 9.9 7.8
9% and over 4.2 6.9
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 8.0 8.0
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 APRIL 30, 2000
6 MONTHS AGO
Years 4.7 4.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 77.1% Mortgage Securities 76.9%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.8% Related Securities 21.0%
U.S. Government Agency U.S. Government Agency
Obligations 3.9% Obligations 0.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets (2.8)%* Net Other Assets 2.1%
Row: 1, Col: 1, Value: 77.09999999999999 Row: 1, Col: 1, Value: 76.90000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 21.8 Row: 1, Col: 3, Value: 21.0
Row: 1, Col: 4, Value: 21.8 Row: 1, Col: 4, Value: 21.0
Row: 1, Col: 5, Value: 3.9 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: 0.0 Row: 1, Col: 8, Value: 2.1
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
Fannie Mae 6.5% 4/29/09 (Cost $ 18,100,000 $ 16,745,396
$16,755,170)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 77.1%
FANNIE MAE - 51.6%
6% 2/1/14 to 1/1/15 746,709 699,344
6.5% 9/1/10 to 5/1/30 114,294,343 106,929,040
6.5% 5/1/30 (b) 3,000,000 2,798,438
7% 3/1/19 to 4/1/30 69,946,624 67,032,036
7% 5/1/30 (b) 11,000,000 10,518,750
7.5% 3/1/22 to 3/1/30 9,859,778 9,663,998
8% 1/1/07 to 5/1/30 13,667,823 13,647,556
8.25% 1/1/13 71,647 72,282
8.5% 6/1/16 to 11/1/23 3,268,454 3,317,929
8.75% 11/1/08 to 7/1/09 130,237 132,117
9% 1/1/08 to 2/1/13 537,030 548,914
9.5% 5/1/03 to 8/1/22 3,584,805 3,707,128
11% 12/1/02 to 8/1/10 1,035,641 1,112,645
12.25% 5/1/13 to 6/1/15 149,609 166,456
12.5% 11/1/14 to 3/1/16 309,193 346,101
12.75% 2/1/14 to 6/1/15 58,776 65,080
13.5% 9/1/13 to 12/1/14 131,651 150,041
14% 11/1/14 41,336 47,523
220,955,378
FREDDIE MAC - 14.9%
5% 7/1/10 2,267,214 2,044,743
6% 2/1/29 to 7/1/29 4,788,503 4,339,232
6.5% 1/1/24 to 9/1/24 21,278,710 20,059,565
7% 7/1/29 to 9/1/29 12,711,685 12,167,370
7.5% 6/1/26 to 8/1/28 2,932,733 2,877,933
8% 10/1/07 to 4/1/21 599,746 597,861
8.5% 11/1/03 to 1/1/20 1,498,214 1,515,124
8.5% 5/1/30 (b) 9,375,000 9,515,625
9% 9/1/08 to 5/1/21 6,195,628 6,337,155
10% 1/1/09 to 5/1/19 1,063,089 1,110,436
10.5% 8/1/10 to 12/1/20 1,104,924 1,173,296
11.5% 4/1/12 59,101 63,930
12.25% 6/1/14 to 7/1/15 141,607 156,758
12.5% 5/1/12 to 12/1/14 572,665 631,273
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - CONTINUED
12.75% 6/1/05 to 3/1/15 $ 59,744 $ 64,771
13% 1/1/11 to 6/1/15 941,125 1,053,920
63,708,992
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 10.6%
6.5% 5/15/28 to 1/15/29 4,239,404 3,971,578
7% 1/15/26 to 5/1/30 17,357,994 16,696,649
7.5% 7/15/05 to 9/15/27 13,484,005 13,345,988
8% 4/15/02 to 12/15/25 8,743,665 8,785,665
8.5% 7/15/16 to 6/15/18 1,734,302 1,776,514
9% 9/20/16 to 4/20/18 64,471 66,355
9.5% 8/15/09 to 12/15/24 73,596 78,248
10.5% 8/15/00 to 2/20/18 579,901 618,388
13% 10/15/13 57,889 66,084
13.5% 7/15/11 to 10/15/14 58,238 66,731
45,472,200
TOTAL U.S. GOVERNMENT AGENCY 330,136,570
- MORTGAGE SECURITIES
(Cost $340,585,284)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.5%
U.S. GOVERNMENT AGENCY - 4.5%
Fannie Mae REMIC planned
amortization class:
Series 1999-1 Class PJ, 6.5% 10,049,260 8,924,999
2/25/29
Series 1999-51 Class LK, 6.5% 10,000,000 9,000,000
8/25/29
Freddie Mac REMIC planned 1,553,188 1,583,273
amortization class Series
70 Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 19,508,272
OBLIGATIONS
(Cost $19,834,372)
COMMERCIAL MORTGAGE
SECURITIES - 17.3%
Bankers Trust II Series 5,000,000 5,003,125
1999-S1A Class D, 8.0675%
2/28/14 (a)(c)
Bankers Trust REMIC Trust 959,113 959,574
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (c)
CBM Funding Corp. sequential 2,300,000 2,246,813
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage $ 2,000,000 $ 1,846,250
Securities Corp. Series
1997-C2 Class D, 7.27%
1/17/35
Deutsche Mortgage & Asset 10,200,000 9,066,844
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 2,877,831 2,845,905
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,374,875
6.9698% 4/13/31 (a)(c)
Series 1999-GSFL II Class F, 4,500,000 4,440,235
7.6634% 11/13/13 (a)(c)
Nomura Asset Securities Corp. 15,000,000 13,509,375
Series 1998-D6 Class A4,
7.1288% 3/17/28 (c)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.9038% 2/15/34 7,900,000 7,639,547
(a)(c)
Class A-5, 7.2538% 2/15/34 5,278,196 5,067,068
(a)(c)
Structured Asset Securities 3,192,522 2,976,528
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 16,960,837
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 73,936,976
SECURITIES
(Cost $78,065,657)
CASH EQUIVALENTS - 2.0%
MATURITY AMOUNT
Investments in repurchase $ 8,728,258 8,724,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $8,724,000)
TOTAL INVESTMENT PORTFOLIO - 449,051,214
104.8%
(Cost $463,964,483)
NET OTHER ASSETS - (4.8)% (20,617,199)
NET ASSETS - 100% $ 428,434,015
</TABLE>
LEGEND
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $40,485,687 or 9.4% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $464,042,874. Net unrealized depreciation
aggregated $14,991,660, of which $1,347,147 related to appreciated
investment securities and $16,338,807 related to depreciated
investment securities.
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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 449,051,214
value (including repurchase
agreements of $8,724,000)
(cost $463,964,483) - See
accompanying schedule
Commitment to sell securities $ (15,380,000)
on a delayed delivery basis
Receivable for securities 15,560,000 180,000
sold on a delayed delivery
basis
Receivable for investments 216,711
sold, regular delivery
Cash 35,249
Receivable for fund shares 355,108
sold
Interest receivable 2,900,904
TOTAL ASSETS 452,739,186
LIABILITIES
Payable for investments 23,049,492
purchased on a delayed
delivery basis
Payable for fund shares 580,408
redeemed
Distributions payable 394,203
Accrued management fee 154,072
Distribution fees payable 20,022
Other payables and accrued 106,974
expenses
TOTAL LIABILITIES 24,305,171
NET ASSETS $ 428,434,015
Net Assets consist of:
Paid in capital $ 450,641,604
Undistributed net investment 636,970
income
Accumulated undistributed net (8,111,290)
realized gain (loss) on
investments
Net unrealized appreciation (14,733,269)
(depreciation) on investments
NET ASSETS $ 428,434,015
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.27
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($4,150,788 (divided by)
403,999 shares)
Maximum offering price per $10.78
share (100/95.25 of $10.27)
CLASS T: NET ASSET VALUE and $10.28
redemption price per share
($25,695,229 (divided by)
2,499,316 shares)
Maximum offering price per $10.65
share (100/96.50 of $10.28)
CLASS B: NET ASSET VALUE and $10.27
offering price per share
($18,878,803 (divided by)
1,837,824 shares) A
INITIAL CLASS: NET ASSET $10.29
VALUE, offering price and
redemption price per share
($369,689,756 (divided by)
35,943,993 shares)
INSTITUTIONAL CLASS: NET $10.27
ASSET VALUE, offering price
and redemption price per
share ($10,019,439 (divided
by) 975,903 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 16,480,715
Interest
EXPENSES
Management fee $ 963,261
Transfer agent fees 393,883
Distribution fees 122,685
Accounting fees and expenses 74,577
Non-interested trustees' 691
compensation
Custodian fees and expenses 34,263
Registration fees 69,434
Audit 25,540
Legal 4,127
Miscellaneous 1,806
Total expenses before 1,690,267
reductions
Expense reductions (9,106) 1,681,161
NET INVESTMENT INCOME 14,799,554
REALIZED AND UNREALIZED GAIN (2,941,058)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (4,884,058)
Delayed delivery commitments 180,000 (4,704,058)
NET GAIN (LOSS) (7,645,116)
NET INCREASE (DECREASE) IN $ 7,154,438
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 14,799,554 $ 30,638,885
income
Net realized gain (loss) (2,941,058) (5,620,586)
Change in net unrealized (4,704,058) (10,190,965)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 7,154,438 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (16,064,557) (30,183,549)
From net investment income
From net realized gain - (6,924,572)
TOTAL DISTRIBUTIONS (16,064,557) (37,108,121)
Share transactions - net (36,159,462) (14,273,306)
increase (decrease)
TOTAL INCREASE (DECREASE) (45,069,581) (36,554,093)
IN NET ASSETS
NET ASSETS
Beginning of period 473,503,596 510,057,689
End of period (including $ 428,434,015 $ 473,503,596
undistributed net investment
income of $636,970 and
$1,901,973, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .328 .646 .669 .170 .268
Net realized and unrealized (.177) (.336) (.061) .048 .224
gain (loss)
Total from investment .151 .310 .608 .218 .492
operations
Less Distributions
From net investment income (.361) (.640) (.638) (.168) (.272)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.361) (.790) (.668) (.248) (.272)
Net asset value, end of $ 10.270 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.48% 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,151 $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, E .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.43% A 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 88% A 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 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> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .326 .637 .665 .167 .255
Net realized and unrealized (.171) (.338) (.063) .048 .233
gain (loss)
Total from investment .155 .299 .602 .215 .488
operations
Less Distributions
From net investment income (.355) (.629) (.632) (.165) (.268)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.355) (.779) (.662) (.245) (.268)
Net asset value, end of $ 10.280 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.51% 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 25,695 $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, E 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 6.33% A 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 88% A 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 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 T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.950 $ 11.020 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .294 .567 .584 .142 .234
Net realized and unrealized (.180) (.324) (.064) .065 .214
gain (loss)
Total from investment .114 .243 .520 .207 .448
operations
Less Distributions
From net investment income (.324) (.563) (.560) (.147) (.238)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.324) (.713) (.590) (.227) (.238)
Net asset value, end of $ 10.270 $ 10.480 $ 10.950 $ 11.020 $ 11.040
period
TOTAL RETURN B, C 1.11% 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,879 $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.61% A 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.72% A 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 88% A 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>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1999 1998 1997 F 1997 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780
period
Income from Investment
Operations
Net investment income .342 D .674 D .700 D .176 D .678 D
Net realized and unrealized (.172) (.342) (.056) .047 .391
gain (loss)
Total from investment .170 .332 .644 .223 1.069
operations
Less Distributions
From net investment income (.370) (.662) (.664) (.173) (.689)
From net realized gain - (.150) (.030) (.080) (.110)
In excess of net realized gain - - - - -
Total distributions (.370) (.812) (.694) (.253) (.799)
Net asset value, end of period $ 10.290 $ 10.490 $ 10.970 $ 11.020 $ 11.050
TOTAL RETURN B, C 1.67% 3.14% 5.99% 2.05% 10.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 369,690 $ 406,839 $ 459,212 $ 494,304 $ 506,113
(000 omitted)
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets after expense
reductions
Ratio of net investment 6.64% A 6.29% 6.34% 6.36% A 6.26%
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .729 .772
Net realized and unrealized (.015) .325
gain (loss)
Total from investment .714 1.097
operations
Less Distributions
From net investment income (.724) (.737)
From net realized gain (.100) -
In excess of net realized gain - (.050)
Total distributions (.824) (.787)
Net asset value, end of period $ 10.780 $ 10.890
TOTAL RETURN B, C 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .74% .77%
net assets
Ratio of expenses to average .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.75% 7.37%
income to average net assets
Portfolio turnover rate 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 FOR THE THREE MONTHS ENDED OCTOBER 31
G FOR THE YEAR ENDED JULY 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 H 1997G
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.470 $ 10.950 $ 11.010 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .340 .669 .693 .172 .263
Net realized and unrealized (.170) (.343) (.063) .050 .226
gain (loss)
Total from investment .170 .326 .630 .222 .489
operations
Less Distributions
From net investment income (.370) (.656) (.660) (.172) (.279)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.370) (.806) (.690) (.252) (.279)
Net asset value, end of $ 10.270 $ 10.470 $ 10.950 $ 11.010 $ 11.040
period
TOTAL RETURN B, C 1.66% 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,019 $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .74% A .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .73% A, F .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.60% A 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities 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, 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. 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, 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $200,462,044 and $231,485,190, respectively, of which U.S.
government and government agency obligations aggregated $188,439,822
and $213,483,079, 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 annualized 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 and
Service Plans with respect to each class of shares (collectively
referred to as "the Plans"). Under certain of the Plans, the class
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. A portion of this fee may be reallowed
to securities dealers, banks and other
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
financial institutions for the distribution of each class of shares
and providing shareholder support services. For the period, this fee
was based on the following annual rates of the average net assets of
each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .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 $ 2,547 $ 0
CLASS T 34,244 1,580
CLASS B 85,894 62,156
$ 122,685 $ 63,736
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 11,799 $ 2,734
CLASS T 19,343 6,877
CLASS B 41,401 41,401*
$ 72,543 $ 51,012
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 Shares. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class Shares.
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 $ 4,116 .24
CLASS T 34,562 .25
CLASS B 17,846 .19
INITIAL CLASS 319,867 .17
INSTITUTIONAL CLASS 17,492 .21
$ 393,883
* ANNUALIZED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, 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% $ 296
CLASS T 1.00% 3,641
$ 3,937
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 $5,169 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 118,171 $ 153,223
Class T 942,284 1,450,107
Class B 599,674 724,614
Initial Class 13,820,612 26,727,640
Institutional Class 583,816 1,127,965
Total $ 16,064,557 $ 30,183,549
FROM NET REALIZED GAIN
Class A $ - $ 26,293
Class T - 278,709
Class B - 132,050
Initial Class - 6,182,269
Institutional Class - 305,251
Total $ - $ 6,924,572
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 233,326 $ 1,556,559
150,089
Reinvestment of distributions 8,606 11,952 88,693
Shares redeemed (49,692) (120,472) (512,298)
Net increase (decrease) 109,003 124,806 $ 1,132,954
CLASS T Shares sold 497,899 2,003,369 $ 5,147,178
Reinvestment of distributions 81,508 148,336 840,877
Shares redeemed (851,733) (1,122,570) (8,780,957)
Net increase (decrease) (272,326) 1,029,135 $ (2,792,902)
CLASS B Shares sold 348,517 1,505,268 $ 3,610,689
Reinvestment of distributions 44,121 63,855 454,806
Shares redeemed (378,214) (461,420) (3,896,947)
Net increase (decrease) 14,424 1,107,703 $ 168,548
INITIAL CLASS Shares sold 1,600,812 3,914,002 $ 16,541,648
Reinvestment of distributions 1,079,535 2,515,203 11,140,746
Shares redeemed (5,534,245) (9,502,966) (57,155,406)
Net increase (decrease) (2,853,898) (3,073,761) $ (29,473,012)
INSTITUTIONAL CLASS Shares 735,644 667,600 $ 7,541,803
sold
Reinvestment of distributions 27,649 70,535 284,726
Shares redeemed (1,260,679) (1,277,677) (13,021,579)
Net increase (decrease) (497,386) (539,542) $ (5,195,050)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 2,488,784
Reinvestment of distributions 127,329
Shares redeemed (1,280,382)
Net increase (decrease) $ 1,335,731
CLASS T Shares sold $ 21,386,352
Reinvestment of distributions 1,582,559
Shares redeemed (11,947,707)
Net increase (decrease) $ 11,021,204
CLASS B Shares sold $ 16,049,817
Reinvestment of distributions 679,689
Shares redeemed (4,891,488)
Net increase (decrease) $ 11,838,018
INITIAL CLASS Shares sold $ 41,964,545
Reinvestment of distributions 26,913,754
Shares redeemed (101,601,425)
Net increase (decrease) $ (32,723,126)
INSTITUTIONAL CLASS Shares $ 7,141,162
sold
Reinvestment of distributions 754,625
Shares redeemed (13,640,920)
Net increase (decrease) $ (5,745,133)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investment Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications & 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
AMOR-SANN-0600 103947
1.703540.102
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
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
SEMIANNUAL REPORT
APRIL 30, 2000
(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 36 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 45 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 year and past ten year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 2.66% -0.96% 30.80% 100.26%
- CL A
FIDELITY ADV MUNICIPAL INCOME -2.21% -5.66% 24.58% 90.75%
- CL A (INCL. 4.75% SALES
CHARGE)
LB 3 Plus Year Municipal Bond 2.81% -1.35% 33.66% n/a
General Municipal Debt Funds 2.05% -3.31% 26.41% 88.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Lehman Brothers Municipal 3 Plus Year Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities of three years or more. To measure how Class A's
performance stacked up against its peers, you can compare it to the
general municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 278 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -0.96% 5.52% 7.19%
- CL A
FIDELITY ADV MUNICIPAL INCOME -5.66% 4.49% 6.67%
- CL A (INCL. 4.75% SALES
CHARGE)
LB 3 Plus Year Municipal Bond -1.35% 5.97% n/a
General Municipal Debt Funds -3.31% 4.79% 6.56%
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
1990/04/30 9525.00 10000.00
1990/05/31 9720.20 10218.30
1990/06/30 9834.72 10308.12
1990/07/31 9986.41 10459.65
1990/08/31 9919.02 10307.77
1990/09/30 9989.56 10313.65
1990/10/31 10126.71 10500.74
1990/11/30 10377.97 10711.91
1990/12/31 10444.18 10758.51
1991/01/31 10565.73 10902.88
1991/02/28 10646.97 10997.74
1991/03/31 10709.56 11001.70
1991/04/30 10883.95 11148.02
1991/05/31 11018.48 11247.13
1991/06/30 11044.13 11235.99
1991/07/31 11186.93 11372.85
1991/08/31 11287.96 11522.63
1991/09/30 11420.36 11672.65
1991/10/31 11546.91 11777.71
1991/11/30 11590.35 11810.57
1991/12/31 11716.40 12064.02
1992/01/31 11846.28 12091.53
1992/02/29 11910.64 12095.40
1992/03/31 11970.39 12099.87
1992/04/30 12078.43 12207.56
1992/05/31 12186.78 12351.24
1992/06/30 12353.88 12558.50
1992/07/31 12784.05 12935.00
1992/08/31 12685.06 12808.88
1992/09/30 12764.22 12892.65
1992/10/31 12610.18 12765.92
1992/11/30 12862.91 12994.56
1992/12/31 13018.00 13127.23
1993/01/31 13238.19 13279.90
1993/02/28 13705.65 13760.24
1993/03/31 13562.69 13614.79
1993/04/30 13706.52 13752.16
1993/05/31 13820.03 13829.45
1993/06/30 14041.60 14060.26
1993/07/31 14052.03 14078.68
1993/08/31 14413.95 14371.80
1993/09/30 14613.55 14535.50
1993/10/31 14621.39 14563.55
1993/11/30 14478.49 14435.24
1993/12/31 14812.82 14739.97
1994/01/31 14985.31 14908.30
1994/02/28 14589.25 14522.18
1994/03/31 13811.59 13930.83
1994/04/30 13903.24 14048.97
1994/05/31 13985.46 14170.77
1994/06/30 13933.97 14084.19
1994/07/31 14185.31 14342.35
1994/08/31 14207.60 14391.98
1994/09/30 13985.03 14180.70
1994/10/31 13739.88 13928.85
1994/11/30 13298.14 13677.02
1994/12/31 13620.44 13978.05
1995/01/31 14080.58 14377.54
1995/02/28 14459.96 14795.64
1995/03/31 14535.99 14965.64
1995/04/30 14583.77 14983.30
1995/05/31 15050.46 15461.42
1995/06/30 14932.40 15326.91
1995/07/31 14981.05 15472.21
1995/08/31 15132.60 15668.39
1995/09/30 15254.63 15767.57
1995/10/31 15457.70 15996.84
1995/11/30 15749.44 16262.22
1995/12/31 15888.50 16418.50
1996/01/31 15975.17 16542.46
1996/02/29 15950.43 16430.80
1996/03/31 15613.40 16220.82
1996/04/30 15551.03 16174.91
1996/05/31 15532.69 16168.44
1996/06/30 15713.63 16344.51
1996/07/31 15816.34 16493.25
1996/08/31 15850.76 16489.29
1996/09/30 15992.15 16720.14
1996/10/31 16150.00 16909.25
1996/11/30 16432.18 17218.69
1996/12/31 16371.16 17146.37
1997/01/31 16445.12 17178.77
1997/02/28 16592.36 17336.47
1997/03/31 16409.31 17105.38
1997/04/30 16547.48 17248.55
1997/05/31 16745.03 17507.97
1997/06/30 16954.99 17694.43
1997/07/31 17439.06 18184.57
1997/08/31 17279.80 18014.18
1997/09/30 17507.08 18228.00
1997/10/31 17607.21 18345.21
1997/11/30 17720.92 18453.08
1997/12/31 18006.64 18722.31
1998/01/31 18179.95 18915.52
1998/02/28 18185.78 18921.20
1998/03/31 18243.64 18937.85
1998/04/30 18149.78 18852.44
1998/05/31 18427.28 19150.87
1998/06/30 18494.61 19226.33
1998/07/31 18534.64 19274.59
1998/08/31 18814.23 19572.38
1998/09/30 19032.77 19816.25
1998/10/31 19028.70 19815.86
1998/11/30 19099.07 19885.41
1998/12/31 19125.94 19935.52
1999/01/31 19337.00 20172.55
1999/02/28 19219.02 20084.40
1999/03/31 19217.60 20112.32
1999/04/30 19259.15 20162.40
1999/05/31 19133.10 20045.66
1999/06/30 18832.31 19757.00
1999/07/31 18891.92 19828.91
1999/08/31 18747.12 19670.28
1999/09/30 18772.67 19678.35
1999/10/31 18580.36 19465.03
1999/11/30 18766.04 19672.14
1999/12/31 18605.90 19525.58
2000/01/31 18495.73 19440.65
2000/02/29 18733.83 19666.16
2000/03/31 19189.32 20096.06
2000/04/28 19075.08 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000519 130109 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class A on April
30, 1990, and the current 4.75% sales charge was paid. As the chart
shows, by April 30, 2000, the value of the investment would have grown
to $19,075 - a 90.75% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index - a
market value-weighted index of investment grade bonds with maturities
of one year or more - did over the same period. With dividends
reinvested, the same $10,000 would have grown to $19,977 - a 99.77%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996
Dividend returns 2.57% 4.42% 4.86% 5.51% 0.89%
Capital returns 0.09% -6.78% 3.21% 3.51% 0.95%
Total returns 2.66% -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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.96(cents) 29.71(cents) 58.34(cents)
Annualized dividend rate 5.11% 5.11% 4.93%
30-day annualized yield 4.89% - -
30-day annualized 7.64% - -
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 $11.81 over the past one
month, $11.67 over the past six months and $11.84 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering 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 year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 2.61% -1.06% 30.68% 100.08%
- CL T
FIDELITY ADV MUNICIPAL INCOME -0.98% -4.52% 26.11% 93.08%
- CL T (INCL. 3.50% SALES
CHARGE)
LB 3 Plus Year Municipal Bond 2.81% -1.35% 33.66% n/a
General Municipal Debt Funds 2.05% -3.31% 26.41% 88.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Lehman Brothers 3 Plus Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities of three years or more. To measure how Class T's
performance stacked up against its peers, you can compare it to the
general municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 278 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -1.06% 5.50% 7.18%
- CL T
FIDELITY ADV MUNICIPAL INCOME -4.52% 4.75% 6.80%
- CL T (INCL. 3.50% SALES
CHARGE)
LB 3 Plus Year Municipal Bond -1.35% 5.97% n/a
General Municipal Debt Funds -3.31% 4.79% 6.56%
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
1990/04/30 9650.00 10000.00
1990/05/31 9847.76 10218.30
1990/06/30 9963.78 10308.12
1990/07/31 10117.46 10459.65
1990/08/31 10049.19 10307.77
1990/09/30 10120.65 10313.65
1990/10/31 10259.60 10500.74
1990/11/30 10514.17 10711.91
1990/12/31 10581.24 10758.51
1991/01/31 10704.39 10902.88
1991/02/28 10786.70 10997.74
1991/03/31 10850.11 11001.70
1991/04/30 11026.78 11148.02
1991/05/31 11163.08 11247.13
1991/06/30 11189.06 11235.99
1991/07/31 11333.74 11372.85
1991/08/31 11436.10 11522.63
1991/09/30 11570.24 11672.65
1991/10/31 11698.45 11777.71
1991/11/30 11742.45 11810.57
1991/12/31 11870.16 12064.02
1992/01/31 12001.74 12091.53
1992/02/29 12066.95 12095.40
1992/03/31 12127.48 12099.87
1992/04/30 12236.94 12207.56
1992/05/31 12346.71 12351.24
1992/06/30 12516.01 12558.50
1992/07/31 12951.82 12935.00
1992/08/31 12851.53 12808.88
1992/09/30 12931.73 12892.65
1992/10/31 12775.67 12765.92
1992/11/30 13031.72 12994.56
1992/12/31 13188.84 13127.23
1993/01/31 13411.92 13279.90
1993/02/28 13885.51 13760.24
1993/03/31 13740.68 13614.79
1993/04/30 13886.39 13752.16
1993/05/31 14001.39 13829.45
1993/06/30 14225.87 14060.26
1993/07/31 14236.44 14078.68
1993/08/31 14603.11 14371.80
1993/09/30 14805.33 14535.50
1993/10/31 14813.27 14563.55
1993/11/30 14668.50 14435.24
1993/12/31 15007.22 14739.97
1994/01/31 15181.97 14908.30
1994/02/28 14780.71 14522.18
1994/03/31 13992.85 13930.83
1994/04/30 14085.69 14048.97
1994/05/31 14168.99 14170.77
1994/06/30 14116.83 14084.19
1994/07/31 14371.47 14342.35
1994/08/31 14394.05 14391.98
1994/09/30 14168.56 14180.70
1994/10/31 13920.19 13928.85
1994/11/30 13472.66 13677.02
1994/12/31 13799.19 13978.05
1995/01/31 14265.36 14377.54
1995/02/28 14649.72 14795.64
1995/03/31 14726.75 14965.64
1995/04/30 14775.15 14983.30
1995/05/31 15247.97 15461.42
1995/06/30 15128.36 15326.91
1995/07/31 15177.65 15472.21
1995/08/31 15331.19 15668.39
1995/09/30 15454.82 15767.57
1995/10/31 15660.55 15996.84
1995/11/30 15956.13 16262.22
1995/12/31 16097.01 16418.50
1996/01/31 16184.82 16542.46
1996/02/29 16159.75 16430.80
1996/03/31 15818.30 16220.82
1996/04/30 15755.11 16174.91
1996/05/31 15736.53 16168.44
1996/06/30 15919.85 16344.51
1996/07/31 16023.90 16493.25
1996/08/31 16058.78 16489.29
1996/09/30 16202.89 16720.14
1996/10/31 16393.50 16909.25
1996/11/30 16635.75 17218.69
1996/12/31 16571.80 17146.37
1997/01/31 16646.18 17178.77
1997/02/28 16809.04 17336.47
1997/03/31 16623.96 17105.38
1997/04/30 16763.51 17248.55
1997/05/31 16963.49 17507.97
1997/06/30 17175.85 17694.43
1997/07/31 17665.81 18184.57
1997/08/31 17519.25 18014.18
1997/09/30 17734.92 18228.00
1997/10/31 17851.29 18345.21
1997/11/30 17948.95 18453.08
1997/12/31 18251.13 18722.31
1998/01/31 18427.02 18915.52
1998/02/28 18447.32 18921.20
1998/03/31 18492.02 18937.85
1998/04/30 18397.72 18852.44
1998/05/31 18679.68 19150.87
1998/06/30 18748.31 19226.33
1998/07/31 18789.66 19274.59
1998/08/31 19073.61 19572.38
1998/09/30 19295.38 19816.25
1998/10/31 19306.41 19815.86
1998/11/30 19360.64 19885.41
1998/12/31 19385.97 19935.52
1999/01/31 19597.72 20172.55
1999/02/28 19476.56 20084.40
1999/03/31 19473.55 20112.32
1999/04/30 19514.04 20162.40
1999/05/31 19384.73 20045.66
1999/06/30 19078.44 19757.00
1999/07/31 19153.02 19828.91
1999/08/31 19004.92 19670.28
1999/09/30 19013.31 19678.35
1999/10/31 18817.25 19465.03
1999/11/30 19019.70 19672.14
1999/12/31 18856.17 19525.58
2000/01/31 18727.01 19440.65
2000/02/29 18966.31 19666.16
2000/03/31 19425.38 20096.06
2000/04/28 19308.10 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000519 133140 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class T on April
30, 1990, and the current 3.50% sales charge was paid. As the chart
shows, by April 30, 2000, the value of the investment would have grown
to $19,308 - a 93.08% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index - a
market value-weighted index of investment grade bonds with maturities
of one year or more - did over the same period. With dividends
reinvested, the same $10,000 would have grown to $19,977 - a 99.77%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.52% 4.32% 4.86% 5.47% 5.69% 6.62%
Capital returns 0.09% -6.85% 3.29% 3.42% -1.01% 5.88%
Total returns 2.61% -2.53% 8.15% 8.89% 4.68% 12.50%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.86(cents) 29.12(cents) 57.15(cents)
Annualized dividend rate 5.00% 5.00% 4.82%
30-day annualized yield 4.85% - -
30-day annualized 7.58% - -
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 $11.82 over the past one
month, $11.69 over the past six months and $11.85 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current 3.50% sales charge. The tax-equivalent yield shows what you
would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
FIDELITY ADVISOR MUNICIPAL INCOME FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on June 30, 1994. Class B shares bear a 0.90% 12b-1 fee
(1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six month, past
one year, past five year and past 10 year total return figures are 5%,
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 2.29% -1.69% 26.42% 91.75%
- CL B
FIDELITY ADV MUNICIPAL INCOME -2.71% -6.41% 24.42% 91.75%
- CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB 3 Plus Year Municipal Bond 2.81% -1.35% 33.66% n/a
General Municipal Debt Funds 2.05% -3.31% 26.41% 88.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers 3 Plus Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities of three years or more. To measure how Class B's
performance stacked up against its peers, you can compare it to the
general municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 278 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -1.69% 4.80% 6.73%
- CL B
FIDELITY ADV MUNICIPAL INCOME -6.41% 4.47% 6.73%
- CL B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB 3 Plus Year Municipal Bond -1.35% 5.97% n/a
General Municipal Debt Funds -3.31% 4.79% 6.56%
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
1990/04/30 10000.00 10000.00
1990/05/31 10204.93 10218.30
1990/06/30 10325.17 10308.12
1990/07/31 10484.42 10459.65
1990/08/31 10413.67 10307.77
1990/09/30 10487.72 10313.65
1990/10/31 10631.71 10500.74
1990/11/30 10895.51 10711.91
1990/12/31 10965.02 10758.51
1991/01/31 11092.63 10902.88
1991/02/28 11177.92 10997.74
1991/03/31 11243.64 11001.70
1991/04/30 11426.72 11148.02
1991/05/31 11567.96 11247.13
1991/06/30 11594.89 11235.99
1991/07/31 11744.81 11372.85
1991/08/31 11850.88 11522.63
1991/09/30 11989.88 11672.65
1991/10/31 12122.74 11777.71
1991/11/30 12168.34 11810.57
1991/12/31 12300.68 12064.02
1992/01/31 12437.04 12091.53
1992/02/29 12504.61 12095.40
1992/03/31 12567.34 12099.87
1992/04/30 12680.76 12207.56
1992/05/31 12794.52 12351.24
1992/06/30 12969.96 12558.50
1992/07/31 13421.58 12935.00
1992/08/31 13317.65 12808.88
1992/09/30 13400.76 12892.65
1992/10/31 13239.04 12765.92
1992/11/30 13504.37 12994.56
1992/12/31 13667.19 13127.23
1993/01/31 13898.37 13279.90
1993/02/28 14389.13 13760.24
1993/03/31 14239.05 13614.79
1993/04/30 14390.05 13752.16
1993/05/31 14509.21 13829.45
1993/06/30 14741.84 14060.26
1993/07/31 14752.79 14078.68
1993/08/31 15132.75 14371.80
1993/09/30 15342.31 14535.50
1993/10/31 15350.54 14563.55
1993/11/30 15200.52 14435.24
1993/12/31 15551.52 14739.97
1994/01/31 15732.61 14908.30
1994/02/28 15316.79 14522.18
1994/03/31 14500.36 13930.83
1994/04/30 14596.57 14048.97
1994/05/31 14682.89 14170.77
1994/06/30 14628.84 14084.19
1994/07/31 14873.78 14342.35
1994/08/31 14897.48 14391.98
1994/09/30 14650.44 14180.70
1994/10/31 14356.75 13928.85
1994/11/30 13885.79 13677.02
1994/12/31 14226.45 13978.05
1995/01/31 14684.89 14377.54
1995/02/28 15071.23 14795.64
1995/03/31 15140.79 14965.64
1995/04/30 15167.65 14983.30
1995/05/31 15643.99 15461.42
1995/06/30 15511.05 15326.91
1995/07/31 15551.64 15472.21
1995/08/31 15699.23 15668.39
1995/09/30 15816.52 15767.57
1995/10/31 16017.99 15996.84
1995/11/30 16311.34 16262.22
1995/12/31 16445.65 16418.50
1996/01/31 16526.93 16542.46
1996/02/29 16492.69 16430.80
1996/03/31 16134.53 16220.82
1996/04/30 16060.07 16174.91
1996/05/31 16030.61 16168.44
1996/06/30 16207.80 16344.51
1996/07/31 16304.73 16493.25
1996/08/31 16331.64 16489.29
1996/09/30 16469.44 16720.14
1996/10/31 16654.75 16909.25
1996/11/30 16893.65 17218.69
1996/12/31 16820.44 17146.37
1997/01/31 16873.52 17178.77
1997/02/28 17044.67 17336.47
1997/03/31 16848.00 17105.38
1997/04/30 16966.64 17248.55
1997/05/31 17175.52 17507.97
1997/06/30 17367.58 17694.43
1997/07/31 17854.46 18184.57
1997/08/31 17695.30 18014.18
1997/09/30 17904.31 18228.00
1997/10/31 18012.71 18345.21
1997/11/30 18116.93 18453.08
1997/12/31 18397.72 18722.31
1998/01/31 18579.58 18915.52
1998/02/28 18575.06 18921.20
1998/03/31 18609.90 18937.85
1998/04/30 18504.50 18852.44
1998/05/31 18778.91 19150.87
1998/06/30 18838.00 19226.33
1998/07/31 18869.56 19274.59
1998/08/31 19145.32 19572.38
1998/09/30 19358.28 19816.25
1998/10/31 19359.11 19815.86
1998/11/30 19403.36 19885.41
1998/12/31 19418.50 19935.52
1999/01/31 19620.85 20172.55
1999/02/28 19488.83 20084.40
1999/03/31 19475.40 20112.32
1999/04/30 19505.54 20162.40
1999/05/31 19365.58 20045.66
1999/06/30 19048.59 19757.00
1999/07/31 19097.12 19828.91
1999/08/31 18938.82 19670.28
1999/09/30 18953.02 19678.35
1999/10/31 18746.99 19465.03
1999/11/30 18938.99 19672.14
1999/12/31 18765.60 19525.58
2000/01/31 18626.74 19440.65
2000/02/29 18855.31 19666.16
2000/03/31 19302.63 20096.06
2000/04/28 19175.43 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000519 135918 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class B on April
30, 1990. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $19,175 - a 91.75% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of investment
grade bonds with maturities of one year or more - did over the same
period. With dividends reinvested, the same $10,000 would have grown
to $19,977 - a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.20% 3.69% 4.17% 4.81% 4.99% 5.77%
Capital returns 0.09% -6.85% 3.30% 3.34% -1.01% 5.80%
Total returns 2.29% -3.16% 7.47% 8.15% 3.98% 11.57%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.22(cents) 25.36(cents) 49.53(cents)
Annualized dividend rate 4.35% 4.37% 4.19%
30-day annualized yield 4.38% - -
30-day annualized 6.84% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $11.79 over the past one
month, $11.65 over the past six months, and $11.82 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge. The tax-equivalent yield shows what
you would have to earn on a taxable investment to equal the class'
tax-free yield, if you're in the 36% federal tax bracket, but does not
reflect payment of the federal alternative minimum tax, if applicable.
FIDELITY ADVISOR MUNICIPAL INCOME FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class C shares
took place on November 3, 1997. Class C shares bear a 1.00% 12b-1 fee.
Returns between June 30, 1994 and November 3, 1997 are those of Class
B shares and reflect Class B shares' 0.90% (1.00% prior to January 1,
1996) 12b-1 fee. Returns prior to June 30, 1994 are those of Class T,
the original class of the fund, and reflect Class T shares' 0.25%
12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns
between November 3, 1997 and January 1, 1996 and prior to June 30,
1994 would have been lower. Class C shares' contingent deferred sales
charge included in the past six month, past one year, past five year
and past 10 year total return figures are 1%, 1%, 0%, and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five year and past 10 year total returns would have been
lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 2.23% -1.79% 25.90% 90.97%
- CL C
FIDELITY ADV MUNICIPAL INCOME 1.23% -2.73% 25.90% 90.97%
- CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB 3 Plus Year Municipal Bond 2.81% -1.35% 33.66% n/a
General Municipal Debt Funds 2.05% -3.31% 26.41% 88.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to those of the
Lehman Brothers 3 Plus Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities of three years or more. To measure how Class C's
performance stacked up against its peers, you can compare it to the
general municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Inc. The
past six months average represents a peer group of 278 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -1.79% 4.71% 6.68%
- CL C
FIDELITY ADV MUNICIPAL INCOME -2.73% 4.71% 6.68%
- CL C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
LB 3 Plus Year Municipal Bond -1.35% 5.97% n/a
General Municipal Debt Funds -3.31% 4.79% 6.56%
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
1990/04/30 10000.00 10000.00
1990/05/31 10204.93 10218.30
1990/06/30 10325.17 10308.12
1990/07/31 10484.42 10459.65
1990/08/31 10413.67 10307.77
1990/09/30 10487.72 10313.65
1990/10/31 10631.71 10500.74
1990/11/30 10895.51 10711.91
1990/12/31 10965.02 10758.51
1991/01/31 11092.63 10902.88
1991/02/28 11177.92 10997.74
1991/03/31 11243.64 11001.70
1991/04/30 11426.72 11148.02
1991/05/31 11567.96 11247.13
1991/06/30 11594.89 11235.99
1991/07/31 11744.81 11372.85
1991/08/31 11850.88 11522.63
1991/09/30 11989.88 11672.65
1991/10/31 12122.74 11777.71
1991/11/30 12168.34 11810.57
1991/12/31 12300.68 12064.02
1992/01/31 12437.04 12091.53
1992/02/29 12504.61 12095.40
1992/03/31 12567.34 12099.87
1992/04/30 12680.76 12207.56
1992/05/31 12794.52 12351.24
1992/06/30 12969.96 12558.50
1992/07/31 13421.58 12935.00
1992/08/31 13317.65 12808.88
1992/09/30 13400.76 12892.65
1992/10/31 13239.04 12765.92
1992/11/30 13504.37 12994.56
1992/12/31 13667.19 13127.23
1993/01/31 13898.37 13279.90
1993/02/28 14389.13 13760.24
1993/03/31 14239.05 13614.79
1993/04/30 14390.05 13752.16
1993/05/31 14509.21 13829.45
1993/06/30 14741.84 14060.26
1993/07/31 14752.79 14078.68
1993/08/31 15132.75 14371.80
1993/09/30 15342.31 14535.50
1993/10/31 15350.54 14563.55
1993/11/30 15200.52 14435.24
1993/12/31 15551.52 14739.97
1994/01/31 15732.61 14908.30
1994/02/28 15316.79 14522.18
1994/03/31 14500.36 13930.83
1994/04/30 14596.57 14048.97
1994/05/31 14682.89 14170.77
1994/06/30 14628.84 14084.19
1994/07/31 14873.78 14342.35
1994/08/31 14897.48 14391.98
1994/09/30 14650.44 14180.70
1994/10/31 14356.75 13928.85
1994/11/30 13885.79 13677.02
1994/12/31 14226.45 13978.05
1995/01/31 14684.89 14377.54
1995/02/28 15071.23 14795.64
1995/03/31 15140.79 14965.64
1995/04/30 15167.65 14983.30
1995/05/31 15643.99 15461.42
1995/06/30 15511.05 15326.91
1995/07/31 15551.64 15472.21
1995/08/31 15699.23 15668.39
1995/09/30 15816.52 15767.57
1995/10/31 16017.99 15996.84
1995/11/30 16311.34 16262.22
1995/12/31 16445.65 16418.50
1996/01/31 16526.93 16542.46
1996/02/29 16492.69 16430.80
1996/03/31 16134.53 16220.82
1996/04/30 16060.07 16174.91
1996/05/31 16030.61 16168.44
1996/06/30 16207.80 16344.51
1996/07/31 16304.73 16493.25
1996/08/31 16331.64 16489.29
1996/09/30 16469.44 16720.14
1996/10/31 16654.75 16909.25
1996/11/30 16893.65 17218.69
1996/12/31 16820.44 17146.37
1997/01/31 16873.52 17178.77
1997/02/28 17044.67 17336.47
1997/03/31 16848.00 17105.38
1997/04/30 16966.64 17248.55
1997/05/31 17175.52 17507.97
1997/06/30 17367.58 17694.43
1997/07/31 17854.46 18184.57
1997/08/31 17695.30 18014.18
1997/09/30 17904.31 18228.00
1997/10/31 18012.71 18345.21
1997/11/30 18099.05 18453.08
1997/12/31 18388.56 18722.31
1998/01/31 18551.48 18915.52
1998/02/28 18559.77 18921.20
1998/03/31 18589.30 18937.85
1998/04/30 18480.65 18852.44
1998/05/31 18749.49 19150.87
1998/06/30 18804.52 19226.33
1998/07/31 18831.63 19274.59
1998/08/31 19101.99 19572.38
1998/09/30 19325.65 19816.25
1998/10/31 19306.53 19815.86
1998/11/30 19349.40 19885.41
1998/12/31 19363.44 19935.52
1999/01/31 19563.77 20172.55
1999/02/28 19431.04 20084.40
1999/03/31 19416.16 20112.32
1999/04/30 19444.47 20162.40
1999/05/31 19303.64 20045.66
1999/06/30 19002.66 19757.00
1999/07/31 19049.36 19828.91
1999/08/31 18890.34 19670.28
1999/09/30 18886.98 19678.35
1999/10/31 18680.59 19465.03
1999/11/30 18869.87 19672.14
1999/12/31 18696.02 19525.58
2000/01/31 18556.53 19440.65
2000/02/29 18782.01 19666.16
2000/03/31 19224.82 20096.06
2000/04/28 19096.80 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000519 140635 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class C on April
30, 1990. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $19,097 - a 90.97% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a market value-weighted index of investment
grade bonds with maturities of one year or more - did over the same
period. With dividends reinvested, the same $10,000 would have grown
to $19,977 - a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31 NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31
2000 1999 1998
Dividend returns 2.14% 3.61% 3.87%
Capital returns 0.09% -6.85% 3.54%
Total returns 2.23% -3.24% 7.41%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.12(cents) 24.77(cents) 48.34(cents)
Annualized dividend rate 4.24% 4.25% 4.08%
30-day annualized yield 4.26% - -
30-day annualized 6.66% - -
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 $11.82 over the past one
month, $11.69 over the past six months, and $11.85 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
Given the investment environment
for municipal bonds during the
six-month period ending April 30,
2000, it seemed almost unrealistic
to expect strong performance
from the sector. After all, there were
three interest-rate hikes by the
Federal Reserve Board in that time
frame. That's typically bad news for
munis, which are generally longer
in duration and, therefore, more
interest-rate sensitive than other
fixed-income sectors. Municipal
bonds also had to compete with
record-setting equity performance
and a strong rally in Treasuries
during the past six months. Yet
remarkably, the municipal bond
sector outperformed nearly every
segment of the fixed-income
market for the overall period. In fact,
through the first four months of 2000,
the Lehman Brothers Municipal Index
also outperformed most major U.S.
equity indexes, including the S&P
500(Registered trademark), the NASDAQ, and the Dow
Jones Industrial Average. For the
six months ending April 30, the
Lehman Brothers Municipal Bond
Index - an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - gained 2.63%.
That outpaced the overall
taxable-bond market return of
1.42%, as measured by the Lehman
Brothers Aggregate Bond Index.
Much of the municipal segment's
gains occurred in February and
March when muni yields rose above
6%, a fairly rare phenomenon. The
attractive yields that munis offered
prompted a powerful rush of retail
buying, which sparked a strong rally
in the sector.
(photograph of Christine Thompson)
An interview with Christine Thompson, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, CHRISTINE?
A. For the six-month period that ended April 30, 2000, the fund's
Class A, Class T, Class B and Class C shares had total returns of
2.66%, 2.61%, 2.29% and 2.23%, respectively. To get a sense of how the
fund did relative to its competitors, the general municipal debt funds
average returned 2.05% for the same six-month period, according to
Lipper Inc. Additionally, the Lehman Brothers 3 Plus Year Municipal
Bond Index, which tracks the types of securities in which the fund
invests, returned 2.81% for the same six-month period. For the
12-month period that ended April 30, 2000, the fund's Class A, Class
T, Class B and Class C shares had total returns of -0.96%, -1.06%,
-1.69% and -1.79%, respectively. Those returns compared to the -3.31%
return of the general municipal debt funds average and the -1.35%
return for the Lehman Brothers index for the same 12-month period.
Q. WHAT STRATEGIES AIDED THE FUND'S PERFORMANCE?
A. There were a couple of strategic factors that helped. First, the
fund was helped by its focus on premium coupon bonds, which pay
interest rates above face - or par - value. One appealing aspect of
premiums was that they were somewhat insulated from unfavorable tax
treatment that negatively affected the prices of lower coupon bonds,
or "discounts," as rates rose. More recently, however, I added some
discount bonds to lock in their relatively cheap valuations. The
fund's performance also was helped by duration management. 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 3 Plus Year Municipal Bond Index. That means I don't
lengthen or shorten duration based on where I think interest rates
will be at some point down the road.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. Yes, there were. Health care bonds continued their disappointing
run through most of the past six months, coming under pressure from a
variety of challenges including cutbacks in Medicare payments and
ensuing questions about many hospitals' future profitability. With the
help of Fidelity's research staff, I continue to carefully monitor the
impact these developments could have on hospitals over the long term.
My approach is to be very selective, emphasizing hospitals with a
proven track record that I believe can do well in today's evolving,
more competitive environment. More recently, we've seen a bit of
improvement among some hospitals that have begun to adjust to today's
more expense-conscious environment.
Q. WHICH SECTORS OF THE MUNICIPAL MARKET WERE ATTRACTIVE?
A. The fund had an overweighted position - relative to its benchmark
and the municipal bond market as a whole - in education bonds,
including those backed by colleges and universities around the
country. They allowed me to diversify the fund away from economically
sensitive issues such as general obligation bonds, which depend on
sales, property, income and other tax revenue collections.
Furthermore, projections call for an increasing number of students to
seek advanced degrees over the next several years. The fund also had a
relatively large weighting in electric utility bonds, particularly
those that I expect to benefit from restructuring activity. To make
rate structures more competitive, large electric issuers are
restructuring and retiring outstanding debt, which can be a positive
event for bondholders.
Q. WHAT FACTORS WILL SHAPE THE OUTLOOK FOR MUNICIPAL BONDS OVER THE
NEXT SIX MONTHS OR SO?
A. The primary factor, as always, will be the direction of interest
rates. Supply and demand also will play a role. The supply of
municipals has continued to decline in response to rising interest
rates. Many issuers now find it too expensive to issue new or
refinance old debt. With municipal bond yields rising above 6% in
February and March, we saw renewed buying from individual investors.
That demand abated somewhat when yields fell back below 6% in April.
To the extent that supply remains low and demand firms, municipals
could benefit.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks to provide a high
current yield exempt from
federal income tax
START DATE: September 16,
1987
SIZE: as of April 30, 2000,
more than $392 million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON THE
FUND'S CREDIT QUALITY:
"As of April 30, 2000, more than 73%
of the fund's investments were in
bonds rated A or higher. The
fund's focus on these higher-quality
bonds reflected the fact that
Fidelity's research indicated that
only selected lower-quality bonds
- those rated Baa - offered
enough incentive by way of
additional yield. That said, there
are some exceptions. For example,
the fund owns some securities
issued by selected hospitals
around the country that I believe
can do well in today's more
competitive operating
environment. To further the fund's
diversification away from
economically sensitive municipal
bonds, I bought some education
bonds - many of which are backed
by colleges and universities.
Finally, I occasionally invest in
Baa-rated bonds issued by Puerto
Rico and Guam. As territories of
the United States, Puerto Rico and
Guam can issue bonds that are
free from taxes in all 50 states.
When the supply of U.S.
municipals is limited or their
prices look expensive, I
occasionally invest in Puerto Rico
and Guam bonds. At the end of the
period, less than 1% of the fund's
net assets were invested in bonds
issued by Puerto Rico and none in
Guam."
INVESTMENT CHANGES
TOP FIVE STATES AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
New York 17.4 18.0
Texas 7.0 8.4
North Carolina 6.0 4.4
Colorado 5.7 5.3
Massachusetts 5.7 6.5
TOP FIVE SECTORS AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Electric Utilities 17.2 15.9
Health Care 16.2 13.4
General Obligations 15.5 19.3
Transportation 14.7 14.4
Water & Sewer 10.5 5.7
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 16.7 12.9
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 APRIL 30, 2000
6 MONTHS AGO
Years 7.3 6.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 2000
Aaa 51.5%
Aa, A 21.8%
Baa 19.0%
Ba and Below 2.5%
Not Rated 4.7%
Short-term
Investments 0.5%
Row: 1, Col: 1, Value: 51.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 21.8
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 2.5
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 0.5
AS OF OCTOBER 31, 1999
Aaa 46.7%
Aa, A 24.3%
Baa 22.4%
Ba and Below 0.0%
Not Rated 4.7%
Short-term
Investments 1.9%
Row: 1, Col: 1, Value: 46.7
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 24.3
Row: 1, Col: 4, Value: 22.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, 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.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 100.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALABAMA - 1.1%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,222,920
Series A, 7.7% 8/1/17
ALASKA - 2.1%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,286,596
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 1,486,545
(d)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,495,860
(d)
8,269,001
ARIZONA - 1.4%
Arizona Student Ln. Aquistion Aaa 1,300,000 1,286,272
Auth. Student Ln. Rev. Rfdg.
Series A1, 5.875% 5/1/18 (d)
Maricopa County Ind. Dev. Baa1 4,495,000 4,178,687
Auth. Health Facilities Rev.
Rfdg. (Catholic Health Care
West Proj.) Series A, 4.1%
7/1/03
5,464,959
CALIFORNIA - 3.5%
California Dept. of Wtr. Aa2 2,190,000 2,231,457
Resources Central Valley
Proj. Rev. (Wtr. Sys. Proj.)
Series J2, 6.125% 12/1/13
California Health Facilities A2 1,230,000 1,199,348
Fing. Auth. Rev.
(Cedars-Sinai Med. Ctr.
Proj.) Series A, 6.125%
12/1/30
California Hsg. Fin. Agcy.
Rev. (Home Mtg. Prog.):
Series B, 5.2% 8/1/26 (MBIA Aaa 760,000 758,168
Insured) (d)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,498,170
Insured) (d)
California Univ. Rev. Series Aaa 1,000,000 999,990
1999 AY, 5.875% 11/1/30
(FGIC Insured)
Central Valley Fing. Auth. BBB- 4,500,000 4,523,670
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Sacramento City Fing. Auth. Aaa 2,000,000 1,918,500
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento Cogeneration Auth. BBB- 500,000 512,450
Cogeneration Proj. Rev.
(Procter & Gamble Proj.)
6.375% 7/1/10
13,641,753
COLORADO - 5.7%
Arapaho County School
District #5:
5.5% 12/15/19 Aa2 1,500,000 1,454,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
COLORADO - CONTINUED
Arapaho County School
District #5: - continued
6% 12/15/15 Aa2 $ 1,250,000 $ 1,292,650
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa2 1,360,000 1,260,258
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist Proj.):
6.625% 2/1/13 Ba1 6,900,000 6,429,144
6.625% 2/1/22 Ba1 4,000,000 3,489,640
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,037,958
0% 1/1/08 (MBIA Insured) Aaa 870,000 573,452
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,858,916
Insured) (d)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,333,650
Insured) (d)
Series A:
7.5% 11/15/23 (d) Baa1 2,070,000 2,198,609
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 477,395
to 11/15/04 @ 102) (d)(e)
Series C, 6.55% 11/15/02 (d) Baa1 1,000,000 1,023,070
22,428,992
CONNECTICUT - 1.3%
Connecticut Health & Edl. AAA 2,170,000 2,282,254
Facilities Auth. Rev. (New
Britain Memorial Hosp.
Proj.) Series A, 7.5%
7/1/06 (Pre-Refunded to
7/1/02 @ 102) (e)
Eastern Connecticut Resources BBB 3,350,000 2,699,062
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(d)
4,981,316
DISTRICT OF COLUMBIA - 1.7%
District of Columbia Gen. Aaa 150,000 157,295
Oblig. Rfdg. Series A, 6%
6/1/07 (MBIA Insured)
(Escrowed to Maturity) (e)
District of Columbia Hosp. - 925,000 953,120
Rev. (Hosp. for Sick
Children Proj.) Series A,
8.875% 1/1/21
District of Columbia Redev. Baa 385,000 387,533
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.625% 11/1/10
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DISTRICT OF COLUMBIA -
CONTINUED
District of Columbia Rev.:
(George Washington Univ. Aaa $ 1,000,000 $ 977,550
Proj.) Series A, 5.75%
9/15/20 (MBIA Insured)
(Nat'l. Academy of Science Aaa 2,500,000 2,209,100
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ. Aaa 2,000,000 2,053,140
Proj.) Series A, 5.95%
4/1/14 (MBIA Insured)
6,737,738
FLORIDA - 2.1%
Broward County Resource A3 515,000 531,480
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,126,800
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (d)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,647,925
Rev. Series A, 7.5% 10/1/17
8,306,205
HAWAII - 0.5%
Honolulu City & County Gen. Aaa 2,000,000 1,886,620
Oblig. Rfdg. Series C,
5.125% 7/1/14 (FGIC Insured)
IDAHO - 0.3%
Boise City Urban Renewal Aaa 1,000,000 997,260
Agcy. Lease Rev. 5.9%
8/15/29 (AMBAC Insured)
ILLINOIS - 5.1%
Chicago Board of Ed. (Chicago Aaa 10,500,000 10,134,495
School Reform Proj.) 5.75%
12/1/27 (AMBAC Insured)
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,384,425
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev. Rfdg. (Gen. Arpt.
Proj.) Series A:
6.25% 1/1/09 (AMBAC Insured) Aaa 3,700,000 3,905,091
(d)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,453,816
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,085,780
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.
Proj.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,061,130
to 5/1/02 @ 102) (e)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,063,470
5/1/02 @ 102) (e)
20,088,207
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
INDIANA - 0.3%
Indianapolis Econ. Dev. Rev. Baa2 $ 1,000,000 $ 1,029,650
Rfdg. & Impt. (Nat'l.
Benevolent Assoc. Proj.)
7.625% 10/1/22
IOWA - 0.9%
Iowa Student Ln. Liquidity Aaa 3,500,000 3,544,555
Corp. Student Ln. Rev. Rfdg.
Series B, 5.75% 12/1/07 (d)
KANSAS - 0.7%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):
5% 12/1/13 (MBIA Insured) Aaa 2,390,000 2,251,810
5% 12/1/14 (MBIA Insured) Aaa 500,000 465,950
2,717,760
KENTUCKY - 3.6%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 5,753,086
Int'l. Proj.) Series A, 6%
3/1/05 (MBIA Insured) (d)
(Delta Air Lines, Inc. Proj.) Baa3 2,000,000 2,052,580
Series A, 7.5% 2/1/20 (d)
Louisville & Jefferson Swr. Aaa 6,550,000 6,390,180
Sys. Rev. Series A, 5.75%
5/15/33 (FGIC Insured)
14,195,846
MARYLAND - 0.7%
Maryland Health & Higher Edl.
Facilities Auth. Rev. (Good
Samaritan Hosp. Proj.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,034,326
(Escrowed to Maturity) (e)
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,710,837
Maturity) (e)
2,745,163
MASSACHUSETTS - 5.7%
Massachusetts Bay Trans. Auth.:
(Gen. Trans. Sys. Proj.):
Series 1997 D, 5% 3/1/27 Aa2 2,000,000 1,719,500
Series A, 5.375% 3/1/19 Aa2 1,435,000 1,358,342
Rfdg. (Gen. Trans. Sys. Aa2 2,000,000 1,942,300
Proj.) Series A, 5.75%
3/1/26 (FGIC Insured)
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College Proj.) Aaa 1,265,000 1,156,817
Series J, 5% 7/1/17 (MBIA
Insured)
(Hebrew Rehab. Ctr. for Aged A 2,000,000 1,742,040
Proj.) Series C, 5.25% 7/1/17
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl.
Facilities Auth. Rev.: -
continued
(New England Med. Ctr. Hosp. Aaa $ 500,000 $ 450,905
Proj.) Series G, 5.375%
7/1/24 (MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 966,430
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
Massachusetts Ind. Fin. Agcy.
Rev. (Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.) Series
A2:
0% 8/1/08 A+ 800,000 509,240
0% 8/1/10 - 4,500,000 2,522,070
Massachusetts Muni. Wholesale Baa2 1,000,000 1,038,540
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Wtr. Poll.
Abatement Trust Wtr. Poll.
Abatement Rev. (MWRA Ln.
Prog.) Series A:
5.25% 8/1/13 Aa1 10,000 9,790
5.25% 8/1/14 Aa1 30,000 29,111
Massachusetts Wtr. Resources Aaa 5,000,000 4,827,300
Auth. Rev. Series A, 5.75%
8/1/39 (FGIC Insured)
New England Ed. Ln. Marketing A3 3,880,000 3,922,835
Corp. Massachusetts Student
Ln. Rev. Rfdg. Series F,
5.625% 7/1/04 (d)
22,195,220
MICHIGAN - 3.9%
Detroit Wtr. Supply Sys. Rev.
Sr. Lien Series A:
5.75% 7/1/26 (FGIC Insured) Aaa 1,400,000 1,361,206
5.875% 7/1/22 (FGIC Insured) Aaa 1,700,000 1,680,059
5.875% 7/1/29 (FGIC Insured) Aaa 1,100,000 1,085,667
Howell Pub. Schools 5.875% Aaa 2,225,000 2,222,975
5/1/22 (MBIA Insured)
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Med. Hosp. Baa2 4,250,000 4,082,763
Proj.) Series A, 5.5%
10/1/18 (Escrowed to
Maturity) (e)
(Pontiac Osteopathic Hosp. Baa2 2,000,000 1,641,540
Proj.) Series A, 6% 2/1/24
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Aaa $ 1,000,000 $ 917,160
Oblig. Rev. Rfdg. (Detroit
Edison Co. Proj.) Series A,
5.55% 9/1/29 (MBIA Insured)
(d)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,410,439
Rev. Rfdg. (William
Beaumont Hosp. Proj.) 6.25%
1/1/09
15,401,809
MINNESOTA - 2.1%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,551,708
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp. Proj.) Series A, 4.75%
11/15/18 (AMBAC Insured)
Minnesota Hsg. Fin. Agcy. Aa2 1,945,000 1,985,359
(Single Family Mtg. Prog.)
Series D, 6.4% 7/1/15 (d)
Rochester Health Care AA+ 2,000,000 1,878,860
Facilities Rev. (Mayo
Foundation Proj.) Series A,
5.5% 11/15/27
Saint Cloud Health Care Rev. Aaa 3,000,000 2,915,880
(Saint Cloud Hosp. Proj.)
Series A, 5.875% 5/1/30
(FSA Insured)
8,331,807
MISSISSIPPI - 0.0%
Mississippi Home Corp. Single Aaa 144,000 148,788
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,491,270
6.1% 6/15/14 BBB+ 1,000,000 1,000,690
2,491,960
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 480,000 489,600
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc. Proj.) Series A, 9.5%
5/1/20 (Pre-Refunded to
5/1/00 @ 102) (e)
NEW JERSEY - 2.4%
New Jersey Econ. Dev. Auth. Aaa 3,185,000 2,882,584
Wtr. Facilities Rev. (New
Jersey Americam Wtr. Co.,
Inc. Proj.) Series 1997 B,
5.375% 5/1/32 (FGIC Insured)
(d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Trans. Trust Fund Aaa $ 4,000,000 $ 4,063,000
Auth. Rfdg. (Trans. Sys.
Proj.) Series A, 5.5%
6/15/11 (MBIA Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,286,250
Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
9,231,834
NEW MEXICO - 1.9%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,221,619
(d)
6.75% 7/1/11 (AMBAC Insured) Aaa 1,805,000 1,990,500
(d)
New Mexico Edl. Assistance Aaa 1,100,000 1,097,624
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (d)
7,309,743
NEW YORK - 17.4%
Long Island Pwr. Auth. Elec. Aaa 9,390,000 8,311,559
Sys. Rev. Series A, 5.125%
12/1/22 (FSA Insured)
Metro. Trans. Auth. Dedicated
Tax Fund Series A:
5% 4/1/23 (FGIC Insured) Aaa 2,565,000 2,229,549
5% 4/1/29 (FSA Insured) Aaa 2,200,000 1,896,840
5.25% 4/1/26 (MBIA Insured) Aaa 1,000,000 903,140
Metro. Trans. Auth. New York
Commuter Facilities Rev.:
Series A:
5.625% 7/1/27 (MBIA Insured) Aaa 200,000 190,256
6.125% 7/1/29 Baa1 6,750,000 6,727,185
Series B, 4.75% 7/1/26 (FGIC Aaa 2,000,000 1,648,980
Insured)
Metro. Trans. Auth. New York
Svc. Contract Rev.:
(Commuter Facilities Proj.) Baa1 700,000 704,858
Series O, 5.75% 7/1/13
(Trans. Facilities Proj.) Baa1 1,010,000 1,005,617
Series P, 5.75% 7/1/15
Rfdg. (Trans. Facilities Baa1 1,000,000 973,310
Proj.) Series 7, 5.625%
7/1/16
Metro. Trans. Auth. New York
Trans. Facilities Rev.:
Rfdg. (Svc. Contract Proj.)
Series 8:
5.25% 7/1/17 Baa1 1,000,000 923,020
5.375% 7/1/21 (FSA Insured) Aaa 700,000 652,575
Series B, 4.75% 7/1/26 (FGIC Aaa 1,000,000 824,490
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York City Gen. Oblig.:
Rfdg. Series B, 5.7% 8/15/02 A3 $ 35,000 $ 35,678
(Escrowed to Maturity) (e)
Series H:
6.875% 2/1/02 A3 160,000 164,800
6.875% 2/1/02 (Escrowed to Aaa 80,000 82,819
Maturity) (e)
New York City Ind. Dev. Agcy. Aaa 965,000 1,010,094
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15 (FSA
Insured) (d)
New York City Ind. Dev. Agcy. A3 8,680,000 8,822,699
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (d)
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa 3,500,000 3,289,125
5.75% 6/15/26 Aa3 5,000,000 4,842,350
5.75% 6/15/29 Aa3 4,000,000 3,863,160
5.75% 6/15/29 (MBIA Insured) Aaa 1,500,000 1,456,740
New York City Transitional Aa3 3,000,000 2,926,920
Fin. Auth. Rev. Series A,
5.75% 8/15/24
New York State Dorm. Auth.
Revs.:
(St. Univ. Edl. Facilities Aaa 5,000,000 4,993,600
Proj.) 5.95% 5/15/29 (FGIC
Insured)
Rfdg. (Jamaica Hosp. Med. Aaa 6,150,000 5,862,180
Ctr. Proj.) Series F, 5.2%
2/15/14 (MBIA Insured)
New York State Envir.
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev.
(Revolving Funds Prog.)
Series F:
4.875% 6/15/18 Aa1 1,000,000 877,760
4.875% 6/15/20 Aa1 1,300,000 1,120,327
5% 6/15/15 Aa1 700,000 645,148
New York State Envir. Aa1 1,000,000 906,190
Facilities Corp. Poll.
Cont. Rev. (State Wtr.
Revolving Fund Prog.) Series
D, 5.125% 6/15/19
Triborough Bridge & Tunnel Aaa 500,000 494,915
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11
(FGIC Insured)
68,385,884
NORTH CAROLINA - 6.0%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series A, 5.5% 1/1/05 (MBIA Aaa 4,000,000 4,055,360
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - CONTINUED
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.: -
continued
Rfdg.:
Series B:
5.875% 1/1/21 (MBIA Insured) Aaa $ 2,400,000 $ 2,378,352
6% 1/1/06 Baa3 4,175,000 4,213,201
6% 1/1/14 Baa3 1,000,000 971,440
7.25% 1/1/07 Baa3 1,000,000 1,074,390
Series C:
5.125% 1/1/03 Baa1 2,700,000 2,656,152
5.25% 1/1/04 Baa1 1,365,000 1,344,402
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,030,760
Series D, 6.7% 1/1/19 Baa3 1,115,000 1,121,066
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 Baa1 1,750,000 1,754,778
Series A, 5.125% 1/1/15 (MBIA Aaa 1,000,000 942,050
Insured)
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,171,666
23,713,617
OHIO - 2.6%
Cincinnati Student Ln. Fdg. - 1,005,000 1,019,382
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (d)
Franklin County Hosp. Rev. Baa3 4,160,000 3,914,269
(Doctor's Ohio Health Corp.
Proj.) Series A, 4.75%
12/1/03
Gateway Economic Dev. Corp. - 3,000,000 2,959,140
Greater Cleveland Stadium
Rev. Series 1990, 6.5%
9/15/14 (d)
Marion County Hosp. Impt. BBB+ 1,000,000 995,330
Rev. Rfdg. (Cmnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Univ. Gen. Receipts Aa2 1,250,000 1,238,625
Series A, 5.75% 12/1/24
10,126,746
OKLAHOMA - 2.4%
Oklahoma Industries Auth. Rev.:
Rfdg. (Health Sys. Oblig. Aaa 1,500,000 1,426,710
Group Proj.) Series A,
5.75% 8/15/29 (MBIA Insured)
6% 8/15/19 (MBIA Insured) Aaa 3,000,000 2,998,350
Sapulpa Muni. Auth. Util. Aaa 1,000,000 976,290
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,172,200
(American Airlines Corp.
Proj.) 7.35% 12/1/11
9,573,550
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PENNSYLVANIA - 5.6%
Allegheny County Arpt. Rev. Aaa $ 1,000,000 $ 1,024,780
Rfdg. (Pittsburgh Int'l.
Arpt. Proj.) Series A2,
5.75% 1/1/07 (MBIA Insured)
(d)
Allegheny County Ind. Dev. - 310,000 320,680
Auth. Rev. (YMCA Pittsburgh
Proj.) Series A, 8.75% 3/1/10
Allegheny County Port Auth. Aaa 4,460,000 4,508,123
Spl. Rev. 6.125% 3/1/29
(MBIA Insured)
Butler County Ind. Dev. Auth. A 3,000,000 2,893,710
Health Ctr. Rev. Rfdg.
(Sherwood Oaks Proj.) 5.75%
6/1/11
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health Proj.):
6.8% 11/15/14 Baa3 3,250,000 3,047,915
6.8% 11/15/23 Baa3 1,000,000 912,420
Delaware County Auth. College Aa3 3,500,000 3,389,260
Rev. (Haverford College
Proj.) 5.75% 11/15/29
Delaware County Auth. Rev.
(First Mtg. Riddle Village
Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,581,628
Maturity) (e)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,144,085
6/1/02 @ 102) (e)
21,822,601
PUERTO RICO - 0.5%
Puerto Rico Commonwealth Gen. Aaa 1,800,000 1,783,152
Oblig. 5.75% 7/1/26 (MBIA
Insured)
RHODE ISLAND - 1.2%
Rhode Island Port Auth. & Aaa 4,000,000 4,562,520
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (d)
SOUTH CAROLINA - 0.7%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,793,684
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
South Carolina Jobs Econ. Baa1 1,000,000 988,520
Dev. Auth. Hosp. Facilities
Rev. (Palmetto Health
Alliance Proj.) Series A,
7.375% 12/15/21
2,782,204
TENNESSEE - 0.2%
Metro. Govt. Nashville & Aaa 1,000,000 727,240
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
TEXAS - 7.0%
Conroe Independent School Aaa 750,000 465,548
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXAS - CONTINUED
Dallas Fort Worth Int'l. Baa1 $ 6,000,000 $ 6,116,820
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc. Proj.) 7.5% 11/1/25 (d)
El Paso Gen. Oblig. 5.75% Aaa 4,500,000 4,323,600
8/15/25 (FSA Insured)
Midlothian Independent School Aaa 1,845,000 1,515,963
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev. Aa1 75,000 77,135
Rfdg. 5.5% 2/1/20
(Pre-Refunded to 2/1/07 @
101) (e)
San Antonio Gen. Oblig. Aa2 1,390,000 1,349,885
Series 2000, 5% 2/1/11
Texas Gen. Oblig. (Texas Pub. Aa1 5,000,000 4,737,400
Fin. Auth. Proj.) Series A,
5% 10/1/14
Texas Muni. Pwr. Agcy. Rev. Aaa 3,930,000 2,106,598
Rfdg. (Cap. Appreciation)
0% 9/1/11 (AMBAC Insured)
Travis County Health Aaa 4,000,000 4,116,200
Facilities Dev. Corp. Rev.
(Ascension Health Cr. Prog.)
Series A, 6.25% 11/15/19
(MBIA Insured)
Yselta Independent School Aaa 4,065,000 2,455,829
District Rfdg. (Cap.
Appreciation) 0% 8/15/09
27,264,978
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr.
Supply Rev. Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa 1,000,000 1,080,340
Insured)
Series B:
5.75% 7/1/16 (MBIA Insured) Aaa 2,500,000 2,501,950
6% 7/1/16 (MBIA Insured) Aaa 7,000,000 7,126,140
South Salt Lake City Ind. - 250,000 261,178
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
10,969,608
VERMONT - 0.2%
Vermont Edl. & Health Bldg. Aa3 1,125,000 945,349
Fin. Agcy. Rev. (Middlebury
College Proj.) 5% 11/1/38
VIRGINIA - 1.5%
Loudoun County Ind. Dev. - 880,000 971,194
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (e)
Virginia Commonwealth Trans. Aa1 1,965,000 1,936,547
Board Trans. Rev. (U.S.
Route 58 Corridor Dev.
Prog.) Series B, 5.75%
5/15/21
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
VIRGINIA - CONTINUED
Virginia State Resources
Auth. Clean Wtr. Rev.:
(State Revolving Fund Proj.) Aaa $ 1,750,000 $ 1,757,245
5.75% 10/1/19
5.625% 10/1/22 Aaa 1,250,000 1,225,738
5,890,724
WASHINGTON - 4.2%
Port Seattle Passenger Aaa 3,000,000 2,818,590
Facilities Charge Rev.
Series B, 5.25% 12/1/14
(AMBAC Insured) (d)
Washington Pub. Pwr. Supply Aa1 14,000,000 13,665,535
Sys. Nuclear Proj. #2 Rev.
5.4% 7/1/12
16,484,125
TOTAL MUNICIPAL BONDS 391,891,004
(Cost $395,304,636)
CASH EQUIVALENTS - 0.5%
SHARES
Municipal Central Cash Fund, 2,039,408 2,039,408
4.80% (b)(c) (Cost
$2,039,408)
TOTAL INVESTMENT PORTFOLIO - 393,930,412
100.5%
(Cost $397,344,044)
NET OTHER ASSETS - (0.5)% (1,831,538)
NET ASSETS - 100% $ 392,098,874
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest
and principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.9% AAA, AA, A 71.3%
Baa 15.9% BBB 17.5%
Ba 2.5% 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 total net assets, is as follows:
Electric Utilities 17.2%
Health Care 16.2
General Obligations 15.5
Transportation 14.7
Water & Sewer 10.5
Education 6.4
Industrial Development 6.2
Others* (individually less 13.3
than 5%)
100.0%
* Includes short-term investments
and net other assets
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $397,344,044. Net unrealized depreciation
aggregated $3,413,632, of which $5,628,243 related to appreciated
investment securities and $9,041,875 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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 393,930,412
value (cost $397,344,044) -
See accompanying schedule
Receivable for fund shares 220,625
sold
Interest receivable 7,386,014
Other receivables 22,338
TOTAL ASSETS 401,559,389
LIABILITIES
Payable for investments $ 7,397,406
purchased
Payable for fund shares 1,157,255
redeemed
Distributions payable 589,714
Accrued management fee 124,330
Distribution fees payable 122,641
Other payables and accrued 69,169
expenses
TOTAL LIABILITIES 9,460,515
NET ASSETS $ 392,098,874
Net Assets consist of:
Paid in capital $ 411,100,814
Distributions in excess of (17,864)
net interest income
Accumulated undistributed net (15,570,444)
realized gain (loss) on
investments
Net unrealized appreciation (3,413,632)
(depreciation) on investments
NET ASSETS $ 392,098,874
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $11.70
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($11,718,967 (divided by)
1,001,707 shares)
Maximum offering price per $12.28
share (100/95.25 of $11.70)
CLASS T: NET ASSET VALUE and $11.71
redemption price per share
($304,077,912 (divided by)
25,967,871 shares)
Maximum offering price per $12.13
share (100/96.50 of $11.71)
CLASS B: NET ASSET VALUE and $11.68
offering price per share
($60,473,267 (divided by)
5,178,389 shares) A
CLASS C: NET ASSET VALUE and $11.71
offering price per share
($13,315,683 (divided by)
1,137,125 shares) A
INSTITUTIONAL CLASS: NET $11.66
ASSET VALUE, offering price
and redemption price per
share ($2,513,045 (divided
by) 215,604 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INTEREST INCOME $ 11,578,397
EXPENSES
Management fee $ 760,104
Transfer agent fees 214,763
Distribution fees 746,787
Accounting fees and expenses 62,034
Non-interested trustees' 586
compensation
Custodian fees and expenses 5,345
Registration fees 37,388
Audit 20,263
Legal 9,768
Miscellaneous 965
Total expenses before 1,858,003
reductions
Expense reductions (1,557) 1,856,446
NET INTEREST INCOME 9,721,951
REALIZED AND UNREALIZED GAIN (1,272,319)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized 1,593,622
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 321,303
NET INCREASE (DECREASE) IN $ 10,043,254
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 9,721,951 $ 19,650,204
Net realized gain (loss) (1,272,319) 2,481,428
Change in net unrealized 1,593,622 (33,690,142)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 10,043,254 (11,558,510)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,844,490) (19,650,204)
from net interest income
Share transactions - net (28,714,379) (1,025,834)
increase (decrease)
TOTAL INCREASE (DECREASE) (28,515,615) (32,234,548)
IN NET ASSETS
NET ASSETS
Beginning of period 420,614,489 452,849,037
End of period (including $ 392,098,874 $ 420,614,489
distributions in excess of
net interest income of
$17,864 and $0, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.690 $ 12.540 $ 12.150 $ 11.740 $ 11.630
of period
Income from Investment
Operations
Net interest income .293 D .567 .571 .583 D .105 D, E
Net realized and unrealized .014 (.850) .390 .445 .109
gain (loss)
Total from investment .307 (.283) .961 1.028 .214
operations
Less Distributions
From net interest income (.297) (.567) (.571) (.616) E (.104)
In excess of net interest - - - (.002) -
income
Total distributions (.297) (.567) (.571) (.618) (.104)
Net asset value, end of $ 11.700 $ 11.690 $ 12.540 $ 12.150 $ 11.740
period
TOTAL RETURN B, C 2.66% (2.36)% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,719 $ 10,722 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .71% A .72% .90% G .90% G .90% A, G
net assets
Ratio of net interest income 5.05% A 4.62% 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700 $ 12.560 $ 12.150 $ 11.760 $ 11.880
period
Income from Investment
Operations
Net interest income .288 C .555 .571 .597 C .677 C, D
Net realized and unrealized .013 (.860) .410 .407 (.136)
gain (loss)
Total from investment .301 (.305) .981 1.004 .541
operations
Less Distributions
From net interest income (.291) (.555) (.571) (.612) D (.661)
In excess of net interest - - - (.002) -
income
Total distributions (.291) (.555) (.571) (.614) (.661)
Net asset value, end of period $ 11.710 $ 11.700 $ 12.560 $ 12.150 $ 11.760
TOTAL RETURN B 2.61% (2.53)% 8.15% 8.89% 4.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 304,078 $ 329,926 $ 380,325 $ 392,075 $ 480,432
(000 omitted)
Ratio of expenses to average .80% A .81% .87% .89% .89%
net assets
Ratio of net interest income 4.96% A 4.51% 4.62% 5.04% 5.74%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.220
period
Income from Investment
Operations
Net interest income .700
Net realized and unrealized .660
gain (loss)
Total from investment 1.360
operations
Less Distributions
From net interest income (.700)
In excess of net interest -
income
Total distributions (.700)
Net asset value, end of period $ 11.880
TOTAL RETURN B 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 565,131
(000 omitted)
Ratio of expenses to average .91%
net assets
Ratio of net interest income 6.06%
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.670 $ 12.530 $ 12.130 $ 11.740 $ 11.860
period
Income from Investment
Operations
Net interest income .250 D .476 .491 .515 D .596 D, E
Net realized and unrealized .014 (.860) .400 .416 (.136)
gain (loss)
Total from investment .264 (.384) .891 .931 .460
operations
Less Distributions
From net interest income (.254) (.476) (.491) (.539) E (.580)
In excess of net interest - - - (.002) -
income
Total distributions (.254) (.476) (.491) (.541) (.580)
Net asset value, end of period $ 11.680 $ 11.670 $ 12.530 $ 12.130 $ 11.740
TOTAL RETURN B, C 2.29% (3.16)% 7.47% 8.15% 3.98%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 60,473 $ 63,464 $ 55,032 $ 41,024 $ 39,389
(000 omitted)
Ratio of expenses to average 1.46% A 1.46% 1.53% 1.56% 1.57%
net assets
Ratio of net interest income 4.31% A 3.88% 3.96% 4.35% 5.06%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.210
period
Income from Investment
Operations
Net interest income .612
Net realized and unrealized .650
gain (loss)
Total from investment 1.262
operations
Less Distributions
From net interest income (.612)
In excess of net interest -
income
Total distributions (.612)
Net asset value, end of period $ 11.860
TOTAL RETURN B, C 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 32,395
(000 omitted)
Ratio of expenses to average 1.86% F
net assets
Ratio of net interest income 5.18%
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F 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>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700 $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .244 D .465 .455
Net realized and unrealized .014 (.860) .430
gain (loss)
Total from investment .258 (.395) .885
operations
Less Distributions
From net interest income (.248) (.465) (.455)
Net asset value, end of period $ 11.710 $ 11.700 $ 12.560
TOTAL RETURN B, C 2.23% (3.24)% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,316 $ 13,071 $ 7,031
(000 omitted)
Ratio of expenses to average 1.56% A 1.56% 1.75% A, F
net assets
Ratio of net interest income 4.20% A 3.79% 3.60% A
to average net assets
Portfolio turnover rate 50% A 23% 36%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.650 $ 12.510 $ 12.120 $ 11.720 $ 11.880
period
Income from Investment
Operations
Net interest income .300 D .584 .592 .609D .707D, E
Net realized and unrealized .014 (.860) .390 .464 (.197)
gain (loss)
Total from investment .314 (.276) .982 1.073 .510
operations
Less Distributions
From net interest income (.304) (.584) (.592) (.671) E (.670)
In excess of net interest - - - (.002) -
income
Total distributions (.304) (.584) (.592) (.673) (.670)
Net asset value, end of $ 11.660 $ 11.650 $ 12.510 $ 12.120 $ 11.720
period
TOTAL RETURN B, C 2.74% (2.31)% 8.28% 9.44% 4.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,513 $ 3,431 $ 3,741 $ 1,511 $ 927
(000 omitted)
Ratio of expenses to average .60% A .60% .75% G .75% G .75% G
net assets
Ratio of net interest income 5.16% A 4.75% 4.75% 5.11% 5.88%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1995F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700
period
Income from Investment
Operations
Net interest income .232
Net realized and unrealized .180
gain (loss)
Total from investment .412
operations
Less Distributions
From net interest income (.232)
In excess of net interest -
income
Total distributions (.232)
Net asset value, end of $ 11.880
period
TOTAL RETURN B, C 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 154
(000 omitted)
Ratio of expenses to average .75% A, G
net assets
Ratio of net interest income 5.89% A
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal 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. 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). Distributions in excess of net
interest 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.
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 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 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $99,851,701 and $118,898,955, 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 annualized 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 and
Service 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 8,087 $ 27
CLASS T 394,276 5,516
CLASS B 277,693 201,147
CLASS C 66,731 34,252
$ 746,787 $ 240,942
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 26,689 $ 8,925
CLASS T 64,420 23,973
CLASS B 135,170 135,170*
CLASS C 6,620 6,620*
$ 232,899 $ 174,688
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $ 5,946 .11*
CLASS T 167,366 .11*
CLASS B 32,170 .10*
CLASS C 7,093 .11*
INSTITUTIONAL CLASS 2,188 .15*
$ 214,763
* ANNUALIZED
5. EXPENSE REDUCTIONS.
Through an arrangement with each class' transfer agent, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the expenses. During the period, Class T's transfer agent
expense was reduced by $1,557 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INTEREST INCOME
Class A $ 270,930 $ 439,029
Class T 7,871,524 16,229,661
Class B 1,343,878 2,381,487
Class C 283,262 421,752
Institutional Class 74,896 178,275
Total $ 9,844,490 $ 19,650,204
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 307,593 565,331 $ 3,598,218
Reinvestment of distributions 16,262 25,296 189,634
Shares redeemed (239,608) (208,996) (2,801,218)
Net increase (decrease) 84,247 381,631 $ 986,634
CLASS T Shares sold 2,096,159 3,793,311 $ 24,482,568
Reinvestment of distributions 418,188 835,205 4,881,883
Shares redeemed (4,744,054) (6,722,556) (55,396,490)
Net increase (decrease) (2,229,707) (2,094,040) $ (26,032,039)
CLASS B Shares sold 796,012 2,125,759 $ 9,280,421
Reinvestment of distributions 67,765 115,598 788,964
Shares redeemed (1,123,629) (1,196,611) (13,073,772)
Net increase (decrease) (259,852) 1,044,746 $ (3,004,387)
CLASS C Shares sold 340,998 871,985 $ 3,982,553
Reinvestment of distributions 15,480 22,987 180,717
Shares redeemed (336,409) (337,753) (3,917,477)
Net increase (decrease) 20,069 557,219 $ 245,793
INSTITUTIONAL CLASS Shares 71,089 103,836 $ 827,838
sold
Reinvestment of distributions 2,861 7,731 33,261
Shares redeemed (152,883) (116,192) (1,771,479)
Net increase (decrease) (78,933) (4,625) $ (910,380)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 6,989,179
Reinvestment of distributions 307,568
Shares redeemed (2,558,328)
Net increase (decrease) $ 4,738,419
CLASS T Shares sold $ 46,774,471
Reinvestment of distributions 10,221,698
Shares redeemed (82,551,608)
Net increase (decrease) $ (25,555,439)
CLASS B Shares sold $ 26,076,418
Reinvestment of distributions 1,407,504
Shares redeemed (14,568,680)
Net increase (decrease) $ 12,915,242
CLASS C Shares sold $ 10,752,375
Reinvestment of distributions 280,065
Shares redeemed (4,112,814)
Net increase (decrease) $ 6,919,626
INSTITUTIONAL CLASS Shares $ 1,286,178
sold
Reinvestment of distributions 93,765
Shares redeemed (1,423,625)
Net increase (decrease) $ (43,682)
</TABLE>
8. MERGER INFORMATION.
On May 25, 2000, Class A, Class T, Class B, Class C, and Institutional
Class of the fund acquired all of the assets and assumed all of the
liabilities of Fidelity Advisor Intermediate Municipal Income Fund
Class A, Class T, Class B, Class C, and Institutional Class,
respectively. Each acquisition was approved by the shareholders of
each class of Fidelity Advisor Intermediate Municipal Income Fund on
April 19, 2000. 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 Intermediate Municipal
Income Fund Class A was accomplished by an exchange of 314,140 shares
of Class A for the 360,900 shares then outstanding of Fidelity Advisor
Intermediate Municipal Income Fund Class A (each valued at $10.01).
Class T's acquisition of Fidelity Advisor Intermediate Municipal
Income Fund Class T was accomplished by an exchange of 3,316,008
shares of Class T for the 3,816,726 shares then outstanding of
Fidelity Advisor Intermediate Municipal Income Fund Class T (each
valued at $10.00). Class B's acquisition of Fidelity Advisor
Intermediate Municipal Income Fund Class B was accomplished by an
exchange of 776,254 shares of Class B for the 892,031 shares then
outstanding of Fidelity Advisor Intermediate Municipal Income Fund
Class B (each valued at $9.99). Class C's acquisition of Fidelity
Advisor Intermediate Municipal Income Fund Class C was accomplished by
an exchange of 114,599 shares of Class C for the 131,903 shares then
outstanding of Fidelity Advisor Intermediate Municipal Income Fund
Class C (each valued at $10.00). Institutional Class's acquisition of
Fidelity Advisor Intermediate Municipal Income Fund Institutional
Class was accomplished by an exchange of 420,609 shares of
Institutional Class for the 482,017 shares then outstanding of
Fidelity Advisor Intermediate Municipal Income Fund Institutional
Class (each valued at $10.00).
Fidelity Advisor Intermediate Municipal Income Fund's net assets,
including $1,412,949 of unrealized depreciation, were combined with
the fund for total net assets after the acquisition of $438,952,773.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Christine J. Thompson, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
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-SANN-0600 103944
1.703468.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
MUNICIPAL INCOME FUND -
INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(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 33 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 year and past
10 year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME 2.74% -0.83% 31.73% 101.69%
- INST CL
LB 3 Plus Year Municipal Bond 2.81% -1.35% 33.66% n/a
General Municipal Debt Funds 2.05% -3.31% 26.41% 88.96%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Lehman Brothers 3 Plus Year Municipal Bond
Index - a market value-weighted index of investment-grade municipal
bonds with maturities of three years or more. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the general municipal debt funds average, which reflects
the performance of mutual funds with similar objectives tracked by
Lipper Inc. The past six months average represents a peer group of 278
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV MUNICIPAL INCOME -0.83% 5.67% 7.27%
- INST CL
LB 3 Plus Year Municipal Bond -1.35% 5.97% n/a
General Municipal Debt Funds -3.31% 4.79% 6.56%
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
1990/04/30 10000.00 10000.00
1990/05/31 10204.93 10218.30
1990/06/30 10325.17 10308.12
1990/07/31 10484.42 10459.65
1990/08/31 10413.67 10307.77
1990/09/30 10487.72 10313.65
1990/10/31 10631.71 10500.74
1990/11/30 10895.51 10711.91
1990/12/31 10965.02 10758.51
1991/01/31 11092.63 10902.88
1991/02/28 11177.92 10997.74
1991/03/31 11243.64 11001.70
1991/04/30 11426.72 11148.02
1991/05/31 11567.96 11247.13
1991/06/30 11594.89 11235.99
1991/07/31 11744.81 11372.85
1991/08/31 11850.88 11522.63
1991/09/30 11989.88 11672.65
1991/10/31 12122.74 11777.71
1991/11/30 12168.34 11810.57
1991/12/31 12300.68 12064.02
1992/01/31 12437.04 12091.53
1992/02/29 12504.61 12095.40
1992/03/31 12567.34 12099.87
1992/04/30 12680.76 12207.56
1992/05/31 12794.52 12351.24
1992/06/30 12969.96 12558.50
1992/07/31 13421.58 12935.00
1992/08/31 13317.65 12808.88
1992/09/30 13400.76 12892.65
1992/10/31 13239.04 12765.92
1992/11/30 13504.37 12994.56
1992/12/31 13667.19 13127.23
1993/01/31 13898.37 13279.90
1993/02/28 14389.13 13760.24
1993/03/31 14239.05 13614.79
1993/04/30 14390.05 13752.16
1993/05/31 14509.21 13829.45
1993/06/30 14741.84 14060.26
1993/07/31 14752.79 14078.68
1993/08/31 15132.75 14371.80
1993/09/30 15342.31 14535.50
1993/10/31 15350.54 14563.55
1993/11/30 15200.52 14435.24
1993/12/31 15551.52 14739.97
1994/01/31 15732.61 14908.30
1994/02/28 15316.79 14522.18
1994/03/31 14500.36 13930.83
1994/04/30 14596.57 14048.97
1994/05/31 14682.89 14170.77
1994/06/30 14628.84 14084.19
1994/07/31 14892.72 14342.35
1994/08/31 14916.11 14391.98
1994/09/30 14682.45 14180.70
1994/10/31 14425.07 13928.85
1994/11/30 13961.30 13677.02
1994/12/31 14299.68 13978.05
1995/01/31 14782.76 14377.54
1995/02/28 15181.06 14795.64
1995/03/31 15260.88 14965.64
1995/04/30 15311.04 14983.30
1995/05/31 15801.01 15461.42
1995/06/30 15677.06 15326.91
1995/07/31 15730.99 15472.21
1995/08/31 15893.45 15668.39
1995/09/30 16051.95 15767.57
1995/10/31 16241.33 15996.84
1995/11/30 16563.39 16262.22
1995/12/31 16710.37 16418.50
1996/01/31 16802.67 16542.46
1996/02/29 16764.84 16430.80
1996/03/31 16424.87 16220.82
1996/04/30 16358.43 16174.91
1996/05/31 16298.88 16168.44
1996/06/30 16490.65 16344.51
1996/07/31 16600.10 16493.25
1996/08/31 16637.94 16489.29
1996/09/30 16788.51 16720.14
1996/10/31 16957.34 16909.25
1996/11/30 17286.59 17218.69
1996/12/31 17227.30 17146.37
1997/01/31 17282.85 17178.77
1997/02/28 17460.42 17336.47
1997/03/31 17276.69 17105.38
1997/04/30 17415.77 17248.55
1997/05/31 17632.39 17507.97
1997/06/30 17861.63 17694.43
1997/07/31 18378.56 18184.57
1997/08/31 18216.53 18014.18
1997/09/30 18447.12 18228.00
1997/10/31 18558.86 18345.21
1997/11/30 18682.40 18453.08
1997/12/31 18988.72 18722.31
1998/01/31 19176.45 18915.52
1998/02/28 19200.50 18921.20
1998/03/31 19233.14 18937.85
1998/04/30 19136.40 18852.44
1998/05/31 19432.45 19150.87
1998/06/30 19506.09 19226.33
1998/07/31 19551.00 19274.59
1998/08/31 19849.40 19572.38
1998/09/30 20099.13 19816.25
1998/10/31 20096.24 19815.86
1998/11/30 20156.89 19885.41
1998/12/31 20187.26 19935.52
1999/01/31 20412.60 20172.55
1999/02/28 20290.03 20084.40
1999/03/31 20291.02 20112.32
1999/04/30 20337.47 20162.40
1999/05/31 20206.11 20045.66
1999/06/30 19889.27 19757.00
1999/07/31 19954.66 19828.91
1999/08/31 19803.52 19670.28
1999/09/30 19832.86 19678.35
1999/10/31 19631.25 19465.03
1999/11/30 19830.50 19672.14
1999/12/31 19662.84 19525.58
2000/01/31 19547.53 19440.65
2000/02/29 19802.04 19666.16
2000/03/31 20270.47 20096.06
2000/04/28 20168.64 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000519 143843 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Institutional
Class on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have grown to $20,169 - a 101.69%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Municipal Bond Index - a market value-weighted index
of investment grade bonds with maturities of one year or more - did
over the same period. With dividends reinvested, the same $10,000
would have grown to $19,977 - a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT
OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.65% 4.56% 5.06% 6.01% 5.76% 2.01%
Capital returns 0.09% -6.87% 3.22% 3.43% -1.35% 1.54%
Total returns 2.74% -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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.09(cents) 30.45(cents) 59.87(cents)
Annualized dividend rate 5.27% 5.25% 5.07%
30-day annualized yield 5.27% - -
30-day annualized 8.23% - -
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 $11.76 over the past
one month, $11.63 over the past six months, and $11.80 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
Given the investment environment
for municipal bonds during the
six-month period ending April 30,
2000, it seemed almost unrealistic
to expect strong performance
from the sector. After all, there were
three interest-rate hikes by the
Federal Reserve Board in that time
frame. That's typically bad news for
munis, which are generally longer
in duration and, therefore, more
interest-rate sensitive than other
fixed-income sectors. Municipal
bonds also had to compete with
record-setting equity performance
and a strong rally in Treasuries
during the past six months. Yet
remarkably, the municipal bond
sector outperformed nearly every
segment of the fixed-income
market for the overall period. In fact,
through the first four months of 2000,
the Lehman Brothers Municipal Index
also outperformed most major U.S.
equity indexes, including the S&P
500(Registered trademark), the NASDAQ, and the Dow
Jones Industrial Average. For the
six months ending April 30, the
Lehman Brothers Municipal Bond
Index - an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - gained 2.63%.
That outpaced the overall
taxable-bond market return of
1.42%, as measured by the Lehman
Brothers Aggregate Bond Index.
Much of the municipal segment's
gains occurred in February and
March when muni yields rose above
6%, a fairly rare phenomenon. The
attractive yields that munis offered
prompted a powerful rush of retail
buying, which sparked a strong rally
in the sector.
(photograph of Christine Thompson)
An interview with Christine Thompson, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, CHRISTINE?
A. For the six-month period that ended April 30, 2000, the fund's
Institutional Class shares had a total return of 2.74%. To get a sense
of how the fund did relative to its competitors, the general municipal
debt funds average returned 2.05% for the same six-month period,
according to Lipper Inc. Additionally, the Lehman Brothers 3 Plus Year
Municipal Bond Index, which tracks the types of securities in which
the fund invests, returned 2.81% for the same six-month period. For
the 12-month period that ended April 30, 2000, the fund's
Institutional Class shares had a total return of -0.83%. Those returns
compared to the -3.31% return of the general municipal debt funds
average and the -1.35% return for the Lehman Brothers index for the
same 12-month period.
Q. WHAT STRATEGIES AIDED THE FUND'S PERFORMANCE?
A. There were a couple of strategic factors that helped. First, the
fund was helped by its focus on premium coupon bonds, which pay
interest rates above face - or par - value. One appealing aspect of
premiums was that they were somewhat insulated from unfavorable tax
treatment that negatively affected the prices of lower coupon bonds,
or "discounts," as rates rose. More recently, however, I added some
discount bonds to lock in their relatively cheap valuations. The
fund's performance also was helped by duration management. 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 3 Plus Year Municipal Bond Index. That means I don't
lengthen or shorten duration based on where I think interest rates
will be at some point down the road.
Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD?
A. Yes, there were. Health care bonds continued their disappointing
run through most of the past six months, coming under pressure from a
variety of challenges including cutbacks in Medicare payments and
ensuing questions about many hospitals' future profitability. With the
help of Fidelity's research staff, I continue to carefully monitor the
impact these developments could have on hospitals over the long term.
My approach is to be very selective, emphasizing hospitals with a
proven track record that I believe can do well in today's evolving,
more competitive environment. More recently, we've seen a bit of
improvement among some hospitals that have begun to adjust to today's
more expense-conscious environment.
Q. WHICH SECTORS OF THE MUNICIPAL MARKET WERE ATTRACTIVE?
A. The fund had an overweighted position - relative to its benchmark
and the municipal bond market as a whole - in education bonds,
including those backed by colleges and universities around the
country. They allowed me to diversify the fund away from economically
sensitive issues such as general obligation bonds, which depend on
sales, property, income and other tax revenue collections.
Furthermore, projections call for an increasing number of students to
seek advanced degrees over the next several years. The fund also had a
relatively large weighting in electric utility bonds, particularly
those that I expect to benefit from restructuring activity. To make
rate structures more competitive, large electric issuers are
restructuring and retiring outstanding debt, which can be a positive
event for bondholders.
Q. WHAT FACTORS WILL SHAPE THE OUTLOOK FOR MUNICIPAL BONDS OVER THE
NEXT SIX MONTHS OR SO?
A. The primary factor, as always, will be the direction of interest
rates. Supply and demand also will play a role. The supply of
municipals has continued to decline in response to rising interest
rates. Many issuers now find it too expensive to issue new or
refinance old debt. With municipal bond yields rising above 6% in
February and March, we saw renewed buying from individual investors.
That demand abated somewhat when yields fell back below 6% in April.
To the extent that supply remains low and demand firms, municipals
could benefit.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks to provide a high
current yield exempt from
federal income tax
START DATE: September 16,
1987
SIZE: as of April 30, 2000,
more than $392 million
MANAGER: Christine Thompson,
since 1998; joined Fidelity
in 1985
CHRISTINE THOMPSON ON THE
FUND'S CREDIT QUALITY:
"As of April 30, 2000, more than 73%
of the fund's investments were in
bonds rated A or higher. The
fund's focus on these higher-quality
bonds reflected the fact that
Fidelity's research indicated that
only selected lower-quality bonds
- those rated Baa - offered
enough incentive by way of
additional yield. That said, there
are some exceptions. For example,
the fund owns some securities
issued by selected hospitals
around the country that I believe
can do well in today's more
competitive operating
environment. To further the fund's
diversification away from
economically sensitive municipal
bonds, I bought some education
bonds - many of which are backed
by colleges and universities.
Finally, I occasionally invest in
Baa-rated bonds issued by Puerto
Rico and Guam. As territories of
the United States, Puerto Rico and
Guam can issue bonds that are
free from taxes in all 50 states.
When the supply of U.S.
municipals is limited or their
prices look expensive, I
occasionally invest in Puerto Rico
and Guam bonds. At the end of the
period, less than 1% of the fund's
net assets were invested in bonds
issued by Puerto Rico and none in
Guam."
INVESTMENT CHANGES
TOP FIVE STATES AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
New York 17.4 18.0
Texas 7.0 8.4
North Carolina 6.0 4.4
Colorado 5.7 5.3
Massachusetts 5.7 6.5
TOP FIVE SECTORS AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Electric Utilities 17.2 15.9
Health Care 16.2 13.4
General Obligations 15.5 19.3
Transportation 14.7 14.4
Water & Sewer 10.5 5.7
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 16.7 12.9
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 APRIL 30, 2000
6 MONTHS AGO
Years 7.3 6.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 2000
Aaa 51.5%
Aa, A 21.8%
Baa 19.0%
Ba and Below 2.5%
Not Rated 4.7%
Short-term
Investments 0.5%
Row: 1, Col: 1, Value: 51.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 21.8
Row: 1, Col: 4, Value: 19.0
Row: 1, Col: 5, Value: 2.5
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 0.5
AS OF OCTOBER 31, 1999
Aaa 46.7%
Aa, A 24.3%
Baa 22.4%
Ba and Below 0.0%
Not Rated 4.7%
Short-term
Investments 1.9%
Row: 1, Col: 1, Value: 46.7
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 24.3
Row: 1, Col: 4, Value: 22.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 4.7
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, 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.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 100.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALABAMA - 1.1%
Shelby County Gen. Oblig. - $ 4,000,000 $ 4,222,920
Series A, 7.7% 8/1/17
ALASKA - 2.1%
Alaska Hsg. Fin. Corp. Rfdg. Aa2 5,490,000 5,286,596
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 1,486,545
(d)
5.45% 7/1/09 (AMBAC Insured) Aaa 1,500,000 1,495,860
(d)
8,269,001
ARIZONA - 1.4%
Arizona Student Ln. Aquistion Aaa 1,300,000 1,286,272
Auth. Student Ln. Rev. Rfdg.
Series A1, 5.875% 5/1/18 (d)
Maricopa County Ind. Dev. Baa1 4,495,000 4,178,687
Auth. Health Facilities Rev.
Rfdg. (Catholic Health Care
West Proj.) Series A, 4.1%
7/1/03
5,464,959
CALIFORNIA - 3.5%
California Dept. of Wtr. Aa2 2,190,000 2,231,457
Resources Central Valley
Proj. Rev. (Wtr. Sys. Proj.)
Series J2, 6.125% 12/1/13
California Health Facilities A2 1,230,000 1,199,348
Fing. Auth. Rev.
(Cedars-Sinai Med. Ctr.
Proj.) Series A, 6.125%
12/1/30
California Hsg. Fin. Agcy.
Rev. (Home Mtg. Prog.):
Series B, 5.2% 8/1/26 (MBIA Aaa 760,000 758,168
Insured) (d)
Series R, 6.15% 8/1/27 (MBIA Aaa 1,500,000 1,498,170
Insured) (d)
California Univ. Rev. Series Aaa 1,000,000 999,990
1999 AY, 5.875% 11/1/30
(FGIC Insured)
Central Valley Fing. Auth. BBB- 4,500,000 4,523,670
Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6%
7/1/09
Sacramento City Fing. Auth. Aaa 2,000,000 1,918,500
Lease Rev. Rfdg. Series A,
5.4% 11/1/20 (AMBAC Insured)
Sacramento Cogeneration Auth. BBB- 500,000 512,450
Cogeneration Proj. Rev.
(Procter & Gamble Proj.)
6.375% 7/1/10
13,641,753
COLORADO - 5.7%
Arapaho County School
District #5:
5.5% 12/15/19 Aa2 1,500,000 1,454,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
COLORADO - CONTINUED
Arapaho County School
District #5: - continued
6% 12/15/15 Aa2 $ 1,250,000 $ 1,292,650
Colorado Health Facilities
Auth. Rev.:
(Nat'l. Benevolent Assoc. Baa2 1,360,000 1,260,258
Proj.) Series A, 6.5% 6/1/25
Rfdg. (Rocky Mountain
Adventist Proj.):
6.625% 2/1/13 Ba1 6,900,000 6,429,144
6.625% 2/1/22 Ba1 4,000,000 3,489,640
Colorado Springs Arpt. Rev.
(Cap. Appreciation) Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 1,037,958
0% 1/1/08 (MBIA Insured) Aaa 870,000 573,452
Denver City & County Arpt.
Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Aaa 2,115,000 1,858,916
Insured) (d)
Series D, 0% 11/15/04 (MBIA Aaa 1,700,000 1,333,650
Insured) (d)
Series A:
7.5% 11/15/23 (d) Baa1 2,070,000 2,198,609
7.5% 11/15/23 (Pre-Refunded Aaa 430,000 477,395
to 11/15/04 @ 102) (d)(e)
Series C, 6.55% 11/15/02 (d) Baa1 1,000,000 1,023,070
22,428,992
CONNECTICUT - 1.3%
Connecticut Health & Edl. AAA 2,170,000 2,282,254
Facilities Auth. Rev. (New
Britain Memorial Hosp.
Proj.) Series A, 7.5%
7/1/06 (Pre-Refunded to
7/1/02 @ 102) (e)
Eastern Connecticut Resources BBB 3,350,000 2,699,062
Recovery Auth. Solid Waste
Rev. (Wheelabrator Lisbon
Proj.) Series A, 5.5% 1/1/20
(d)
4,981,316
DISTRICT OF COLUMBIA - 1.7%
District of Columbia Gen. Aaa 150,000 157,295
Oblig. Rfdg. Series A, 6%
6/1/07 (MBIA Insured)
(Escrowed to Maturity) (e)
District of Columbia Hosp. - 925,000 953,120
Rev. (Hosp. for Sick
Children Proj.) Series A,
8.875% 1/1/21
District of Columbia Redev. Baa 385,000 387,533
Land Agcy. Washington D.C.
Sports Arena Spl. Tax Rev.
5.625% 11/1/10
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DISTRICT OF COLUMBIA -
CONTINUED
District of Columbia Rev.:
(George Washington Univ. Aaa $ 1,000,000 $ 977,550
Proj.) Series A, 5.75%
9/15/20 (MBIA Insured)
(Nat'l. Academy of Science Aaa 2,500,000 2,209,100
Proj.) Series A, 5% 1/1/19
(AMBAC Insured)
Rfdg. (Georgetown Univ. Aaa 2,000,000 2,053,140
Proj.) Series A, 5.95%
4/1/14 (MBIA Insured)
6,737,738
FLORIDA - 2.1%
Broward County Resource A3 515,000 531,480
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Dade County Aviation Rev. Aaa 5,000,000 5,126,800
Rfdg. Series D, 5.75%
10/1/09 (AMBAC Insured) (d)
Florida Mid-Bay Bridge Auth. - 2,500,000 2,647,925
Rev. Series A, 7.5% 10/1/17
8,306,205
HAWAII - 0.5%
Honolulu City & County Gen. Aaa 2,000,000 1,886,620
Oblig. Rfdg. Series C,
5.125% 7/1/14 (FGIC Insured)
IDAHO - 0.3%
Boise City Urban Renewal Aaa 1,000,000 997,260
Agcy. Lease Rev. 5.9%
8/15/29 (AMBAC Insured)
ILLINOIS - 5.1%
Chicago Board of Ed. (Chicago Aaa 10,500,000 10,134,495
School Reform Proj.) 5.75%
12/1/27 (AMBAC Insured)
Chicago Midway Arpt. Rev. Aaa 1,500,000 1,384,425
Series A, 5.5% 1/1/29 (MBIA
Insured)
Chicago O'Hare Int'l. Arpt.
Rev. Rfdg. (Gen. Arpt.
Proj.) Series A:
6.25% 1/1/09 (AMBAC Insured) Aaa 3,700,000 3,905,091
(d)
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,453,816
Chicago O'Hare Int'l. Arpt. Baa2 1,000,000 1,085,780
Spl. Facilities Rev. Rfdg.
(American Airlines, Inc.
Proj.) 8.2% 12/1/24
Illinois Health Facilities
Auth. Rev. (Memorial Hosp.
Proj.):
7.125% 5/1/10 (Pre-Refunded - 1,000,000 1,061,130
to 5/1/02 @ 102) (e)
7.25% 5/1/22 (Pre-Refunded to - 1,000,000 1,063,470
5/1/02 @ 102) (e)
20,088,207
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
INDIANA - 0.3%
Indianapolis Econ. Dev. Rev. Baa2 $ 1,000,000 $ 1,029,650
Rfdg. & Impt. (Nat'l.
Benevolent Assoc. Proj.)
7.625% 10/1/22
IOWA - 0.9%
Iowa Student Ln. Liquidity Aaa 3,500,000 3,544,555
Corp. Student Ln. Rev. Rfdg.
Series B, 5.75% 12/1/07 (d)
KANSAS - 0.7%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):
5% 12/1/13 (MBIA Insured) Aaa 2,390,000 2,251,810
5% 12/1/14 (MBIA Insured) Aaa 500,000 465,950
2,717,760
KENTUCKY - 3.6%
Kenton County Arpt. Board
Arpt. Rev.:
(Cincinnati/Northern Kentucky Aaa 5,570,000 5,753,086
Int'l. Proj.) Series A, 6%
3/1/05 (MBIA Insured) (d)
(Delta Air Lines, Inc. Proj.) Baa3 2,000,000 2,052,580
Series A, 7.5% 2/1/20 (d)
Louisville & Jefferson Swr. Aaa 6,550,000 6,390,180
Sys. Rev. Series A, 5.75%
5/15/33 (FGIC Insured)
14,195,846
MARYLAND - 0.7%
Maryland Health & Higher Edl.
Facilities Auth. Rev. (Good
Samaritan Hosp. Proj.):
5.75% 7/1/13 (AMBAC Insured) Aaa 1,015,000 1,034,326
(Escrowed to Maturity) (e)
5.75% 7/1/13 (Escrowed to A1 1,665,000 1,710,837
Maturity) (e)
2,745,163
MASSACHUSETTS - 5.7%
Massachusetts Bay Trans. Auth.:
(Gen. Trans. Sys. Proj.):
Series 1997 D, 5% 3/1/27 Aa2 2,000,000 1,719,500
Series A, 5.375% 3/1/19 Aa2 1,435,000 1,358,342
Rfdg. (Gen. Trans. Sys. Aa2 2,000,000 1,942,300
Proj.) Series A, 5.75%
3/1/26 (FGIC Insured)
Massachusetts Health & Edl.
Facilities Auth. Rev.:
(Bentley College Proj.) Aaa 1,265,000 1,156,817
Series J, 5% 7/1/17 (MBIA
Insured)
(Hebrew Rehab. Ctr. for Aged A 2,000,000 1,742,040
Proj.) Series C, 5.25% 7/1/17
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Health & Edl.
Facilities Auth. Rev.: -
continued
(New England Med. Ctr. Hosp. Aaa $ 500,000 $ 450,905
Proj.) Series G, 5.375%
7/1/24 (MBIA Insured)
Massachusetts Ind. Fin. Agcy. BBB 1,000,000 966,430
Resource Recovery Rev. Rfdg.
(Ogden Haverhill Proj.)
Series A, 4.7% 12/1/03
Massachusetts Ind. Fin. Agcy.
Rev. (Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.) Series
A2:
0% 8/1/08 A+ 800,000 509,240
0% 8/1/10 - 4,500,000 2,522,070
Massachusetts Muni. Wholesale Baa2 1,000,000 1,038,540
Elec. Co. Pwr. Supply Sys.
Rev. Rfdg. Series C, 6.5%
7/1/03
Massachusetts Wtr. Poll.
Abatement Trust Wtr. Poll.
Abatement Rev. (MWRA Ln.
Prog.) Series A:
5.25% 8/1/13 Aa1 10,000 9,790
5.25% 8/1/14 Aa1 30,000 29,111
Massachusetts Wtr. Resources Aaa 5,000,000 4,827,300
Auth. Rev. Series A, 5.75%
8/1/39 (FGIC Insured)
New England Ed. Ln. Marketing A3 3,880,000 3,922,835
Corp. Massachusetts Student
Ln. Rev. Rfdg. Series F,
5.625% 7/1/04 (d)
22,195,220
MICHIGAN - 3.9%
Detroit Wtr. Supply Sys. Rev.
Sr. Lien Series A:
5.75% 7/1/26 (FGIC Insured) Aaa 1,400,000 1,361,206
5.875% 7/1/22 (FGIC Insured) Aaa 1,700,000 1,680,059
5.875% 7/1/29 (FGIC Insured) Aaa 1,100,000 1,085,667
Howell Pub. Schools 5.875% Aaa 2,225,000 2,222,975
5/1/22 (MBIA Insured)
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(Genesys Reg'l. Med. Hosp. Baa2 4,250,000 4,082,763
Proj.) Series A, 5.5%
10/1/18 (Escrowed to
Maturity) (e)
(Pontiac Osteopathic Hosp. Baa2 2,000,000 1,641,540
Proj.) Series A, 6% 2/1/24
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MICHIGAN - CONTINUED
Michigan Strategic Fund Ltd. Aaa $ 1,000,000 $ 917,160
Oblig. Rev. Rfdg. (Detroit
Edison Co. Proj.) Series A,
5.55% 9/1/29 (MBIA Insured)
(d)
Royal Oak Hosp. Fin. Auth. Aa3 2,310,000 2,410,439
Rev. Rfdg. (William
Beaumont Hosp. Proj.) 6.25%
1/1/09
15,401,809
MINNESOTA - 2.1%
Minneapolis & Saint Paul Hsg. Aaa 1,800,000 1,551,708
& Redev. Auth. Health Care
Sys. Rev. Rfdg. (Healthspan
Corp. Proj.) Series A, 4.75%
11/15/18 (AMBAC Insured)
Minnesota Hsg. Fin. Agcy. Aa2 1,945,000 1,985,359
(Single Family Mtg. Prog.)
Series D, 6.4% 7/1/15 (d)
Rochester Health Care AA+ 2,000,000 1,878,860
Facilities Rev. (Mayo
Foundation Proj.) Series A,
5.5% 11/15/27
Saint Cloud Health Care Rev. Aaa 3,000,000 2,915,880
(Saint Cloud Hosp. Proj.)
Series A, 5.875% 5/1/30
(FSA Insured)
8,331,807
MISSISSIPPI - 0.0%
Mississippi Home Corp. Single Aaa 144,000 148,788
Family Rev. Rfdg. Series A,
9.25% 3/1/12 (FGIC Insured)
NEVADA - 0.6%
Las Vegas Downtown Redev.
Agcy. Tax Increment Rev.
(Fremont Street Proj.)
Series A:
6% 6/15/10 BBB+ 1,500,000 1,491,270
6.1% 6/15/14 BBB+ 1,000,000 1,000,690
2,491,960
NEW HAMPSHIRE - 0.1%
New Hampshire Higher Edl. & - 480,000 489,600
Health Facilities Auth. Rev.
(Littleton Hosp. Assoc.,
Inc. Proj.) Series A, 9.5%
5/1/20 (Pre-Refunded to
5/1/00 @ 102) (e)
NEW JERSEY - 2.4%
New Jersey Econ. Dev. Auth. Aaa 3,185,000 2,882,584
Wtr. Facilities Rev. (New
Jersey Americam Wtr. Co.,
Inc. Proj.) Series 1997 B,
5.375% 5/1/32 (FGIC Insured)
(d)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW JERSEY - CONTINUED
New Jersey Trans. Trust Fund Aaa $ 4,000,000 $ 4,063,000
Auth. Rfdg. (Trans. Sys.
Proj.) Series A, 5.5%
6/15/11 (MBIA Insured)
Passaic County Util. Auth. Aaa 2,500,000 2,286,250
Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0%
3/1/02 (MBIA Insured)
9,231,834
NEW MEXICO - 1.9%
Albuquerque Arpt. Rev. Rfdg.:
6.7% 7/1/18 (AMBAC Insured) Aaa 3,970,000 4,221,619
(d)
6.75% 7/1/11 (AMBAC Insured) Aaa 1,805,000 1,990,500
(d)
New Mexico Edl. Assistance Aaa 1,100,000 1,097,624
Foundation Student Ln. Rev.
Series B, 5.25% 4/1/05
(AMBAC Insured) (d)
7,309,743
NEW YORK - 17.4%
Long Island Pwr. Auth. Elec. Aaa 9,390,000 8,311,559
Sys. Rev. Series A, 5.125%
12/1/22 (FSA Insured)
Metro. Trans. Auth. Dedicated
Tax Fund Series A:
5% 4/1/23 (FGIC Insured) Aaa 2,565,000 2,229,549
5% 4/1/29 (FSA Insured) Aaa 2,200,000 1,896,840
5.25% 4/1/26 (MBIA Insured) Aaa 1,000,000 903,140
Metro. Trans. Auth. New York
Commuter Facilities Rev.:
Series A:
5.625% 7/1/27 (MBIA Insured) Aaa 200,000 190,256
6.125% 7/1/29 Baa1 6,750,000 6,727,185
Series B, 4.75% 7/1/26 (FGIC Aaa 2,000,000 1,648,980
Insured)
Metro. Trans. Auth. New York
Svc. Contract Rev.:
(Commuter Facilities Proj.) Baa1 700,000 704,858
Series O, 5.75% 7/1/13
(Trans. Facilities Proj.) Baa1 1,010,000 1,005,617
Series P, 5.75% 7/1/15
Rfdg. (Trans. Facilities Baa1 1,000,000 973,310
Proj.) Series 7, 5.625%
7/1/16
Metro. Trans. Auth. New York
Trans. Facilities Rev.:
Rfdg. (Svc. Contract Proj.)
Series 8:
5.25% 7/1/17 Baa1 1,000,000 923,020
5.375% 7/1/21 (FSA Insured) Aaa 700,000 652,575
Series B, 4.75% 7/1/26 (FGIC Aaa 1,000,000 824,490
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York City Gen. Oblig.:
Rfdg. Series B, 5.7% 8/15/02 A3 $ 35,000 $ 35,678
(Escrowed to Maturity) (e)
Series H:
6.875% 2/1/02 A3 160,000 164,800
6.875% 2/1/02 (Escrowed to Aaa 80,000 82,819
Maturity) (e)
New York City Ind. Dev. Agcy. Aaa 965,000 1,010,094
Ind. Dev. Rev. (Japan
Airlines Co. Ltd. Proj.)
Series 1991, 6% 11/1/15 (FSA
Insured) (d)
New York City Ind. Dev. Agcy. A3 8,680,000 8,822,699
Spl. Facilities Rev. (Term.
One Group Assoc. Proj.) 5.9%
1/1/06 (d)
New York City Muni. Wtr. Fin.
Auth. Wtr. & Swr. Sys. Rev.
Series B:
5.5% 6/15/27 (MBIA Insured) Aaa 3,500,000 3,289,125
5.75% 6/15/26 Aa3 5,000,000 4,842,350
5.75% 6/15/29 Aa3 4,000,000 3,863,160
5.75% 6/15/29 (MBIA Insured) Aaa 1,500,000 1,456,740
New York City Transitional Aa3 3,000,000 2,926,920
Fin. Auth. Rev. Series A,
5.75% 8/15/24
New York State Dorm. Auth.
Revs.:
(St. Univ. Edl. Facilities Aaa 5,000,000 4,993,600
Proj.) 5.95% 5/15/29 (FGIC
Insured)
Rfdg. (Jamaica Hosp. Med. Aaa 6,150,000 5,862,180
Ctr. Proj.) Series F, 5.2%
2/15/14 (MBIA Insured)
New York State Envir.
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev.
(Revolving Funds Prog.)
Series F:
4.875% 6/15/18 Aa1 1,000,000 877,760
4.875% 6/15/20 Aa1 1,300,000 1,120,327
5% 6/15/15 Aa1 700,000 645,148
New York State Envir. Aa1 1,000,000 906,190
Facilities Corp. Poll.
Cont. Rev. (State Wtr.
Revolving Fund Prog.) Series
D, 5.125% 6/15/19
Triborough Bridge & Tunnel Aaa 500,000 494,915
Auth. Spl. Oblig. Rfdg.
Series A, 5.25% 1/1/11
(FGIC Insured)
68,385,884
NORTH CAROLINA - 6.0%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series A, 5.5% 1/1/05 (MBIA Aaa 4,000,000 4,055,360
Insured)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NORTH CAROLINA - CONTINUED
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.: -
continued
Rfdg.:
Series B:
5.875% 1/1/21 (MBIA Insured) Aaa $ 2,400,000 $ 2,378,352
6% 1/1/06 Baa3 4,175,000 4,213,201
6% 1/1/14 Baa3 1,000,000 971,440
7.25% 1/1/07 Baa3 1,000,000 1,074,390
Series C:
5.125% 1/1/03 Baa1 2,700,000 2,656,152
5.25% 1/1/04 Baa1 1,365,000 1,344,402
5.5% 1/1/07 (MBIA Insured) Aaa 2,000,000 2,030,760
Series D, 6.7% 1/1/19 Baa3 1,115,000 1,121,066
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.:
Rfdg. 5.75% 1/1/02 Baa1 1,750,000 1,754,778
Series A, 5.125% 1/1/15 (MBIA Aaa 1,000,000 942,050
Insured)
6.25% 1/1/17 (AMBAC Insured) Aaa 1,150,000 1,171,666
23,713,617
OHIO - 2.6%
Cincinnati Student Ln. Fdg. - 1,005,000 1,019,382
Corp. Student Ln. Rev.
Series B, 8.875% 8/1/08 (d)
Franklin County Hosp. Rev. Baa3 4,160,000 3,914,269
(Doctor's Ohio Health Corp.
Proj.) Series A, 4.75%
12/1/03
Gateway Economic Dev. Corp. - 3,000,000 2,959,140
Greater Cleveland Stadium
Rev. Series 1990, 6.5%
9/15/14 (d)
Marion County Hosp. Impt. BBB+ 1,000,000 995,330
Rev. Rfdg. (Cmnty. Hosp.
Proj.) 5.6% 5/15/01
Ohio Univ. Gen. Receipts Aa2 1,250,000 1,238,625
Series A, 5.75% 12/1/24
10,126,746
OKLAHOMA - 2.4%
Oklahoma Industries Auth. Rev.:
Rfdg. (Health Sys. Oblig. Aaa 1,500,000 1,426,710
Group Proj.) Series A,
5.75% 8/15/29 (MBIA Insured)
6% 8/15/19 (MBIA Insured) Aaa 3,000,000 2,998,350
Sapulpa Muni. Auth. Util. Aaa 1,000,000 976,290
Rev. Rfdg. 5.75% 4/1/23
(FGIC Insured)
Tulsa Muni. Arpt. Trust Rev. Baa2 4,000,000 4,172,200
(American Airlines Corp.
Proj.) 7.35% 12/1/11
9,573,550
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
PENNSYLVANIA - 5.6%
Allegheny County Arpt. Rev. Aaa $ 1,000,000 $ 1,024,780
Rfdg. (Pittsburgh Int'l.
Arpt. Proj.) Series A2,
5.75% 1/1/07 (MBIA Insured)
(d)
Allegheny County Ind. Dev. - 310,000 320,680
Auth. Rev. (YMCA Pittsburgh
Proj.) Series A, 8.75% 3/1/10
Allegheny County Port Auth. Aaa 4,460,000 4,508,123
Spl. Rev. 6.125% 3/1/29
(MBIA Insured)
Butler County Ind. Dev. Auth. A 3,000,000 2,893,710
Health Ctr. Rev. Rfdg.
(Sherwood Oaks Proj.) 5.75%
6/1/11
Cumberland County Muni. Auth.
Rev. Rfdg. (Carlisle Hosp. &
Health Proj.):
6.8% 11/15/14 Baa3 3,250,000 3,047,915
6.8% 11/15/23 Baa3 1,000,000 912,420
Delaware County Auth. College Aa3 3,500,000 3,389,260
Rev. (Haverford College
Proj.) 5.75% 11/15/29
Delaware County Auth. Rev.
(First Mtg. Riddle Village
Proj.):
8.25% 6/1/22 (Escrowed to Aaa 2,250,000 2,581,628
Maturity) (e)
8.75% 6/1/10 (Pre-Refunded to Aaa 2,870,000 3,144,085
6/1/02 @ 102) (e)
21,822,601
PUERTO RICO - 0.5%
Puerto Rico Commonwealth Gen. Aaa 1,800,000 1,783,152
Oblig. 5.75% 7/1/26 (MBIA
Insured)
RHODE ISLAND - 1.2%
Rhode Island Port Auth. & Aaa 4,000,000 4,562,520
Economic Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14
(FSA Insured) (d)
SOUTH CAROLINA - 0.7%
Piedmont Muni. Pwr. Agcy. Aaa 1,715,000 1,793,684
Elec. Rev. Rfdg. Series A,
6.25% 1/1/05 (FGIC Insured)
South Carolina Jobs Econ. Baa1 1,000,000 988,520
Dev. Auth. Hosp. Facilities
Rev. (Palmetto Health
Alliance Proj.) Series A,
7.375% 12/15/21
2,782,204
TENNESSEE - 0.2%
Metro. Govt. Nashville & Aaa 1,000,000 727,240
Davidson County Elec. Rev.
(Cap. Appreciation) Series
A, 0% 5/15/06 (MBIA Insured)
TEXAS - 7.0%
Conroe Independent School Aaa 750,000 465,548
District Rfdg. (Cap.
Appreciation) Series B, 0%
2/15/09
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXAS - CONTINUED
Dallas Fort Worth Int'l. Baa1 $ 6,000,000 $ 6,116,820
Arpt. Facility Impt. Corp.
Rev. (American Airlines,
Inc. Proj.) 7.5% 11/1/25 (d)
El Paso Gen. Oblig. 5.75% Aaa 4,500,000 4,323,600
8/15/25 (FSA Insured)
Midlothian Independent School Aaa 1,845,000 1,515,963
District Rfdg. (Cap.
Appreciation) 0% 2/15/04
San Antonio Elec. & Gas Rev. Aa1 75,000 77,135
Rfdg. 5.5% 2/1/20
(Pre-Refunded to 2/1/07 @
101) (e)
San Antonio Gen. Oblig. Aa2 1,390,000 1,349,885
Series 2000, 5% 2/1/11
Texas Gen. Oblig. (Texas Pub. Aa1 5,000,000 4,737,400
Fin. Auth. Proj.) Series A,
5% 10/1/14
Texas Muni. Pwr. Agcy. Rev. Aaa 3,930,000 2,106,598
Rfdg. (Cap. Appreciation)
0% 9/1/11 (AMBAC Insured)
Travis County Health Aaa 4,000,000 4,116,200
Facilities Dev. Corp. Rev.
(Ascension Health Cr. Prog.)
Series A, 6.25% 11/15/19
(MBIA Insured)
Yselta Independent School Aaa 4,065,000 2,455,829
District Rfdg. (Cap.
Appreciation) 0% 8/15/09
27,264,978
UTAH - 2.8%
Intermountain Pwr. Agcy. Pwr.
Supply Rev. Rfdg.:
Series A, 6.5% 7/1/09 (AMBAC Aaa 1,000,000 1,080,340
Insured)
Series B:
5.75% 7/1/16 (MBIA Insured) Aaa 2,500,000 2,501,950
6% 7/1/16 (MBIA Insured) Aaa 7,000,000 7,126,140
South Salt Lake City Ind. - 250,000 261,178
Rev. (Price Savers Wholesale
Club Proj.) 9% 11/15/13
10,969,608
VERMONT - 0.2%
Vermont Edl. & Health Bldg. Aa3 1,125,000 945,349
Fin. Agcy. Rev. (Middlebury
College Proj.) 5% 11/1/38
VIRGINIA - 1.5%
Loudoun County Ind. Dev. - 880,000 971,194
Auth. Residential Care
Facilities Rev. (Falcons
Landing Proj.) Series A,
9.25% 11/1/04 (Escrowed to
Maturity) (e)
Virginia Commonwealth Trans. Aa1 1,965,000 1,936,547
Board Trans. Rev. (U.S.
Route 58 Corridor Dev.
Prog.) Series B, 5.75%
5/15/21
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
VIRGINIA - CONTINUED
Virginia State Resources
Auth. Clean Wtr. Rev.:
(State Revolving Fund Proj.) Aaa $ 1,750,000 $ 1,757,245
5.75% 10/1/19
5.625% 10/1/22 Aaa 1,250,000 1,225,738
5,890,724
WASHINGTON - 4.2%
Port Seattle Passenger Aaa 3,000,000 2,818,590
Facilities Charge Rev.
Series B, 5.25% 12/1/14
(AMBAC Insured) (d)
Washington Pub. Pwr. Supply Aa1 14,000,000 13,665,535
Sys. Nuclear Proj. #2 Rev.
5.4% 7/1/12
16,484,125
TOTAL MUNICIPAL BONDS 391,891,004
(Cost $395,304,636)
CASH EQUIVALENTS - 0.5%
SHARES
Municipal Central Cash Fund, 2,039,408 2,039,408
4.80% (b)(c) (Cost
$2,039,408)
TOTAL INVESTMENT PORTFOLIO - 393,930,412
100.5%
(Cost $397,344,044)
NET OTHER ASSETS - (0.5)% (1,831,538)
NET ASSETS - 100% $ 392,098,874
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Information in this report regarding holdings by state and
security types does not reflect the holdings of the Municipal Central
Cash Fund. A listing of the Municipal Central Cash Fund's holdings as
of its most recent fiscal period end is available upon request.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
(e) Security collateralized by an amount sufficient to pay interest
and principal.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.9% AAA, AA, A 71.3%
Baa 15.9% BBB 17.5%
Ba 2.5% 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 total net assets, is as follows:
Electric Utilities 17.2%
Health Care 16.2
General Obligations 15.5
Transportation 14.7
Water & Sewer 10.5
Education 6.4
Industrial Development 6.2
Others* (individually less 13.3
than 5%)
100.0%
* Includes short-term investments
and net other assets
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $397,344,044. Net unrealized depreciation
aggregated $3,413,632, of which $5,628,243 related to appreciated
investment securities and $9,041,875 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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 393,930,412
value (cost $397,344,044) -
See accompanying schedule
Receivable for fund shares 220,625
sold
Interest receivable 7,386,014
Other receivables 22,338
TOTAL ASSETS 401,559,389
LIABILITIES
Payable for investments $ 7,397,406
purchased
Payable for fund shares 1,157,255
redeemed
Distributions payable 589,714
Accrued management fee 124,330
Distribution fees payable 122,641
Other payables and accrued 69,169
expenses
TOTAL LIABILITIES 9,460,515
NET ASSETS $ 392,098,874
Net Assets consist of:
Paid in capital $ 411,100,814
Distributions in excess of (17,864)
net interest income
Accumulated undistributed net (15,570,444)
realized gain (loss) on
investments
Net unrealized appreciation (3,413,632)
(depreciation) on investments
NET ASSETS $ 392,098,874
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $11.70
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($11,718,967 (divided by)
1,001,707 shares)
Maximum offering price per $12.28
share (100/95.25 of $11.70)
CLASS T: NET ASSET VALUE and $11.71
redemption price per share
($304,077,912 (divided by)
25,967,871 shares)
Maximum offering price per $12.13
share (100/96.50 of $11.71)
CLASS B: NET ASSET VALUE and $11.68
offering price per share
($60,473,267 (divided by)
5,178,389 shares) A
CLASS C: NET ASSET VALUE and $11.71
offering price per share
($13,315,683 (divided by)
1,137,125 shares) A
INSTITUTIONAL CLASS: NET $11.66
ASSET VALUE, offering price
and redemption price per
share ($2,513,045 (divided
by) 215,604 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INTEREST INCOME $ 11,578,397
EXPENSES
Management fee $ 760,104
Transfer agent fees 214,763
Distribution fees 746,787
Accounting fees and expenses 62,034
Non-interested trustees' 586
compensation
Custodian fees and expenses 5,345
Registration fees 37,388
Audit 20,263
Legal 9,768
Miscellaneous 965
Total expenses before 1,858,003
reductions
Expense reductions (1,557) 1,856,446
NET INTEREST INCOME 9,721,951
REALIZED AND UNREALIZED GAIN (1,272,319)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized 1,593,622
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) 321,303
NET INCREASE (DECREASE) IN $ 10,043,254
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 9,721,951 $ 19,650,204
Net realized gain (loss) (1,272,319) 2,481,428
Change in net unrealized 1,593,622 (33,690,142)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 10,043,254 (11,558,510)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,844,490) (19,650,204)
from net interest income
Share transactions - net (28,714,379) (1,025,834)
increase (decrease)
TOTAL INCREASE (DECREASE) (28,515,615) (32,234,548)
IN NET ASSETS
NET ASSETS
Beginning of period 420,614,489 452,849,037
End of period (including $ 392,098,874 $ 420,614,489
distributions in excess of
net interest income of
$17,864 and $0, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.690 $ 12.540 $ 12.150 $ 11.740 $ 11.630
of period
Income from Investment
Operations
Net interest income .293 D .567 .571 .583 D .105 D, E
Net realized and unrealized .014 (.850) .390 .445 .109
gain (loss)
Total from investment .307 (.283) .961 1.028 .214
operations
Less Distributions
From net interest income (.297) (.567) (.571) (.616) E (.104)
In excess of net interest - - - (.002) -
income
Total distributions (.297) (.567) (.571) (.618) (.104)
Net asset value, end of $ 11.700 $ 11.690 $ 12.540 $ 12.150 $ 11.740
period
TOTAL RETURN B, C 2.66% (2.36)% 8.07% 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,719 $ 10,722 $ 6,721 $ 3,755 $ 202
(000 omitted)
Ratio of expenses to average .71% A .72% .90% G .90% G .90% A, G
net assets
Ratio of net interest income 5.05% A 4.62% 4.57% 4.87% 5.73% A
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700 $ 12.560 $ 12.150 $ 11.760 $ 11.880
period
Income from Investment
Operations
Net interest income .288 C .555 .571 .597 C .677 C, D
Net realized and unrealized .013 (.860) .410 .407 (.136)
gain (loss)
Total from investment .301 (.305) .981 1.004 .541
operations
Less Distributions
From net interest income (.291) (.555) (.571) (.612) D (.661)
In excess of net interest - - - (.002) -
income
Total distributions (.291) (.555) (.571) (.614) (.661)
Net asset value, end of period $ 11.710 $ 11.700 $ 12.560 $ 12.150 $ 11.760
TOTAL RETURN B 2.61% (2.53)% 8.15% 8.89% 4.68%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 304,078 $ 329,926 $ 380,325 $ 392,075 $ 480,432
(000 omitted)
Ratio of expenses to average .80% A .81% .87% .89% .89%
net assets
Ratio of net interest income 4.96% A 4.51% 4.62% 5.04% 5.74%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.220
period
Income from Investment
Operations
Net interest income .700
Net realized and unrealized .660
gain (loss)
Total from investment 1.360
operations
Less Distributions
From net interest income (.700)
In excess of net interest -
income
Total distributions (.700)
Net asset value, end of period $ 11.880
TOTAL RETURN B 12.50%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 565,131
(000 omitted)
Ratio of expenses to average .91%
net assets
Ratio of net interest income 6.06%
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.670 $ 12.530 $ 12.130 $ 11.740 $ 11.860
period
Income from Investment
Operations
Net interest income .250 D .476 .491 .515 D .596 D, E
Net realized and unrealized .014 (.860) .400 .416 (.136)
gain (loss)
Total from investment .264 (.384) .891 .931 .460
operations
Less Distributions
From net interest income (.254) (.476) (.491) (.539) E (.580)
In excess of net interest - - - (.002) -
income
Total distributions (.254) (.476) (.491) (.541) (.580)
Net asset value, end of period $ 11.680 $ 11.670 $ 12.530 $ 12.130 $ 11.740
TOTAL RETURN B, C 2.29% (3.16)% 7.47% 8.15% 3.98%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 60,473 $ 63,464 $ 55,032 $ 41,024 $ 39,389
(000 omitted)
Ratio of expenses to average 1.46% A 1.46% 1.53% 1.56% 1.57%
net assets
Ratio of net interest income 4.31% A 3.88% 3.96% 4.35% 5.06%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS B
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.210
period
Income from Investment
Operations
Net interest income .612
Net realized and unrealized .650
gain (loss)
Total from investment 1.262
operations
Less Distributions
From net interest income (.612)
In excess of net interest -
income
Total distributions (.612)
Net asset value, end of period $ 11.860
TOTAL RETURN B, C 11.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 32,395
(000 omitted)
Ratio of expenses to average 1.86% F
net assets
Ratio of net interest income 5.18%
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F 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>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700 $ 12.560 $ 12.130
period
Income from Investment
Operations
Net interest income .244 D .465 .455
Net realized and unrealized .014 (.860) .430
gain (loss)
Total from investment .258 (.395) .885
operations
Less Distributions
From net interest income (.248) (.465) (.455)
Net asset value, end of period $ 11.710 $ 11.700 $ 12.560
TOTAL RETURN B, C 2.23% (3.24)% 7.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 13,316 $ 13,071 $ 7,031
(000 omitted)
Ratio of expenses to average 1.56% A 1.56% 1.75% A, F
net assets
Ratio of net interest income 4.20% A 3.79% 3.60% A
to average net assets
Portfolio turnover rate 50% A 23% 36%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.650 $ 12.510 $ 12.120 $ 11.720 $ 11.880
period
Income from Investment
Operations
Net interest income .300 D .584 .592 .609D .707D, E
Net realized and unrealized .014 (.860) .390 .464 (.197)
gain (loss)
Total from investment .314 (.276) .982 1.073 .510
operations
Less Distributions
From net interest income (.304) (.584) (.592) (.671) E (.670)
In excess of net interest - - - (.002) -
income
Total distributions (.304) (.584) (.592) (.673) (.670)
Net asset value, end of $ 11.660 $ 11.650 $ 12.510 $ 12.120 $ 11.720
period
TOTAL RETURN B, C 2.74% (2.31)% 8.28% 9.44% 4.41%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,513 $ 3,431 $ 3,741 $ 1,511 $ 927
(000 omitted)
Ratio of expenses to average .60% A .60% .75% G .75% G .75% G
net assets
Ratio of net interest income 5.16% A 4.75% 4.75% 5.11% 5.88%
to average net assets
Portfolio turnover rate 50% A 23% 36% 36% 49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1995F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.700
period
Income from Investment
Operations
Net interest income .232
Net realized and unrealized .180
gain (loss)
Total from investment .412
operations
Less Distributions
From net interest income (.232)
In excess of net interest -
income
Total distributions (.232)
Net asset value, end of $ 11.880
period
TOTAL RETURN B, C 3.55%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 154
(000 omitted)
Ratio of expenses to average .75% A, G
net assets
Ratio of net interest income 5.89% A
to average net assets
Portfolio turnover rate 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
F FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
G FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal 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. 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). Distributions in excess of net
interest 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.
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 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 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.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $99,851,701 and $118,898,955, 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 annualized 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 and
Service 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, each class paid FDC the following amounts, a portion
of which was retained by FDC:
PAID TO FDC RETAINED BY FDC
CLASS A $ 8,087 $ 27
CLASS T 394,276 5,516
CLASS B 277,693 201,147
CLASS C 66,731 34,252
$ 746,787 $ 240,942
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 26,689 $ 8,925
CLASS T 64,420 23,973
CLASS B 135,170 135,170*
CLASS C 6,620 6,620*
$ 232,899 $ 174,688
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $ 5,946 .11*
CLASS T 167,366 .11*
CLASS B 32,170 .10*
CLASS C 7,093 .11*
INSTITUTIONAL CLASS 2,188 .15*
$ 214,763
* ANNUALIZED
5. EXPENSE REDUCTIONS.
Through an arrangement with each class' transfer agent, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the expenses. During the period, Class T's transfer agent
expense was reduced by $1,557 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INTEREST INCOME
Class A $ 270,930 $ 439,029
Class T 7,871,524 16,229,661
Class B 1,343,878 2,381,487
Class C 283,262 421,752
Institutional Class 74,896 178,275
Total $ 9,844,490 $ 19,650,204
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 307,593 565,331 $ 3,598,218
Reinvestment of distributions 16,262 25,296 189,634
Shares redeemed (239,608) (208,996) (2,801,218)
Net increase (decrease) 84,247 381,631 $ 986,634
CLASS T Shares sold 2,096,159 3,793,311 $ 24,482,568
Reinvestment of distributions 418,188 835,205 4,881,883
Shares redeemed (4,744,054) (6,722,556) (55,396,490)
Net increase (decrease) (2,229,707) (2,094,040) $ (26,032,039)
CLASS B Shares sold 796,012 2,125,759 $ 9,280,421
Reinvestment of distributions 67,765 115,598 788,964
Shares redeemed (1,123,629) (1,196,611) (13,073,772)
Net increase (decrease) (259,852) 1,044,746 $ (3,004,387)
CLASS C Shares sold 340,998 871,985 $ 3,982,553
Reinvestment of distributions 15,480 22,987 180,717
Shares redeemed (336,409) (337,753) (3,917,477)
Net increase (decrease) 20,069 557,219 $ 245,793
INSTITUTIONAL CLASS Shares 71,089 103,836 $ 827,838
sold
Reinvestment of distributions 2,861 7,731 33,261
Shares redeemed (152,883) (116,192) (1,771,479)
Net increase (decrease) (78,933) (4,625) $ (910,380)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 6,989,179
Reinvestment of distributions 307,568
Shares redeemed (2,558,328)
Net increase (decrease) $ 4,738,419
CLASS T Shares sold $ 46,774,471
Reinvestment of distributions 10,221,698
Shares redeemed (82,551,608)
Net increase (decrease) $ (25,555,439)
CLASS B Shares sold $ 26,076,418
Reinvestment of distributions 1,407,504
Shares redeemed (14,568,680)
Net increase (decrease) $ 12,915,242
CLASS C Shares sold $ 10,752,375
Reinvestment of distributions 280,065
Shares redeemed (4,112,814)
Net increase (decrease) $ 6,919,626
INSTITUTIONAL CLASS Shares $ 1,286,178
sold
Reinvestment of distributions 93,765
Shares redeemed (1,423,625)
Net increase (decrease) $ (43,682)
</TABLE>
8. MERGER INFORMATION.
On May 25, 2000, Class A, Class T, Class B, Class C, and Institutional
Class of the fund acquired all of the assets and assumed all of the
liabilities of Fidelity Advisor Intermediate Municipal Income Fund
Class A, Class T, Class B, Class C, and Institutional Class,
respectively. Each acquisition was approved by the shareholders of
each class of Fidelity Advisor Intermediate Municipal Income Fund on
April 19, 2000. 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 Intermediate Municipal
Income Fund Class A was accomplished by an exchange of 314,140 shares
of Class A for the 360,900 shares then outstanding of Fidelity Advisor
Intermediate Municipal Income Fund Class A (each valued at $10.01).
Class T's acquisition of Fidelity Advisor Intermediate Municipal
Income Fund Class T was accomplished by an exchange of 3,316,008
shares of Class T for the 3,816,726 shares then outstanding of
Fidelity Advisor Intermediate Municipal Income Fund Class T (each
valued at $10.00). Class B's acquisition of Fidelity Advisor
Intermediate Municipal Income Fund Class B was accomplished by an
exchange of 776,254 shares of Class B for the 892,031 shares then
outstanding of Fidelity Advisor Intermediate Municipal Income Fund
Class B (each valued at $9.99). Class C's acquisition of Fidelity
Advisor Intermediate Municipal Income Fund Class C was accomplished by
an exchange of 114,599 shares of Class C for the 131,903 shares then
outstanding of Fidelity Advisor Intermediate Municipal Income Fund
Class C (each valued at $10.00). Institutional Class's acquisition of
Fidelity Advisor Intermediate Municipal Income Fund Institutional
Class was accomplished by an exchange of 420,609 shares of
Institutional Class for the 482,017 shares then outstanding of
Fidelity Advisor Intermediate Municipal Income Fund Institutional
Class (each valued at $10.00).
Fidelity Advisor Intermediate Municipal Income Fund's net assets,
including $1,412,949 of unrealized depreciation, were combined with
the fund for total net assets after the acquisition of $438,952,773.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Christine J. Thompson, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
HIMI-SANN-0600 103944
1.703468.102
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
HIGH YIELD
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 2000
(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 44 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 53 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A 0.87% -3.89% 50.93% 242.82%
FIDELITY ADV HIGH YIELD - CL -3.92% -8.45% 43.76% 226.54%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master II 0.25% -2.75% 44.85% 189.63%
High Current Yield Funds 1.03% -2.56% 40.76% 165.32%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Merrill Lynch High Yield Master II Index - a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. To measure how Class A's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 370 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL A -3.89% 8.58% 13.11%
FIDELITY ADV HIGH YIELD - CL -8.45% 7.53% 12.56%
A (INCL. 4.75% SALES CHARGE)
ML High Yield Master II -2.75% 7.69% 11.22%
High Current Yield Funds -2.56% 7.01% 10.18%
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
1990/04/30 9525.00 10000.00
1990/05/31 9844.91 10166.95
1990/06/30 10125.90 10425.14
1990/07/31 10361.48 10684.06
1990/08/31 10107.12 10195.40
1990/09/30 9851.60 9769.04
1990/10/31 9622.27 9489.77
1990/11/30 9922.70 9589.40
1990/12/31 10124.03 9735.10
1991/01/31 10356.95 9934.38
1991/02/28 10951.30 10796.22
1991/03/31 11362.14 11320.76
1991/04/30 11708.13 11722.14
1991/05/31 11832.84 11767.80
1991/06/30 12150.52 12027.77
1991/07/31 12589.45 12357.88
1991/08/31 12752.87 12639.01
1991/09/30 12925.07 12821.16
1991/10/31 13439.78 13256.24
1991/11/30 13594.93 13395.88
1991/12/31 13661.83 13548.45
1992/01/31 14288.08 14006.08
1992/02/29 14879.54 14356.15
1992/03/31 15301.31 14562.13
1992/04/30 15440.56 14637.61
1992/05/31 15609.02 14845.61
1992/06/30 15844.63 15025.17
1992/07/31 16130.32 15317.22
1992/08/31 16428.58 15512.30
1992/09/30 16604.53 15676.74
1992/10/31 16391.21 15470.76
1992/11/30 16570.31 15711.82
1992/12/31 16816.28 15911.82
1993/01/31 17265.77 16282.01
1993/02/28 17643.97 16573.25
1993/03/31 18053.37 16864.09
1993/04/30 18156.20 16979.81
1993/05/31 18403.13 17186.92
1993/06/30 18852.21 17521.39
1993/07/31 19099.73 17692.63
1993/08/31 19248.48 17859.10
1993/09/30 19285.15 17938.37
1993/10/31 19746.07 18270.50
1993/11/30 19889.14 18374.99
1993/12/31 20255.12 18568.21
1994/01/31 20837.11 18969.59
1994/02/28 20751.54 18837.79
1994/03/31 20118.91 18228.97
1994/04/30 19894.79 18002.21
1994/05/31 20018.30 17962.86
1994/06/30 19981.37 18044.96
1994/07/31 20058.70 18153.89
1994/08/31 20202.22 18297.82
1994/09/30 20304.90 18294.18
1994/10/31 20267.78 18342.42
1994/11/30 19943.57 18184.60
1994/12/31 19952.55 18376.20
1995/01/31 20124.12 18634.23
1995/02/28 20772.00 19231.50
1995/03/31 20958.98 19491.38
1995/04/30 21635.36 19985.21
1995/05/31 22120.09 20612.54
1995/06/30 22073.40 20751.13
1995/07/31 22617.00 21021.36
1995/08/31 22745.16 21131.66
1995/09/30 23018.88 21377.25
1995/10/31 23319.09 21557.94
1995/11/30 23445.51 21771.60
1995/12/31 23797.61 22136.38
1996/01/31 24357.54 22506.16
1996/02/29 24686.03 22574.93
1996/03/31 24517.39 22482.65
1996/04/30 24805.37 22514.16
1996/05/31 24991.94 22676.43
1996/06/30 25029.90 22766.77
1996/07/31 25033.44 22916.43
1996/08/31 25391.43 23195.96
1996/09/30 26232.24 23741.18
1996/10/31 26295.36 23947.25
1996/11/30 26609.51 24428.15
1996/12/31 26918.59 24631.22
1997/01/31 27181.76 24816.28
1997/02/28 27710.97 25197.78
1997/03/31 26969.14 24851.19
1997/04/30 27157.58 25169.82
1997/05/31 27957.88 25699.77
1997/06/30 28465.53 26096.96
1997/07/31 29414.32 26788.69
1997/08/31 29558.58 26756.45
1997/09/30 30600.84 27237.75
1997/10/31 30287.51 27376.83
1997/11/30 30569.18 27620.71
1997/12/31 30976.26 27898.86
1998/01/31 31807.49 28343.47
1998/02/28 32178.24 28458.31
1998/03/31 32824.45 28728.62
1998/04/30 32842.72 28852.01
1998/05/31 32614.00 29025.51
1998/06/30 32663.65 29175.41
1998/07/31 32924.25 29361.36
1998/08/31 29354.49 27879.22
1998/09/30 29488.42 27951.79
1998/10/31 28910.06 27348.62
1998/11/30 30930.14 28774.19
1998/12/31 30844.98 28722.64
1999/01/31 31894.14 29110.28
1999/02/28 31689.88 28912.22
1999/03/31 32640.53 29248.06
1999/04/30 33974.74 29783.19
1999/05/31 33141.89 29509.97
1999/06/30 33061.56 29436.83
1999/07/31 32879.40 29476.43
1999/08/31 32574.12 29164.99
1999/09/30 32241.10 29048.06
1999/10/31 32373.14 28890.40
1999/11/30 33024.38 29267.13
1999/12/31 33483.92 29443.78
2000/01/31 33152.26 29331.05
2000/02/29 33670.02 29393.76
2000/03/31 33197.07 28962.32
2000/04/28 32653.67 28962.72
IMATRL PRASUN SHR__CHT 20000430 20000526 131813 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class A on April 30,
1990, and the current 4.75% sales charge was paid. As the chart shows,
by April 30, 2000, the value of the investment would have grown to
$32,654 - a 226.54% 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 $28,963 - a 189.63% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996
Dividend returns 4.11% 10.58% 7.65% 9.54% 1.17%
Capital returns -3.24% 1.40% -12.20% 5.64% 2.41%
Total returns 0.87% 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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.96(cents) 46.38(cents) 93.55(cents) A
Annualized dividend rate 8.97% 8.31% 8.24%
30-day annualized yield 10.66% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.80 over the past one
month, $11.19 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. 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.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T 0.73% -4.05% 50.76% 242.45%
FIDELITY ADV HIGH YIELD - CL -2.80% -7.41% 45.49% 230.46%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master II 0.25% -2.75% 44.85% 189.63%
High Current Yield Funds 1.03% -2.56% 40.76% 165.32%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Merrill Lynch High Yield Master II Index - a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. To measure how Class T's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 370 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL T -4.05% 8.56% 13.10%
FIDELITY ADV HIGH YIELD - CL -7.41% 7.79% 12.70%
T (INCL. 3.50% SALES CHARGE)
ML High Yield Master II -2.75% 7.69% 11.22%
High Current Yield Funds -2.56% 7.01% 10.18%
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
1990/04/30 9650.00 10000.00
1990/05/31 9974.10 10166.95
1990/06/30 10258.78 10425.14
1990/07/31 10497.46 10684.06
1990/08/31 10239.76 10195.40
1990/09/30 9980.88 9769.04
1990/10/31 9748.54 9489.77
1990/11/30 10052.91 9589.40
1990/12/31 10256.90 9735.10
1991/01/31 10492.87 9934.38
1991/02/28 11095.02 10796.22
1991/03/31 11511.25 11320.76
1991/04/30 11861.78 11722.14
1991/05/31 11988.12 11767.80
1991/06/30 12309.97 12027.77
1991/07/31 12754.67 12357.88
1991/08/31 12920.23 12639.01
1991/09/30 13094.69 12821.16
1991/10/31 13616.15 13256.24
1991/11/30 13773.34 13395.88
1991/12/31 13841.12 13548.45
1992/01/31 14475.58 14006.08
1992/02/29 15074.81 14356.15
1992/03/31 15502.12 14562.13
1992/04/30 15643.19 14637.61
1992/05/31 15813.87 14845.61
1992/06/30 16052.57 15025.17
1992/07/31 16342.00 15317.22
1992/08/31 16644.18 15512.30
1992/09/30 16822.43 15676.74
1992/10/31 16606.32 15470.76
1992/11/30 16787.77 15711.82
1992/12/31 17036.97 15911.82
1993/01/31 17492.36 16282.01
1993/02/28 17875.52 16573.25
1993/03/31 18290.29 16864.09
1993/04/30 18394.47 16979.81
1993/05/31 18644.64 17186.92
1993/06/30 19099.61 17521.39
1993/07/31 19350.39 17692.63
1993/08/31 19501.08 17859.10
1993/09/30 19538.24 17938.37
1993/10/31 20005.21 18270.50
1993/11/30 20150.16 18374.99
1993/12/31 20520.94 18568.21
1994/01/31 21110.56 18969.59
1994/02/28 21023.87 18837.79
1994/03/31 20382.94 18228.97
1994/04/30 20155.88 18002.21
1994/05/31 20281.01 17962.86
1994/06/30 20243.59 18044.96
1994/07/31 20321.94 18153.89
1994/08/31 20467.34 18297.82
1994/09/30 20571.37 18294.18
1994/10/31 20533.76 18342.42
1994/11/30 20205.30 18184.60
1994/12/31 20214.40 18376.20
1995/01/31 20388.22 18634.23
1995/02/28 21044.60 19231.50
1995/03/31 21234.03 19491.38
1995/04/30 21919.29 19985.21
1995/05/31 22410.38 20612.54
1995/06/30 22363.08 20751.13
1995/07/31 22913.81 21021.36
1995/08/31 23043.65 21131.66
1995/09/30 23320.96 21377.25
1995/10/31 23625.11 21557.94
1995/11/30 23753.19 21771.60
1995/12/31 24109.91 22136.38
1996/01/31 24677.19 22506.16
1996/02/29 25010.00 22574.93
1996/03/31 24839.14 22482.65
1996/04/30 25130.90 22514.16
1996/05/31 25319.92 22676.43
1996/06/30 25358.38 22766.77
1996/07/31 25361.96 22916.43
1996/08/31 25724.65 23195.96
1996/09/30 26588.36 23741.18
1996/10/31 26677.34 23947.25
1996/11/30 26999.02 24428.15
1996/12/31 27307.60 24631.22
1997/01/31 27596.24 24816.28
1997/02/28 28111.94 25197.78
1997/03/31 27342.02 24851.19
1997/04/30 27559.82 25169.82
1997/05/31 28353.57 25699.77
1997/06/30 28869.34 26096.96
1997/07/31 29832.31 26788.69
1997/08/31 30002.35 26756.45
1997/09/30 31057.85 27237.75
1997/10/31 30734.78 27376.83
1997/11/30 31016.14 27620.71
1997/12/31 31427.69 27898.86
1998/01/31 32267.56 28343.47
1998/02/28 32643.02 28458.31
1998/03/31 33321.15 28728.62
1998/04/30 33336.67 28852.01
1998/05/31 33077.77 29025.51
1998/06/30 33125.05 29175.41
1998/07/31 33386.41 29361.36
1998/08/31 29766.44 27879.22
1998/09/30 29899.42 27951.79
1998/10/31 29338.61 27348.62
1998/11/30 31380.80 28774.19
1998/12/31 31288.63 28722.64
1999/01/31 32346.97 29110.28
1999/02/28 32136.17 28912.22
1999/03/31 33064.90 29248.06
1999/04/30 34442.39 29783.19
1999/05/31 33598.38 29509.97
1999/06/30 33514.59 29436.83
1999/07/31 33328.00 29476.43
1999/08/31 33016.46 29164.99
1999/09/30 32677.17 29048.06
1999/10/31 32808.48 28890.40
1999/11/30 33434.98 29267.13
1999/12/31 33926.63 29443.78
2000/01/31 33588.96 29331.05
2000/02/29 34109.64 29393.76
2000/03/31 33628.93 28962.32
2000/04/28 33046.35 28962.72
IMATRL PRASUN SHR__CHT 20000430 20000526 132419 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class T on April 30,
1990, and the current 3.50% sales charge was paid. As the chart shows,
by April 30, 2000, the value of the investment would have grown to
$33,046 - a 230.46% 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 $28,963 - a 189.63% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 4.05% 10.43% 7.57% 9.57% 9.56% 8.90%
Capital returns -3.32% 1.40% -12.11% 5.64% 3.36% 6.15%
Total returns 0.73% 11.83% -4.54% 15.21% 12.92% 15.05%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.87(cents) 45.85(cents) 92.56(cents) A
Annualized dividend rate 8.85% 8.20% 8.13%
30-day annualized yield 10.69% - -
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 $10.82 over the past one
month, $11.21 over the past six months and $11.38 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.
FIDELITY ADVISOR HIGH YIELD FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on June 30, 1994. Class B shares bear a 0.90% 12b-1 fee
(1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are
those of Class T, the original class of the fund, and reflect Class T
shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six month, past
one year, past five year and past 10 year total return figures are 5%,
5%, 2% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses during the periods shown, the past 10 year total
returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B 0.49% -4.62% 45.85% 228.13%
FIDELITY ADV HIGH YIELD - CL -4.35% -9.04% 43.98% 228.13%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II 0.25% -2.75% 44.85% 189.63%
High Current Yield Funds 1.03% -2.56% 40.76% 165.32%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Merrill Lynch High Yield Master II Index - a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. To measure how Class B's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 370 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL B -4.62% 7.84% 12.62%
FIDELITY ADV HIGH YIELD - CL -9.04% 7.56% 12.62%
B (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II -2.75% 7.69% 11.22%
High Current Yield Funds -2.56% 7.01% 10.18%
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
1990/04/30 10000.00 10000.00
1990/05/31 10335.86 10166.95
1990/06/30 10630.86 10425.14
1990/07/31 10878.20 10684.06
1990/08/31 10611.15 10195.40
1990/09/30 10342.88 9769.04
1990/10/31 10102.12 9489.77
1990/11/30 10417.53 9589.40
1990/12/31 10628.91 9735.10
1991/01/31 10873.44 9934.38
1991/02/28 11497.43 10796.22
1991/03/31 11928.76 11320.76
1991/04/30 12292.00 11722.14
1991/05/31 12422.92 11767.80
1991/06/30 12756.45 12027.77
1991/07/31 13217.27 12357.88
1991/08/31 13388.84 12639.01
1991/09/30 13569.63 12821.16
1991/10/31 14110.00 13256.24
1991/11/30 14272.89 13395.88
1991/12/31 14343.12 13548.45
1992/01/31 15000.61 14006.08
1992/02/29 15621.56 14356.15
1992/03/31 16064.37 14562.13
1992/04/30 16210.56 14637.61
1992/05/31 16387.43 14845.61
1992/06/30 16634.79 15025.17
1992/07/31 16934.72 15317.22
1992/08/31 17247.85 15512.30
1992/09/30 17432.57 15676.74
1992/10/31 17208.62 15470.76
1992/11/30 17396.65 15711.82
1992/12/31 17654.89 15911.82
1993/01/31 18126.80 16282.01
1993/02/28 18523.85 16573.25
1993/03/31 18953.67 16864.09
1993/04/30 19061.63 16979.81
1993/05/31 19320.87 17186.92
1993/06/30 19792.35 17521.39
1993/07/31 20052.21 17692.63
1993/08/31 20208.38 17859.10
1993/09/30 20246.88 17938.37
1993/10/31 20730.78 18270.50
1993/11/30 20880.99 18374.99
1993/12/31 21265.22 18568.21
1994/01/31 21876.23 18969.59
1994/02/28 21786.39 18837.79
1994/03/31 21122.22 18228.97
1994/04/30 20886.92 18002.21
1994/05/31 21016.59 17962.86
1994/06/30 20977.81 18044.96
1994/07/31 21023.78 18153.89
1994/08/31 21155.34 18297.82
1994/09/30 21246.39 18294.18
1994/10/31 21173.96 18342.42
1994/11/30 20839.92 18184.60
1994/12/31 20816.07 18376.20
1995/01/31 20981.93 18634.23
1995/02/28 21644.60 19231.50
1995/03/31 21826.16 19491.38
1995/04/30 22497.97 19985.21
1995/05/31 23007.62 20612.54
1995/06/30 22944.15 20751.13
1995/07/31 23475.68 21021.36
1995/08/31 23615.40 21131.66
1995/09/30 23866.21 21377.25
1995/10/31 24164.41 21557.94
1995/11/30 24261.63 21771.60
1995/12/31 24633.11 22136.38
1996/01/31 25177.92 22506.16
1996/02/29 25502.97 22574.93
1996/03/31 25313.60 22482.65
1996/04/30 25598.74 22514.16
1996/05/31 25799.95 22676.43
1996/06/30 25803.01 22766.77
1996/07/31 25813.16 22916.43
1996/08/31 26146.25 23195.96
1996/09/30 27011.70 23741.18
1996/10/31 27088.12 23947.25
1996/11/30 27379.19 24428.15
1996/12/31 27700.90 24631.22
1997/01/31 27979.94 24816.28
1997/02/28 28488.66 25197.78
1997/03/31 27691.03 24851.19
1997/04/30 27896.93 25169.82
1997/05/31 28663.54 25699.77
1997/06/30 29194.15 26096.96
1997/07/31 30153.44 26788.69
1997/08/31 30286.05 26756.45
1997/09/30 31338.35 27237.75
1997/10/31 30973.54 27376.83
1997/11/30 31268.00 27620.71
1997/12/31 31666.99 27898.86
1998/01/31 32498.69 28343.47
1998/02/28 32859.76 28458.31
1998/03/31 33501.21 28728.62
1998/04/30 33498.58 28852.01
1998/05/31 33244.13 29025.51
1998/06/30 33274.26 29175.41
1998/07/31 33519.48 29361.36
1998/08/31 29882.21 27879.22
1998/09/30 29974.48 27951.79
1998/10/31 29392.94 27348.62
1998/11/30 31430.82 28774.19
1998/12/31 31327.01 28722.64
1999/01/31 32346.31 29110.28
1999/02/28 32119.61 28912.22
1999/03/31 33067.63 29248.06
1999/04/30 34402.26 29783.19
1999/05/31 33564.63 29509.97
1999/06/30 33462.58 29436.83
1999/07/31 33228.53 29476.43
1999/08/31 32898.67 29164.99
1999/09/30 32541.19 29048.06
1999/10/31 32654.64 28890.40
1999/11/30 33292.32 29267.13
1999/12/31 33765.19 29443.78
2000/01/31 33409.83 29331.05
2000/02/29 33881.31 29393.76
2000/03/31 33412.82 28962.32
2000/04/28 32813.43 28962.72
IMATRL PRASUN SHR__CHT 20000430 20000526 134706 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class B on April 30,
1990. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $32,813 - a 228.13% 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 would have grown to $28,963 - a 189.63%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.74% 9.79% 6.98% 8.85% 8.82% 8.05%
Capital returns -3.25% 1.31% -12.08% 5.49% 3.28% 6.07%
Total returns 0.49% 11.10% -5.10% 14.34% 12.10% 14.12%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effects of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.27(cents) 42.16(cents) 85.06(cents) A
Annualized dividend rate 8.21% 7.57% 7.51%
30-day annualized yield 10.45% - -
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 $10.78 over the past one
month, $11.17 over the past six months, and $11.33 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.
FIDELITY ADVISOR HIGH YIELD FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class C shares
took place on November 3, 1997. Class C shares bear a 1.00% 12b-1 fee.
Returns between June 30, 1994 and November 3, 1997 are those of Class
B and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January
1, 1996). Returns prior to June 30, 1994 are those of Class T and
reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee
been reflected, returns between January 1, 1996 and November 3, 1997
and prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past six month, past
one year, past five year and past 10 year total return figures are 1%,
1%, 0% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses during the periods shown, the past 10 year total
returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C 0.44% -4.70% 45.33% 226.96%
FIDELITY ADV HIGH YIELD - CL -0.53% -5.59% 45.33% 226.96%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II 0.25% -2.75% 44.85% 189.63%
High Current Yield Funds 1.03% -2.56% 40.76% 165.32%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to those of the
Merrill Lynch High Yield Master II Index - a market value-weighted
index of all domestic and yankee high-yield bonds, including deferred
interest bonds and payment-in-kind securities. Issues included in the
index have maturities of one year or more and have a credit rating
lower than BBB-/Baa3, but are not in default. To measure how Class C's
performance stacked up against its peers, you can compare it to the
high current yield funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
six months average represents a peer group of 370 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - CL C -4.70% 7.76% 12.58%
FIDELITY ADV HIGH YIELD - CL -5.59% 7.76% 12.58%
C (INCL. CONTINGENT
DEFERRED SALES CHARGE)
ML High Yield Master II -2.75% 7.69% 11.22%
High Current Yield Funds -2.56% 7.01% 10.18%
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
1990/04/30 10000.00 10000.00
1990/05/31 10335.86 10166.95
1990/06/30 10630.86 10425.14
1990/07/31 10878.20 10684.06
1990/08/31 10611.15 10195.40
1990/09/30 10342.88 9769.04
1990/10/31 10102.12 9489.77
1990/11/30 10417.53 9589.40
1990/12/31 10628.91 9735.10
1991/01/31 10873.44 9934.38
1991/02/28 11497.43 10796.22
1991/03/31 11928.76 11320.76
1991/04/30 12292.00 11722.14
1991/05/31 12422.92 11767.80
1991/06/30 12756.45 12027.77
1991/07/31 13217.27 12357.88
1991/08/31 13388.84 12639.01
1991/09/30 13569.63 12821.16
1991/10/31 14110.00 13256.24
1991/11/30 14272.89 13395.88
1991/12/31 14343.12 13548.45
1992/01/31 15000.61 14006.08
1992/02/29 15621.56 14356.15
1992/03/31 16064.37 14562.13
1992/04/30 16210.56 14637.61
1992/05/31 16387.43 14845.61
1992/06/30 16634.79 15025.17
1992/07/31 16934.72 15317.22
1992/08/31 17247.85 15512.30
1992/09/30 17432.57 15676.74
1992/10/31 17208.62 15470.76
1992/11/30 17396.65 15711.82
1992/12/31 17654.89 15911.82
1993/01/31 18126.80 16282.01
1993/02/28 18523.85 16573.25
1993/03/31 18953.67 16864.09
1993/04/30 19061.63 16979.81
1993/05/31 19320.87 17186.92
1993/06/30 19792.35 17521.39
1993/07/31 20052.21 17692.63
1993/08/31 20208.38 17859.10
1993/09/30 20246.88 17938.37
1993/10/31 20730.78 18270.50
1993/11/30 20880.99 18374.99
1993/12/31 21265.22 18568.21
1994/01/31 21876.23 18969.59
1994/02/28 21786.39 18837.79
1994/03/31 21122.22 18228.97
1994/04/30 20886.92 18002.21
1994/05/31 21016.59 17962.86
1994/06/30 20977.81 18044.96
1994/07/31 21023.78 18153.89
1994/08/31 21155.34 18297.82
1994/09/30 21246.39 18294.18
1994/10/31 21173.96 18342.42
1994/11/30 20839.92 18184.60
1994/12/31 20816.07 18376.20
1995/01/31 20981.93 18634.23
1995/02/28 21644.60 19231.50
1995/03/31 21826.16 19491.38
1995/04/30 22497.97 19985.21
1995/05/31 23007.62 20612.54
1995/06/30 22944.15 20751.13
1995/07/31 23475.68 21021.36
1995/08/31 23615.40 21131.66
1995/09/30 23866.21 21377.25
1995/10/31 24164.41 21557.94
1995/11/30 24261.63 21771.60
1995/12/31 24633.11 22136.38
1996/01/31 25177.92 22506.16
1996/02/29 25502.97 22574.93
1996/03/31 25313.60 22482.65
1996/04/30 25598.74 22514.16
1996/05/31 25799.95 22676.43
1996/06/30 25803.01 22766.77
1996/07/31 25813.16 22916.43
1996/08/31 26146.25 23195.96
1996/09/30 27011.70 23741.18
1996/10/31 27088.12 23947.25
1996/11/30 27379.19 24428.15
1996/12/31 27700.90 24631.22
1997/01/31 27979.94 24816.28
1997/02/28 28488.66 25197.78
1997/03/31 27691.03 24851.19
1997/04/30 27896.93 25169.82
1997/05/31 28663.54 25699.77
1997/06/30 29194.15 26096.96
1997/07/31 30153.44 26788.69
1997/08/31 30286.05 26756.45
1997/09/30 31338.35 27237.75
1997/10/31 30973.54 27376.83
1997/11/30 31257.20 27620.71
1997/12/31 31624.36 27898.86
1998/01/31 32472.33 28343.47
1998/02/28 32806.90 28458.31
1998/03/31 33471.75 28728.62
1998/04/30 33438.33 28852.01
1998/05/31 33174.19 29025.51
1998/06/30 33201.29 29175.41
1998/07/31 33443.49 29361.36
1998/08/31 29792.98 27879.22
1998/09/30 29907.51 27951.79
1998/10/31 29326.82 27348.62
1998/11/30 31355.91 28774.19
1998/12/31 31254.85 28722.64
1999/01/31 32269.07 29110.28
1999/02/28 32069.24 28912.22
1999/03/31 32984.09 29248.06
1999/04/30 34309.26 29783.19
1999/05/31 33471.12 29509.97
1999/06/30 33366.99 29436.83
1999/07/31 33131.66 29476.43
1999/08/31 32800.32 29164.99
1999/09/30 32442.31 29048.06
1999/10/31 32552.77 28890.40
1999/11/30 33185.11 29267.13
1999/12/31 33653.42 29443.78
2000/01/31 33297.11 29331.05
2000/02/29 33763.21 29393.76
2000/03/31 33295.09 28962.32
2000/04/28 32695.58 28962.72
IMATRL PRASUN SHR__CHT 20000430 20000526 140125 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Class C on April 30,
1990. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $32,696 - a 226.96% 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 $28,963 - a 189.63%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
2000 1999 1998
Dividend returns 3.68% 9.69% 6.74%
Capital returns -3.24% 1.31% -12.47%
Total returns 0.44% 11.00% -5.73%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 7.16(cents) 41.64(cents) 83.96(cents) A
Annualized dividend rate 8.07% 7.46% 7.40%
30-day annualized yield 10.32% - -
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 $10.80 over the past one
month, $11.19 over the past six months and $11.35 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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
The high-yield bond market eked
out a positive return over the past
six months ending April 30, 2000,
despite facing numerous obstacles
along the way, including widening
credit spreads, competition from the
high-flying NASDAQ market and
negative outflows from high-yield
mutual funds. For the six-month
period ending April 30, 2000, the
Merrill Lynch High Yield Master II
Index - a broad measure of the
high-yield market - had a
marginal gain of 0.25%. A
short-lived rally in the fourth
quarter of 1999 was responsible
for the majority of this positive
performance, as investor sentiment
was geared toward more
aggressive investment
opportunities. Still, the high-yield
sector lost a good portion of its
inflows to the technology-rich
NASDAQ market's double- and
triple-digit gains during the period.
And when the NASDAQ faltered in
March and April of 2000, the
high-yield market tumbled as well.
Restrictive monetary policy by the
Federal Reserve Board, which hiked
interest rates three times during the
six-month period, also put a
damper on high-yield bond
performance, as did widening
credit spreads, or the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities. For the period,
the high-yield sector trailed the
performance of the overall U.S.
taxable bond market, as
measured by the Lehman Brothers
Aggregate Bond Index, which
gained 1.42% during the past six
months.
(photograph of Margaret Eagle)
An interview with Margaret Eagle, Portfolio Manager of Fidelity
Advisor High Yield Fund
Q. HOW DID THE FUND PERFORM, MARGARET?
A. For the six-month period that ended April 30, 2000, the fund's
Class A, Class T, Class B and Class C shares provided total returns of
0.87%, 0.73%, 0.49% and 0.44%, respectively. To get a sense of how the
fund did relative to its competitors, the high current yield funds
average returned 1.03% for the same six-month period, according to
Lipper Inc. The Merrill Lynch High Yield Master II Index returned
0.25%. For the 12-month period that ended April 30, 2000, the fund's
Class A, Class T, Class B and Class C shares returned -3.89%, -4.05%,
-4.62% and -4.70%, respectively. That compared to the -2.56% return
for the high current yield funds average and the -2.75% return of the
Merrill Lynch index.
Q. WHY DID THE FUND LAG ITS LIPPER PEER GROUP WHILE BEATING THE
MERRILL LYNCH INDEX DURING THE PAST SIX MONTHS?
A. Unfortunately, a few of the fund's holdings had a fairly tough go
of it during the past six months and detracted from the fund's
performance relative to its peers. Supermarket chains Jitney Jungle
and Pathmark were two of the biggest disappointments. The business
prospects for Jitney Jungle continued to deteriorate, while Pathmark
suffered when a proposed acquisition of the company fell through.
Movie theater chains Regal Cinema and AMC performed poorly in response
to perceptions that the industry was overbuilt. Finally, holdings in
Allied Waste suffered in sympathy with the woes of its chief
competitor, even though Allied didn't experience similar problems.
What helped the fund outpace the Merrill Lynch index, on the other
hand, was its holdings in cable and telecommunications companies.
Q. WHAT WAS TROUBLING THE HIGH-YIELD MARKET?
A. There were a number of factors. First, the technical backdrop was
not very favorable. By that I mean that the high-yield market didn't
attract a lot of new investment at a time when supply was pretty
heavy. Although new supply has abated somewhat toward the end of the
period, it still exceeded rather tepid demand. Rising interest rates
also were a concern. Although the high-yield market traditionally is
not as sensitive to rising rates as other fixed-income investments,
this time climbing rates were enough to curtail investor interest in
high-yield securities. Those technical factors overwhelmed the more
fundamental positives of a strong economy and a seemingly abating
default rate among high-yield bonds.
Q. WHAT FUELED THE RELATIVELY STRONG PERFORMANCE OF THE CABLE AND
TELECOM HOLDINGS?
A. Technological advancements, the introduction of more appealing
products, continued strong demand, and a wave of merger and
acquisition activity were some of the primary factors behind the
strong performance of the cable and telecom sectors. Our stock and
bond holdings in cable company EchoStar, for example, were driven
higher in response to strong subscriber growth, the addition of new
channels and the company's new Internet service. Similar developments
boosted other European cable holdings such as NTL. The fund also
benefited from cable holdings Falcon and Golden Sky, both of which
were the target of acquisitions during the period. Being acquired also
helped some of our telecom holdings, namely Splitrock, Concentric, IXC
and Esat Telecom. Direct satellite broadcast company WinStar, which
offered to buy back its debt at a very attractive level, was another
strong performer.
Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST SIX
MONTHS?
A. To help mitigate the effects of rising interest rates, I recently
began to reduce the fund's stake in securities with a credit quality
rating higher than B, because they tend to be the most sensitive to
interest-rate changes. At the same time, I reduced the fund's exposure
to the lowest-quality tiers in order to maintain the overall credit
quality of the fund.
Q. WHAT'S YOUR OUTLOOK?
A. From a valuation standpoint, high-yield bonds look attractive when
viewed from a historical perspective. Spreads on high-yield bonds -
the amount of yield investors demanded over Treasury bond yields - are
quite wide. In fact, they're as wide as they've been since the autumn
of 1998 when investors were concerned that global economic and
financial market difficulties would spell trouble for the high-yield
market. To the extent that investors embrace the value that high-yield
bonds offer and as long as the economy is on track to achieve a soft
landing, they could perform well.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a combination of
a high level of income and
potential for capital gains
START DATE: January 5, 1987
SIZE: as of April 30, 2000,
more than $3.9 billion
MANAGER: Margaret Eagle,
since 1987; joined Fidelity
in 1980
MARGARET EAGLE ON THE
PROSPECTS FOR
TELECOMMUNICATIONS
COMPANIES:
"In my view, telecommunications
companies offer some of the best
opportunities available in the
high-yield market today. In
addition to building out the
infrastructure that will define
communications over the next
decade, one of the telecom
sector's most exciting areas of
growth is providing Internet services
such as Web-hosting for commercial
applications.
"While recent stock market
volatility has raised concerns
about these companies' ability to
fund their growth plans, I
generally emphasize
telecommunications companies
that have sufficient funds to
sustain their build-out plans until
2001. Many of these companies took
advantage of strong stock market
conditions in early 2000 to raise
additional equity. At the end of the
period, telecommunications
companies made up
approximately 34% of the fund's
net assets, which is a reflection of
my conviction about the strength
of the telecom sector."
NOTE TO SHAREHOLDERS:
Effective June 1, 2000, Tom Soviero
became Portfolio Manager of
Fidelity Advisor High Yield Fund.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 2000
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
WinStar Communications, Inc. 3.3 2.3
United Pan-Europe 2.5 1.2
Communications NV
Intermedia Communications, Inc. 2.5 2.0
EchoStar Communications Corp. 2.4 1.6
CSC Holdings, Inc. 2.1 2.0
12.8 9.1
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Media & Leisure 29.6 33.1
Utilities 28.9 26.8
Basic Industries 8.3 8.0
Technology 7.6 3.8
Energy 4.2 5.4
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.5 0.0
Baa 0.5 0.6
Ba 5.1 8.0
B 55.2 53.1
Caa, Ca, C 13.5 13.7
D 0.2 0.0
Not Rated 5.6 5.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 2000 AND OCTOBER 31, 1999
ACCOUNT FOR 5.6% AND 5.4 % RESPECTIVELY OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Nonconvertible Bonds 77.4% Nonconvertible Bonds 77.6%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 11.2% Stocks 12.4%
Common Stocks 4.7% Common Stocks 3.9%
Other Investments 1.3% Other Investments 1.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.4% Net Other Assets 4.7%
* FOREIGN INVESTMENTS 12.6% ** FOREIGN INVESTMENTS 8.8%
Row: 1, Col: 1, Value: 77.40000000000001 Row: 1, Col: 1, Value: 77.59999999999999
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 11.2 Row: 1, Col: 3, Value: 12.4
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.7 Row: 1, Col: 5, Value: 3.9
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.3 Row: 1, Col: 7, Value: 1.4
Row: 1, Col: 8, Value: 5.4 Row: 1, Col: 8, Value: 4.7
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 78.1%
MOODY'S RATINGS (UNAUDITED) (B) 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 - 0.4%
MEDICAL FACILITIES MANAGEMENT
- 0.4%
Total Renal Care Holdings,
Inc.:
7% 5/15/09 B1 2,000 1,100
7% 5/15/09 (e) B3 24,020 13,451
14,551
MEDIA & LEISURE - 0.0%
RESTAURANTS - 0.0%
CKE Restaurants, Inc. 4.25% B1 5,740 2,332
3/15/04
TOTAL CONVERTIBLE BONDS 27,551
NONCONVERTIBLE BONDS - 77.4%
BASIC INDUSTRIES - 8.2%
CHEMICALS & PLASTICS - 4.6%
Avecia Group PLC 11% 7/1/09 B2 28,890 29,251
Huntsman Corp. 9.5% 7/1/07 (e) B2 37,590 34,207
Huntsman ICI Chemicals LLC B2 23,790 23,731
10.125% 7/1/09
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 7,905 7,786
9.875% 5/1/07 Ba3 32,710 32,219
10.875% 5/1/09 B2 42,730 42,089
Sterling Chemicals, Inc.:
11.25% 4/1/07 Caa3 8,180 6,871
11.75% 8/15/06 Caa3 5,035 4,406
180,560
PACKAGING & CONTAINERS - 1.6%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 15,365
9.75% 6/15/07 Caa1 6,340 5,658
9.875% 2/15/08 Caa2 28,165 21,969
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS -
CONTINUED
Packaging Corp. of America B2 $ 19,740 $ 19,839
9.625% 4/1/09
Sweetheart Cup, Inc. 10.5% Caa1 2,525 2,310
9/1/03
65,141
PAPER & FOREST PRODUCTS - 2.0%
APP China Group Ltd. 14% B3 5,575 4,516
3/15/10 unit (e)
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 370 207
12% 3/15/04 B3 7,420 4,155
Container Corp. of America
gtd.:
9.75% 4/1/03 B2 3,490 3,507
11.25% 5/1/04 B2 4,550 4,641
Millar Western Forest B3 17,375 16,767
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 6,750 6,868
yankee 10.625% 4/15/05 Caa1 18,190 17,190
Stone Container Corp. 12.58% B2 18,740 19,677
8/1/16 (f)
77,528
TOTAL BASIC INDUSTRIES 323,229
CONSTRUCTION & REAL ESTATE -
0.8%
CONSTRUCTION - 0.2%
Blount, Inc. 13% 8/1/09 B3 7,160 7,035
REAL ESTATE INVESTMENT TRUSTS
- 0.6%
Ocwen Asset Investment Corp. - 30,010 24,608
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 31,643
ESTATE
DURABLES - 0.7%
HOME FURNISHINGS - 0.6%
Sealy Corp., Inc. 10% - 13,392 12,723
12/18/08 pay-in-kind (h)
Sealy Mattress Co.:
0% 12/15/07 (d) B3 6,930 4,851
9.875% 12/15/07 B3 5,550 5,273
22,847
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.1%
Pillowtex Corp.:
9% 12/15/07 Ca $ 5,340 $ 2,083
10% 11/15/06 Ca 4,370 1,748
3,831
TOTAL DURABLES 26,678
ENERGY - 3.8%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 13,626
9.625% 5/15/08
ENERGY SERVICES - 1.5%
Parker Drilling Co. 9.75% B1 3,511 3,300
11/15/06
R&B Falcon Corp.:
6.95% 4/15/08 Ba3 320 266
9.5% 12/15/08 Ba3 25,820 25,045
12.25% 3/15/06 Ba3 16,570 18,061
RBF Finance Co. 11.375% Ba3 10,650 11,342
3/15/09
58,014
OIL & GAS - 2.0%
Chesapeake Energy Corp. B3 15,765 15,056
9.625% 5/1/05
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 10,660 9,861
9.25% 4/1/07 B2 2,940 2,837
Lomak Petroleum, Inc. 8.75% B3 8,777 7,504
1/15/07
Plains Resources, Inc.:
Series B 10.25% 3/15/06 B2 2,780 2,697
10.25% 3/15/06 (e) B2 9,340 9,153
Swift Energy Co. 10.25% 8/1/09 B2 12,560 12,246
Tesoro Petroleum Corp. 9% B1 16,330 15,350
7/1/08
Vintage Petroleum, Inc.:
9% 12/15/05 B1 1,620 1,596
9.75% 6/30/09 B1 3,590 3,626
79,926
TOTAL ENERGY 151,566
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 3.2%
CREDIT & OTHER FINANCE - 3.2%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 27,115 $ 18,709
10% 3/15/04 Caa3 3,800 2,470
APP International Finance Co. B3 7,235 5,860
11.75% 10/1/05
Arch Escrow Corp. 13.75% B3 26,120 21,941
4/15/08
Denbury Management, Inc. 9% B3 27,120 23,730
3/1/08
Dobson/Sygnet Communications - 8,070 8,393
Co. 12.25% 12/15/08
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 8,420
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 6,670 5,003
7.6% 8/1/07 Ba2 6,970 4,182
Ocwen Capital Trust 10.875% B2 4,780 2,964
8/1/27
Stone Container Finance Co. B2 8,330 8,663
11.5% 8/15/06 (e)
Venetian Casino Resort Caa1 15,770 15,376
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
125,711
HEALTH - 2.3%
DRUGS & PHARMACEUTICALS - 0.4%
Global Health Sciences, Inc. Caa1 41,010 14,354
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- 0.2%
Graham-Field Health Products, C 13,670 3,144
Inc. 9.75% 8/15/07 (c)
PharMerica, Inc. 8.375% 4/1/08 B3 8,500 5,100
8,244
MEDICAL FACILITIES MANAGEMENT
- 1.7%
Everest Healthcare Services, B3 3,740 3,118
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 5,209
4/15/08
Hanger Orthopedic Group, Inc. B3 3,390 2,661
11.25% 6/15/09
Harborside Healthcare Corp. B3 24,000 5,280
0% 8/1/08 (d)
Oxford Health Plans, Inc. 11% Caa1 29,600 30,192
5/15/05
Unilab Corp. 12.75% 10/1/09 B3 20,624 20,572
67,032
TOTAL HEALTH 89,630
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.2%
ELECTRICAL EQUIPMENT - 0.3%
L-3 Communications Corp.:
8% 8/1/08 B2 $ 10,600 $ 9,328
10.375% 5/1/07 B2 2,600 2,613
11,941
POLLUTION CONTROL - 1.9%
Allied Waste North America, B2 109,600 75,076
Inc. 10% 8/1/09
TOTAL INDUSTRIAL MACHINERY & 87,017
EQUIPMENT
MEDIA & LEISURE - 21.1%
BROADCASTING - 17.7%
ACME Television LLC/ACME B3 11,102 10,158
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp. B1 36,755 35,744
9.875% 3/1/07
Ascent Entertainment Group, Ba1 11,280 9,024
Inc. 0% 12/15/04 (d)
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (d) B2 9,910 8,770
9.25% 7/1/07 B1 3,230 3,214
Chancellor Media Corp. 9% B1 17,475 17,693
10/1/08
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 1,810 1,720
10.25% 7/1/07 B3 10,990 10,990
Classic Cable, Inc.:
9.375% 8/1/09 B3 3,995 3,745
10.5% 3/1/10 (e) B3 8,750 8,597
Comcast UK Cable Partners B2 5,370 5,102
Ltd. 0% 11/15/07 (d)
Diamond Cable Communications B3 34,145 32,011
PLC yankee 0% 12/15/05 (d)
EchoStar DBS Corp. 9.375% B2 56,555 54,434
2/1/09
Fox Family Worldwide, Inc. 0% B1 10,210 6,126
11/1/07 (d)
FrontierVision Holdings B1 36,450 31,803
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Holdings Caa1 22,460 19,596
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(d)
Golden Sky DBS, Inc. 0% Caa1 24,025 15,977
3/1/07 (d)
Impsat Fiber Networks, Inc. B3 30,195 28,081
13.75% 2/15/05 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
International Cabletel, Inc. B3 $ 51,577 $ 47,967
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 17,035 10,562
10/15/07 (d)
NorthPoint Communication Caa1 37,905 33,735
Holdings, Inc. 12.875%
2/15/10 (e)
NTL Communications Corp.:
0% 10/1/08 (d) B3 30,780 20,238
11.5% 10/1/08 B3 35,980 36,340
NTL, Inc. 10% 2/15/07 B3 20,160 19,454
Olympus Communications B1 5,820 5,849
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp.:
9.625% 10/15/05 B3 2,770 2,715
9.75% 12/1/06 B3 7,495 7,345
12.5% 8/1/17 B3 12,450 12,948
Satelites Mexicanos SA de CV:
10.03% 6/30/04 (e)(f) B1 13,115 12,263
10.125% 11/1/04 B3 34,710 25,685
Telemundo Holdings, Inc. 0% Caa1 3,815 2,442
8/15/08 (d)
Telewest Communications PLC B1 5,360 5,414
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 8,843
0% 10/1/07 (d) B1 29,550 27,334
United International B3 25,735 17,307
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe
Communications NV:
0% 8/1/09 (d) B2 2,860 1,430
0% 11/1/09 (d)(e) B2 52,150 25,554
10.875% 8/1/09 B2 23,150 21,067
11.25% 11/1/09 (e) B2 31,010 28,529
11.25% 2/1/10 (e) B2 12,775 11,753
11.5% 2/1/10 (e) B2 17,030 15,753
703,312
ENTERTAINMENT - 1.5%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 16,990 9,345
9.5% 2/1/11 B3 6,690 3,613
Cinemark USA, Inc. 8.5% 8/1/08 B2 3,390 2,034
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 4,698
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Livent, Inc. 9.375% 10/15/04 - $ 11,100 $ 2,220
(c)
Premier Parks, Inc. 9.25% B3 13,110 12,323
4/1/06
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 8,770 3,157
9.5% 6/1/08 Caa2 28,710 10,910
Waterford Gaming B1 10,564 10,036
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (e)
58,336
LODGING & GAMING - 1.7%
Florida Panthers Holdings, B2 17,210 15,661
Inc. 9.875% 4/15/09
Horseshoe Gaming LLC 8.625% B2 37,840 35,475
5/15/09
Mohegan Tribal Gaming Ba3 3,630 3,449
Authority 8.75% 1/1/09
Signature Resorts, Inc. 9.75% Caa2 22,680 6,804
10/1/07
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 2,800 2,520
8.625% 12/15/07 Ba3 3,690 3,284
67,193
RESTAURANTS - 0.2%
NE Restaurant, Inc. 10.75% B3 8,990 7,012
7/15/08
TOTAL MEDIA & LEISURE 835,853
NONDURABLES - 0.9%
FOODS - 0.4%
Del Monte Corp. 12.25% 4/15/07 B3 6,355 6,641
Del Monte Foods Co. 0% Caa1 7,584 5,650
12/15/07 (d)
Gorges/Quik-To-Fix Foods, Caa1 18,290 5,487
Inc. 11.5% 12/1/06
17,778
HOUSEHOLD PRODUCTS - 0.5%
AKI Holding Corp. 0% 7/1/09 Caa1 17,930 8,248
(d)
AKI, Inc. 10.5% 7/1/08 B2 13,150 11,046
19,294
TOTAL NONDURABLES 37,072
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - 1.0%
GENERAL MERCHANDISE STORES -
0.2%
Kmart Corp. 7.95% 2/1/23 Baa3 $ 8,850 $ 7,213
GROCERY STORES - 0.8%
Jitney-Jungle Stores of C 70,419 704
America, Inc. 10.375%
9/15/07 (c)
Pathmark Stores, Inc.:
9.625% 5/1/03 (c) Caa3 21,250 15,088
11.625% 6/15/02 Ca 35,245 9,869
12.625% 6/15/02 Ca 20,260 5,673
31,334
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
U.S. Office Products Co. Ca 4,745 1,471
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 40,018
SERVICES - 1.7%
LEASING & RENTAL - 0.0%
Anthony Crane Rentals B3 2,250 1,598
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
PRINTING - 0.7%
Sullivan Graphics, Inc. Caa1 15,420 15,574
12.75% 8/1/05
World Color Press, Inc. Baa3 11,330 10,197
8.375% 11/15/08
25,771
SERVICES - 1.0%
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 1,654
Iron Mountain, Inc. 8.75% B2 6,990 6,239
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 5,571
SITEL Corp. 9.25% 3/15/06 B3 17,150 15,778
Young American Corp. 11.625% Caa1 15,920 11,661
2/15/06
40,903
TOTAL SERVICES 68,272
TECHNOLOGY - 6.9%
COMPUTER SERVICES & SOFTWARE
- 5.0%
Colo.com 13.875% 3/15/10 unit - 18,640 19,013
(e)
Concentric Network Corp. B- 27,280 28,917
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 32,560 20,024
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Covad Communications Group,
Inc.: - continued
12% 2/15/10 (e) B3 $ 8,245 $ 7,812
12.5% 2/15/09 B3 25,410 24,711
Exodus Communications, Inc. B- 24,725 24,725
10.75% 12/15/09
Federal Data Corp. 10.125% B3 4,270 2,776
8/1/05
PSINet, Inc.:
10% 2/15/05 B3 1,375 1,210
10.5% 12/1/06 B3 39,230 34,915
11% 8/1/09 B3 35,065 31,383
Verio, Inc. 11.25% 12/1/08 B3 4,050 4,010
199,496
COMPUTERS & OFFICE EQUIPMENT
- 0.5%
Globix Corp. 12.5% 2/1/10 (e) - 22,630 19,801
ELECTRONIC INSTRUMENTS - 0.9%
Fisher Scientific B3 21,815 20,070
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 15,185 13,932
Co. LLC 9.75% 5/15/08
34,002
ELECTRONICS - 0.5%
Details, Inc. 10% 11/15/05 B3 3,555 3,271
Intersil Corp. 13.25% 8/15/09 B3 11,445 12,933
Stellex Industries, Inc. 9.5% B3 3,750 1,875
11/1/07
18,079
TOTAL TECHNOLOGY 271,378
TRANSPORTATION - 0.2%
RAILROADS - 0.1%
TFM SA de CV 10.25% 6/15/07 B2 4,610 4,011
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,113
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 9,124
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - 24.4%
CELLULAR - 8.8%
Arch Communications Group, B3 $ 3,825 $ 3,060
Inc. 12.75% 7/1/07
Clearnet Communications, Inc. B3 7,240 4,208
0% 5/1/09 (d)
ESAT Holdings Ltd. 0% 2/1/07 Aa1 15,520 14,317
(d)
ICO Global Communications D 14,125 8,616
Holdings Ltd. 15% 8/1/05
unit (c)
Intercel, Inc. 0% 2/1/06 (d) B2 5,190 4,762
Leap Wireless International, Caa2 18,260 17,164
Inc. 12.5% 4/15/10 unit (e)
McCaw International Ltd. 0% Caa1 47,100 34,619
4/15/07 (d)
Metrocall, Inc.:
9.75% 11/1/07 B3 2,170 1,530
10.375% 10/1/07 B3 5,335 3,895
11% 9/15/08 B3 2,155 1,595
Microcell Telecommunications,
Inc.:
0% 6/1/06 (d) B3 6,395 5,756
0% 6/1/09 (d) B3 8,385 5,220
Millicom International Caa1 20,340 17,187
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 9/15/07 (d) B1 21,280 15,960
12% 11/1/08 B1 22,320 23,882
Nextel International, Inc. 0% Caa1 1,255 797
4/15/08 (d)
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B2 5,910 6,265
11.5% 9/15/09 (e) B2 8,050 8,614
11.625% 8/15/06 B2 2,510 2,648
Orbital Imaging Corp. 11.625% CCC+ 16,476 7,249
3/1/05
PageMart Nationwide, Inc. 15% B3 10,235 10,133
2/1/05
Paging Network, Inc.:
8.875% 2/1/06 Caa3 1,695 924
10% 10/15/08 (c) Caa3 17,995 9,807
10.125% 8/1/07 (c) Caa3 16,510 8,998
ProNet, Inc. 11.875% 6/15/05 B3 5,825 5,126
Rogers Cantel, Inc. 8.8% Ba2 10,630 10,471
10/1/07
Rogers Communications, Inc. Ba3 9,700 9,409
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 35,670 23,364
(d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Tritel PCS, Inc. 0% 5/15/09 B3 $ 50,540 $ 32,977
(d)
Triton PCS, Inc. 0% 5/1/08 (d) B3 16,300 11,614
US Unwired, Inc. 0% 11/1/09 Caa1 23,625 13,289
(d)(e)
USA Mobile Communication, B3 13,915 11,132
Inc. II 9.5% 2/1/04
Voicestream Wireless B2 16,310 16,473
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(e)
351,061
TELEPHONE SERVICES - 15.6%
360networks, Inc. 13% 5/1/08 B3 31,970 31,490
(e)
Allegiance Telecom, Inc.:
0% 2/15/08 (d) B3 16,681 11,635
12.875% 5/15/08 B3 19,580 21,146
e.spire Communications, Inc. - 16,890 9,796
13.75% 7/15/07
Esat Telecom Group PLC:
0% 2/1/07 (d) Aa1 7,530 6,946
11.875% 12/1/08 Caa1 4,680 5,476
FirstWorld Communications, - 22,465 9,772
Inc. 0% 4/15/08 (d)
Focal Communications Corp. B3 5,775 5,789
11.875% 1/15/10 (e)
Global Crossing Holdings Ltd. Ba2 21,190 20,554
9.5% 11/15/09 (e)
Globenet Communication Group Caa1 30,660 30,813
Ltd. 13% 7/15/07
GST Equipment Funding, Inc. - 12,810 7,046
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 12,114
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 44,455 20,005
Hermes Europe Railtel BV B3 20,320 17,983
11.5% 8/15/07
Hyperion Telecommunications,
Inc.:
0% 4/15/03 (d) B3 9,665 8,940
12% 11/1/07 Caa1 1,690 1,711
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 13,540 12,795
0% 5/1/06 (d) B3 14,265 11,448
ICG Services, Inc.:
0% 2/15/08 (d) B3 86,370 44,481
0% 5/1/08 (d) B3 4,670 2,312
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Intermedia Communications,
Inc.:
0% 5/15/06 (d) B2 $ 2,000 $ 1,880
0% 7/15/07 (d) B2 20,880 15,817
0% 3/1/09 (d) B3 17,000 9,903
8.6% 6/1/08 B2 11,320 10,358
KMC Telecom Holdings, Inc.:
0% 2/15/08 (d) Caa2 28,410 14,205
13.5% 5/15/09 Caa2 10,070 9,164
Logix Communications - 13,108 5,243
Enterprises, Inc. 12.25%
6/15/08
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 24,497 23,395
10% 12/15/09 B2 9,740 9,302
Netia Holdings BV 10.25% B3 2,955 2,512
11/1/07
NEXTLINK Communications LLC B2 28,040 29,021
12.5% 4/15/06
NEXTLINK Communications, Inc. B2 10,590 10,378
10.75% 6/1/09
NorthEast Optic Network, Inc. - 2,305 2,224
12.75% 8/15/08
Ono Finance PLC 13% 5/1/09 Caa1 9,975 10,025
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 16,270 8,135
12.75% 4/15/09 B3 16,860 14,331
Splitrock Services, Inc. - 22,500 23,794
11.75% 7/15/08
Viatel, Inc. 11.25% 4/15/08 B3 13,290 11,695
WinStar Communications, Inc.:
0% 4/15/10 (d)(e) B3 33,138 14,995
12.5% 4/15/08 (e) B3 22,276 21,775
12.75% 4/15/10 (e) B3 70,622 67,267
Worldwide Fiber, Inc. 12% B3 10,205 9,491
8/1/09
617,162
TOTAL UTILITIES 968,223
TOTAL NONCONVERTIBLE BONDS 3,065,414
TOTAL CORPORATE BONDS 3,092,965
(Cost $3,561,085)
ASSET-BACKED SECURITIES - 0.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Airplanes pass through trust Ba2 $ 18,188 $ 14,551
10.875% 3/15/19 (Cost
$19,159)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,563 1,661
12.5%, 11/1/08 (h)
First Chicago/Lennar Trust I - 10,700 7,831
Series 1997-CHL1 Class E,
8.1256% 4/1/39 (f)
Resolution Trust Corp. Series Baa3 3,032 2,456
1991-M2 Class A3, 7.3307%
9/25/20 (f)
Structured Asset Securities
Corp.:
Series 1995-C1:
Class E, 7.375% 9/25/24 (e) BB 4,000 3,653
Class F, 7.375% 9/25/24 (e) - 2,500 1,948
Series 1996-CFL Class G, B+ 9,260 8,074
7.75% 2/25/28 (e)
TOTAL COMMERCIAL MORTGAGE 25,623
SECURITIES
(Cost $24,440)
</TABLE>
COMMON STOCKS - 4.7%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 3 287
Ltd. (g)
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 2,627
A (a)
2,628
TOTAL BASIC INDUSTRIES 2,915
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 6
Inc. warrants 5/1/02 (a)(e)
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Arena Brands Holdings Corp. 42,253 1,056
Class B
ENERGY - 0.0%
OIL & GAS - 0.0%
Plains Resources, Inc. (a) 70,500 1,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. (a) 118,000 $ 103
SAVINGS & LOANS - 0.0%
Ocwen Financial Corp. (a) 116,760 847
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(e) 900 79
TOTAL FINANCE 1,029
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- 0.1%
Oxford Health Plans, Inc. (a) 180,000 3,420
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 407,000 2,493
(a)
MEDIA & LEISURE - 2.9%
BROADCASTING - 2.9%
Classic Communications, Inc. 28,500 306
(a)(e)
CS Wireless Systems, Inc. 439 0
(a)(e)
EchoStar Communications Corp. 1,457,296 92,798
Class A (a)
NTL, Inc. (a) 122,813 9,395
NTL, Inc. warrants 10/14/08 53,424 3,099
(a)
Pegasus Communications Corp. 6,509 6,932
unit
Telewest Communications PLC 16,363 1,023
sponsored ADR (a)
UIH Australia/Pacific, Inc. 19,690 394
warrants 5/15/06 (a)
113,947
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 1
LODGING & GAMING - 0.0%
Sunterra Corp. (a) 275,500 568
TOTAL MEDIA & LEISURE 114,516
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Kroger Co. (a) 59,400 1,103
TECHNOLOGY - 0.5%
COMPUTER SERVICES & SOFTWARE
- 0.3%
Concentric Network Corp. (a) 102,600 4,463
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Concentric Network Corp. 8,680 $ 3,741
warrants 12/15/07 (a)(e)
DecisionOne Corp. 63,872 1
DecisionOne Corp.:
warrants 4/18/07 36,096 0
warrants 4/18/07 62,195 0
warrants 4/18/07 36,890 0
PSINet, Inc. (a) 200,000 4,638
12,843
ELECTRONICS - 0.2%
Intersil Holding Corp. 16,220 7,299
warrants 8/15/09 (a)(e)
TOTAL TECHNOLOGY 20,142
UTILITIES - 1.0%
CELLULAR - 0.1%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 78
.47) (a)
warrants 1/15/07 (CV ratio 18,480 111
.6) (a)
McCaw International Ltd. 66,290 166
warrants 4/16/07 (a)(e)
Orbital Imaging Corp. 5,486 27
warrants 3/1/05 (a)(e)
Powertel, Inc. warrants 85,408 3,075
2/1/06 (a)
3,457
TELEPHONE SERVICES - 0.9%
Adelphia Business Solution, 87,200 3,052
Inc. Class A (a)
FirstWorld Communications, 21,135 2,114
Inc. warrants 4/15/08 (a)(e)
GST Telecommunications, Inc. 356,900 1,205
(a)
Intermedia Communications, 2,500 378
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(e)
McLeodUSA, Inc. Class A (a) 404,950 10,124
Metromedia Fiber Network, 300,000 9,263
Inc. Class A (a)
MGC Communications, Inc. 28,787 1,411
(a)(e)
Ono Finance PLC rights 850 128
5/31/09 (a)(e)
RSL Communications Ltd./RSL 25,710 1,337
Communications PLC warrants
11/15/06 (a)(e)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Versatel Telecom 7,060 $ 3,530
International NV warrants
5/15/08 (a)(e)
Viatel, Inc. (a) 34,546 1,321
33,958
TOTAL UTILITIES 37,415
TOTAL COMMON STOCKS 185,095
(Cost $103,770)
PREFERRED STOCKS - 10.5%
CONVERTIBLE PREFERRED STOCKS
- 0.4%
ENERGY - 0.4%
OIL & GAS - 0.4%
Chesapeake Energy Corp. $3.50 297,500 14,801
(a)
NONCONVERTIBLE PREFERRED
STOCKS - 10.1%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- 0.3%
California Federal Preferred 533,897 11,345
Capital Corp. $2.2812
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 69
Series 1
FINANCE - 0.2%
INSURANCE - 0.2%
American Annuity Group 10,340 8,531
Capital Trust II 8.875%
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT
- 0.3%
Fresenius Medical Care 9,847 9,404
Capital Trust 9%
MEDIA & LEISURE - 5.6%
BROADCASTING - 4.7%
Adelphia Communications Corp. 228,536 24,225
$13.00
Benedek Communications Corp. 11,712 8,198
11.5% pay-in-kind
Citadel Broadcasting Co. 85,567 9,198
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 612,372 64,452
Series H, 11.75% pay-in-kind 196,927 20,923
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Granite Broadcasting Corp. 21,935 $ 19,083
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 36,652 37,752
Pegasus Communications Corp. 2,350 2,503
12.75% pay-in-kind
186,334
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 6,688
8.625% 6,185 529
Series D, $10.00 309,863 28,972
36,189
TOTAL MEDIA & LEISURE 222,523
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 110,124 110
Corp. $3.52 pay-in-kind
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- 0.2%
Concentric Network Corp. 8,410 8,452
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- 0.0%
Ampex Corp. 8% non-cumulative 159 248
TOTAL TECHNOLOGY 8,700
UTILITIES - 3.5%
CELLULAR - 0.9%
Nextel Communications, Inc.:
11.125% pay-in-kind 11,901 11,484
Series D, 13% pay-in-kind 22,236 23,237
34,721
TELEPHONE SERVICES - 2.6%
e.spire Communications, Inc.:
$127.50 pay-in-kind 32,505 7,476
14.75% pay-in-kind 8,736 2,184
ICG Holdings, Inc. 14.25% 12,306 10,029
pay-in-kind
Intermedia Communications, 64,607 61,054
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 1 0
14% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Source Media, Inc. 13.50% 119,854 $ 929
pay-in-kind
WinStar Communications, Inc. 16,106 23,354
14.25%
105,026
TOTAL UTILITIES 139,747
TOTAL NONCONVERTIBLE 400,429
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 415,230
(Cost $471,122)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.3%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
Lyondell Chemical Co. sr. - $ 2,860 2,910
secured Tranche E term loan
9.9875% 5/17/06 (f)
Oxford Health Plans, Inc. sr. B3 3,000 3,038
secured term loan 10.47%
5/13/03 (f)
Synthetic Industries, Inc. - 6,200 6,138
term loan 13% 12/13/00 (f)
TOTAL PURCHASED BANK DEBT 12,086
(Cost $11,998)
</TABLE>
CASH EQUIVALENTS - 3.8%
MATURITY AMOUNT (000S)
Investments in repurchase $ 150,316 150,245
agreements (U.S. Government
Obligations), in a joint
trading account at 5.69%,
dated 4/28/00 due 5/1/00
(Cost $150,245)
TOTAL INVESTMENT PORTFOLIO - 3,895,795
98.4%
(Cost $4,341,819)
NET OTHER ASSETS - 1.6% 64,694
NET ASSETS - 100% $ 3,960,489
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) 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.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $542,241,000 or 13.7% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) Share amount represents number of units held.
(h) 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 4/19/94 $ 1,589
Trust 12.5%, 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 3/31/00 $ 12,677
12/18/08 pay-in-kind
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 0.5% AAA, AA, A 0.0%
Baa 0.5% BBB 0.3%
Ba 5.0% BB 4.2%
B 53.6% B 57.3%
Caa 12.7% CCC 8.0%
Ca, C 0.6% CC, C 1.4%
D 0.3%
The percentage not rated by Moody's or S&P amounted to 5.6%. FMR has
determined that unrated debt securities that are lower quality account
for 5.6% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 87.4%
Canada 3.5
Netherlands 3.2
United Kingdom 2.8
Mexico 1.1
Others (individually less 2.0
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $4,344,717,000. Net unrealized depreciation
aggregated $448,922,000, of which $160,215,000 related to appreciated
investment securities and $609,137,000 related to depreciated
investment securities.
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)
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 3,895,795
value (including repurchase
agreements of $150,245)
(cost $4,341,819) - See
accompanying schedule
Receivable for investments 12,732
sold
Receivable for fund shares 11,681
sold
Dividends receivable 1,331
Interest receivable 77,075
Other receivables 948
TOTAL ASSETS 3,999,562
LIABILITIES
Payable to custodian bank $ 815
Payable for investments 14,626
purchased
Payable for fund shares 11,608
redeemed
Distributions payable 7,676
Accrued management fee 1,910
Other payables and accrued 2,438
expenses
TOTAL LIABILITIES 39,073
NET ASSETS $ 3,960,489
Net Assets consist of:
Paid in capital $ 4,424,518
Undistributed net investment 76,510
income
Accumulated undistributed net (94,523)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (446,016)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 3,960,489
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS)
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.76
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($239,660
(divided by) 22,283 shares)
Maximum offering price per $11.30
share (100/95.25 of $10.76)
CLASS T: NET ASSET VALUE and $10.77
redemption price per share
($2,185,534 (divided by)
202,835 shares)
Maximum offering price per $11.16
share (100/96.50 of $10.77)
CLASS B: NET ASSET VALUE and $10.73
offering price per share
($1,129,022 (divided by)
105,217 shares) A
CLASS C: NET ASSET VALUE and $10.75
offering price per share
($280,569 (divided by)
26,097 shares) A
INSTITUTIONAL CLASS: NET $10.53
ASSET VALUE, offering price
and redemption price per
share ($125,704 (divided by)
11,933 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED APRIL 30, 2000
(UNAUDITED)
INVESTMENT INCOME $ 24,139
Dividends
Interest 194,210
TOTAL INCOME 218,349
EXPENSES
Management fee $ 12,183
Transfer agent fees 3,586
Distribution fees 9,984
Accounting fees and expenses 422
Non-interested trustees' 7
compensation
Custodian fees and expenses 59
Registration fees 110
Audit 30
Legal 38
Miscellaneous 20
Total expenses before 26,439
reductions
Expense reductions (29) 26,410
NET INVESTMENT INCOME 191,939
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (58,074)
Foreign currency transactions (4) (58,078)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (99,488)
Assets and liabilities in (26) (99,514)
foreign currencies
NET GAIN (LOSS) (157,592)
NET INCREASE (DECREASE) IN $ 34,347
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 191,939 $ 358,470
income
Net realized gain (loss) (58,078) (56,481)
Change in net unrealized (99,514) 120,312
appreciation (depreciation)
NET INCREASE (DECREASE) IN 34,347 422,301
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (168,331) (352,867)
From net investment income
From net realized gain - (40,674)
In excess of net realized - (29,684)
gain
Return of capital - (16,824)
TOTAL DISTRIBUTIONS (168,331) (440,049)
Share transactions - net (61,747) 568,709
increase (decrease)
TOTAL INCREASE (DECREASE) (195,731) 550,961
IN NET ASSETS
NET ASSETS
Beginning of period 4,156,220 3,605,259
End of period (including $ 3,960,489 $ 4,156,220
undistributed net investment
income of $76,510 and
$52,902, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.120 $ 11.090 $ 12.930 $ 12.300 $ 12.010
of period
Income from Investment
Operations
Net investment income D .525 1.022 1.111 1.058 .163
Net realized and unrealized (.421) .287 (1.603) .710 .267
gain (loss)
Total from investment .104 1.309 (.492) 1.768 .430
operations
Less Distributions
From net investment income (.464) (1.030) (1.048) (1.078) (.140)
From net realized gain - (.120) (.300) (.060) -
In excess of net realized - (.080) - - -
gain
Return of capital - (.049) - - -
Total distributions (.464) (1.279) (1.348) (1.138) (.140)
Net asset value, end of $ 10.760 $ 11.120 $ 11.090 $ 12.930 $ 12.300
period
TOTAL RETURN B, C .87% 11.98% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 240 $ 221 $ 117 $ 44 $ 4
(in millions)
Ratio of expenses to average .93% A .95% 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .93% A .95% 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 9.45% A 8.89% 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 63% A 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
period
Income from Investment
Operations
Net investment income D .522 1.021 1.119 1.086 1.105 .930
Net realized and unrealized (.433) .274 (1.612) .686 .364 .680
gain (loss)
Total from investment .089 1.295 (.493) 1.772 1.469 1.610
operations
Less Distributions
From net investment income (.459) (1.017) (1.037) (1.082) (1.069) (.920)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.048) - - - -
Total distributions (.459) (1.265) (1.337) (1.142) (1.069) (.920)
Net asset value, end of period $ 10.770 $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910
TOTAL RETURN B, C .73% 11.83% (4.54)% 15.21% 12.92% 15.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 2,186 $ 2,351 $ 2,322 $ 2,208 $ 1,709 $ 1,200
millions)
Ratio of expenses to average 1.03% A 1.04% 1.07% 1.09% 1.12% 1.15%
net assets
Ratio of expenses to average 1.03% A 1.04% 1.07% 1.08% E 1.11% E 1.15%
net assets after expense
reductions
Ratio of net investment 9.35% A 8.80% 8.91% 8.72% 9.20% 8.32%
income to average net assets
Portfolio turnover rate 63% A 61% 75% 105% 121% 112%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
period
Income from Investment
Operations
Net investment income D .483 .938 1.024 .998 1.017 .794
Net realized and unrealized (.421) .276 (1.588) .674 .361 .721
gain (loss)
Total from investment .062 1.214 (.564) 1.672 1.378 1.515
operations
Less Distributions
From net investment income (.422) (.949) (.956) (1.002) (.988) (.835)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.045) - - - -
Total distributions (.422) (1.194) (1.256) (1.062) (.988) (.835)
Net asset value, end of period $ 10.730 $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890
TOTAL RETURN B, C .49% 11.10% (5.10)% 14.34% 12.10% 14.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 1,129 $ 1,192 $ 923 $ 593 $ 344 $ 156
millions)
Ratio of expenses to average 1.69% A 1.70% 1.74% 1.74% 1.79% 2.01%
net assets
Ratio of expenses to average 1.69% A 1.69% E 1.74% 1.74% 1.79% 2.01%
net assets after expense
reductions
Ratio of net investment 8.69% A 8.15% 8.25% 8.04% 8.52% 7.46%
income to average net assets
Portfolio turnover rate 63% A 61% 75% 105% 121% 112%
</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 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>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .478 .926 .988
Net realized and unrealized (.422) .280 (1.639)
gain (loss)
Total from investment .056 1.206 (.651)
operations
Less Distributions
From net investment income (.416) (.941) (.929)
From net realized gain - (.120) (.300)
In excess of net realized gain - (.080) -
Return of capital - (.045) -
Total distributions (.416) (1.186) (1.229)
Net asset value, end of period $ 10.750 $ 11.110 $ 11.090
TOTAL RETURN B, C .44% 11.00% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 281 $ 269 $ 130
millions)
Ratio of expenses to average 1.78% A 1.78% 1.86% A
net assets
Ratio of expenses to average 1.78% A 1.78% 1.86% A
net assets after expense
reductions
Ratio of net investment 8.60% A 8.06% 8.21% A
income to average net assets
Portfolio turnover rate 63% A 61% 75%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760 $ 11.560
period
Income from Investment
Operations
Net investment income D .522 1.024 1.123 1.094 1.070 .390
Net realized and unrealized (.421) .269 (1.562) .671 .368 .193
gain (loss)
Total from investment .101 1.293 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (.471) (1.044) (1.071) (1.115) (1.078) (.383)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.049) - - - -
Total distributions (.471) (1.293) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 10.530 $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURN B, C .86% 12.05% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 126 $ 123 $ 113 $ 76 $ 38 $ 0.1
millions)
Ratio of expenses to average .80% A .82% .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .80% A .81% F .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.58% A 9.03% 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 63% A 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High Yield Fund (the fund) is a fund of Fidelity
Advisor Series II (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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, Federal Agency,
or other obligations found to be satisfactory by FMR 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, restricted securities (excluding 144A
issues) amounted to $14,384,000 or 0.4% 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 $12,086,000 or 0.3% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,257,346,000 and $1,356,549,000, 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 annualized rate of .58% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted separate Distribution and
Service 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 $ 181,000 $ 1,000
CLASS T 2,963,000 61,000
CLASS B 5,393,000 3,906,000
CLASS C 1,447,000 789,000
$ 9,984,000 $ 4,757,000
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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 267,000 $ 104,000
CLASS T 603,000 236,000
CLASS B 2,128,000 2,128,000*
CLASS C 93,000 93,000*
$ 3,091,000 $ 2,561,000
* 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 $ 207,000 .17 *
CLASS T 1,964,000 .17 *
CLASS B 1,059,000 .18 *
CLASS C 233,000 .16 *
INSTITUTIONAL CLASS 123,000 .19 *
$ 3,586,000
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR 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 $3,000 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 the fund's expenses. During the period, the fund's
custodian fees were reduced by $26,000 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 10,058 $ 14,241
Class T 96,784 218,969
Class B 45,166 91,163
Class C 10,756 16,708
Institutional Class 5,567 11,786
Total $ 168,331 $ 352,867
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
Class T - 25,543
Class B - 10,501
Class C - 1,751
Institutional Class - 1,433
Total $ - $ 40,674
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
$ 168,331 $ 440,049
</TABLE>
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 13,700 $ 83,630
7,457
Reinvestment of distributions 563 1,173 6,269
Shares redeemed (5,612) (5,559) (63,033)
Net increase (decrease) 2,408 9,314 $ 26,866
CLASS T Shares sold 47,995 101,408 $ 538,926
Reinvestment of distributions 6,641 18,746 74,042
Shares redeemed (62,912) (118,096) (705,582)
Net increase (decrease) (8,278) 2,058 $ (92,614)
CLASS B Shares sold 14,558 43,832 $ 162,842
Reinvestment of distributions 2,529 6,459 28,086
Shares redeemed (19,358) (26,213) (216,274)
Net increase (decrease) (2,271) 24,078 $ (25,346)
CLASS C Shares sold 8,600 20,267 $ 96,469
Reinvestment of distributions 531 1,004 5,903
Shares redeemed (7,206) (8,802) (80,646)
Net increase (decrease) 1,925 12,469 $ 21,726
INSTITUTIONAL CLASS Shares 3,479 11,210 $ 38,336
sold
Reinvestment of distributions 377 981 4,106
Shares redeemed (3,173) (11,277) (34,821)
Net increase (decrease) 683 914 $ 7,621
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
AMOUNTS IN THOUSANDS DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 158,674
Reinvestment of distributions 13,495
Shares redeemed (64,643)
Net increase (decrease) $ 107,526
CLASS T Shares sold $ 1,178,382
Reinvestment of distributions 216,117
Shares redeemed (1,367,579)
Net increase (decrease) $ 26,920
CLASS B Shares sold $ 507,464
Reinvestment of distributions 74,128
Shares redeemed (302,213)
Net increase (decrease) $ 279,379
CLASS C Shares sold $ 234,940
Reinvestment of distributions 11,541
Shares redeemed (101,978)
Net increase (decrease) $ 144,503
INSTITUTIONAL CLASS Shares $ 127,339
sold
Reinvestment of distributions 11,076
Shares redeemed (128,034)
Net increase (decrease) $ 10,381
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Margaret L. Eagle, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications and 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HY-SANN-0600 103976
1.703458.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
HIGH YIELD
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(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 32 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 41 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 during the periods shown,
the past 10 year total returns would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - 0.86% -3.75% 51.20% 243.44%
INST CL
ML High Yield Master II 0.25% -2.75% 44.85% 189.63%
High Current Yield Funds 1.03% -2.56% 40.76% 165.32%
Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Merrill Lynch High Yield Master II Index - a
market value-weighted index of all domestic and yankee high-yield
bonds, including deferred interest bonds and payment-in-kind
securities. Issues included in the index have maturities of one year
or more and have a credit rating lower than BBB-/Baa3, but are not in
default. To measure how Institutional Class' performance stacked up
against its peers, you can compare it to the high current yield funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 370 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV HIGH YIELD - -3.75% 8.62% 13.13%
INST CL
ML High Yield Master II -2.75% 7.69% 11.22%
High Current Yield Funds -2.56% 7.01% 10.18%
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
1990/04/30 10000.00 10000.00
1990/05/31 10335.86 10166.95
1990/06/30 10630.86 10425.14
1990/07/31 10878.20 10684.06
1990/08/31 10611.15 10195.40
1990/09/30 10342.88 9769.04
1990/10/31 10102.12 9489.77
1990/11/30 10417.53 9589.40
1990/12/31 10628.91 9735.10
1991/01/31 10873.44 9934.38
1991/02/28 11497.43 10796.22
1991/03/31 11928.76 11320.76
1991/04/30 12292.00 11722.14
1991/05/31 12422.92 11767.80
1991/06/30 12756.45 12027.77
1991/07/31 13217.27 12357.88
1991/08/31 13388.84 12639.01
1991/09/30 13569.63 12821.16
1991/10/31 14110.00 13256.24
1991/11/30 14272.89 13395.88
1991/12/31 14343.12 13548.45
1992/01/31 15000.61 14006.08
1992/02/29 15621.56 14356.15
1992/03/31 16064.37 14562.13
1992/04/30 16210.56 14637.61
1992/05/31 16387.43 14845.61
1992/06/30 16634.79 15025.17
1992/07/31 16934.72 15317.22
1992/08/31 17247.85 15512.30
1992/09/30 17432.57 15676.74
1992/10/31 17208.62 15470.76
1992/11/30 17396.65 15711.82
1992/12/31 17654.89 15911.82
1993/01/31 18126.80 16282.01
1993/02/28 18523.85 16573.25
1993/03/31 18953.67 16864.09
1993/04/30 19061.63 16979.81
1993/05/31 19320.87 17186.92
1993/06/30 19792.35 17521.39
1993/07/31 20052.21 17692.63
1993/08/31 20208.38 17859.10
1993/09/30 20246.88 17938.37
1993/10/31 20730.78 18270.50
1993/11/30 20880.99 18374.99
1993/12/31 21265.22 18568.21
1994/01/31 21876.23 18969.59
1994/02/28 21786.39 18837.79
1994/03/31 21122.22 18228.97
1994/04/30 20886.92 18002.21
1994/05/31 21016.59 17962.86
1994/06/30 20977.81 18044.96
1994/07/31 21059.00 18153.89
1994/08/31 21209.68 18297.82
1994/09/30 21317.48 18294.18
1994/10/31 21278.51 18342.42
1994/11/30 20938.13 18184.60
1994/12/31 20947.56 18376.20
1995/01/31 21127.69 18634.23
1995/02/28 21807.88 19231.50
1995/03/31 22004.18 19491.38
1995/04/30 22714.29 19985.21
1995/05/31 23223.19 20612.54
1995/06/30 23174.17 20751.13
1995/07/31 23748.30 21021.36
1995/08/31 23889.19 21131.66
1995/09/30 24181.80 21377.25
1995/10/31 24364.44 21557.94
1995/11/30 24496.06 21771.60
1995/12/31 24867.36 22136.38
1996/01/31 25458.73 22506.16
1996/02/29 25787.50 22574.93
1996/03/31 25635.83 22482.65
1996/04/30 25916.34 22514.16
1996/05/31 26092.42 22676.43
1996/06/30 26135.73 22766.77
1996/07/31 26139.70 22916.43
1996/08/31 26495.59 23195.96
1996/09/30 27399.51 23741.18
1996/10/31 27486.25 23947.25
1996/11/30 27830.63 24428.15
1996/12/31 28160.03 24631.22
1997/01/31 28446.31 24816.28
1997/02/28 28994.18 25197.78
1997/03/31 28217.59 24851.19
1997/04/30 28450.76 25169.82
1997/05/31 29263.27 25699.77
1997/06/30 29808.99 26096.96
1997/07/31 30801.26 26788.69
1997/08/31 30986.18 26756.45
1997/09/30 32076.94 27237.75
1997/10/31 31723.29 27376.83
1997/11/30 32053.96 27620.71
1997/12/31 32467.87 27898.86
1998/01/31 33359.71 28343.47
1998/02/28 33762.35 28458.31
1998/03/31 34457.80 28728.62
1998/04/30 34482.42 28852.01
1998/05/31 34242.05 29025.51
1998/06/30 34272.39 29175.41
1998/07/31 34556.11 29361.36
1998/08/31 30827.18 27879.22
1998/09/30 30946.07 27951.79
1998/10/31 30388.27 27348.62
1998/11/30 32495.95 28774.19
1998/12/31 32408.78 28722.64
1999/01/31 33505.72 29110.28
1999/02/28 33289.69 28912.22
1999/03/31 34278.94 29248.06
1999/04/30 35682.25 29783.19
1999/05/31 34855.26 29509.97
1999/06/30 34772.86 29436.83
1999/07/31 34581.58 29476.43
1999/08/31 34258.70 29164.99
1999/09/30 33905.92 29048.06
1999/10/31 34051.55 28890.40
1999/11/30 34722.74 29267.13
1999/12/31 35251.11 29443.78
2000/01/31 34899.95 29331.05
2000/02/29 35427.62 29393.76
2000/03/31 34956.05 28962.32
2000/04/28 34343.85 28962.72
IMATRL PRASUN SHR__CHT 20000430 20000526 141139 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor High Yield Fund - Institutional Class on
April 30, 1990. As the chart shows, by April 30, 2000, the value of
the investment would have grown to $34,344 - a 243.44% 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 $28,963 -
a 189.63% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL CLASS
SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 4.25% 10.90% 7.97% 10.03% 9.75% 3.34%
Capital returns -3.39% 1.15% -12.18% 5.39% 3.06% 1.73%
Total returns 0.86% 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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 8.09(cents) 47.14(cents) 95.16(cents) A
Annualized dividend rate 9.30% 8.62% 8.55%
30-day annualized yield 11.60% - -
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 $10.58 over the past one
month, $10.97 over the past six months, and $11.13 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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
The high-yield bond market eked
out a positive return over the past
six months ending April 30, 2000,
despite facing numerous obstacles
along the way, including widening
credit spreads, competition from the
high-flying NASDAQ market and
negative outflows from high-yield
mutual funds. For the six-month
period ending April 30, 2000, the
Merrill Lynch High Yield Master II
Index - a broad measure of the
high-yield market - had a
marginal gain of 0.25%. A
short-lived rally in the fourth
quarter of 1999 was responsible
for the majority of this positive
performance, as investor sentiment
was geared toward more
aggressive investment
opportunities. Still, the high-yield
sector lost a good portion of its
inflows to the technology-rich
NASDAQ market's double- and
triple-digit gains during the period.
And when the NASDAQ faltered in
March and April of 2000, the
high-yield market tumbled as well.
Restrictive monetary policy by the
Federal Reserve Board, which hiked
interest rates three times during the
six-month period, also put a
damper on high-yield bond
performance, as did widening
credit spreads, or the premium that
investors demand for higher
perceived levels of risk versus
Treasury securities. For the period,
the high-yield sector trailed the
performance of the overall U.S.
taxable bond market, as
measured by the Lehman Brothers
Aggregate Bond Index, which
gained 1.42% during the past six
months.
(photograph of Margaret Eagle)
An interview with Margaret Eagle, Portfolio Manager of Fidelity
Advisor High Yield Fund
Q. HOW DID THE FUND PERFORM, MARGARET?
A. For the six-month period that ended April 30, 2000, the fund's
Institutional Class shares provided a total return of 0.86%. To get a
sense of how the fund did relative to its competitors, the high
current yield funds average returned 1.03% for the same six-month
period, according to Lipper Inc. The Merrill Lynch High Yield Master
II Index returned 0.25%. For the 12-month period ended April 30, 2000,
the fund's Institutional Class shares returned -3.75%. That compared
to the -2.56% return for the high current yield funds average and the
-2.75% return of the Merrill Lynch index.
Q. WHY DID THE FUND LAG ITS LIPPER PEER GROUP WHILE BEATING THE
MERRILL LYNCH INDEX DURING THE PAST SIX MONTHS?
A. Unfortunately, a few of the fund's holdings had a fairly tough go
of it during the past six months and detracted from the fund's
performance relative to its peers. Supermarket chains Jitney Jungle
and Pathmark were two of the biggest disappointments. The business
prospects for Jitney Jungle continued to deteriorate, while Pathmark
suffered when a proposed acquisition of the company fell through.
Movie theater chains Regal Cinema and AMC performed poorly in response
to perceptions that the industry was overbuilt. Finally, holdings in
Allied Waste suffered in sympathy with the woes of its chief
competitor, even though Allied didn't experience similar problems.
What helped the fund outpace the Merrill Lynch index, on the other
hand, was its holdings in cable and telecommunications companies.
Q. WHAT WAS TROUBLING THE HIGH-YIELD MARKET?
A. There were a number of factors. First, the technical backdrop was
not very favorable. By that I mean that the high-yield market didn't
attract a lot of new investment at a time when supply was pretty
heavy. Although new supply has abated somewhat toward the end of the
period, it still exceeded rather tepid demand. Rising interest rates
also were a concern. Although the high-yield market traditionally is
not as sensitive to rising rates as other fixed-income investments,
this time climbing rates were enough to curtail investor interest in
high-yield securities. Those technical factors overwhelmed the more
fundamental positives of a strong economy and a seemingly abating
default rate among high-yield bonds.
Q. WHAT FUELED THE RELATIVELY STRONG PERFORMANCE OF THE CABLE AND
TELECOM HOLDINGS?
A. Technological advancements, the introduction of more appealing
products, continued strong demand, and a wave of merger and
acquisition activity were some of the primary factors behind the
strong performance of the cable and telecom sectors. Our stock and
bond holdings in cable company EchoStar, for example, were driven
higher in response to strong subscriber growth, the addition of new
channels and the company's new Internet service. Similar developments
boosted other European cable holdings such as NTL. The fund also
benefited from cable holdings Falcon and Golden Sky, both of which
were the target of acquisitions during the period. Being acquired also
helped some of our telecom holdings, namely Splitrock, Concentric, IXC
and Esat Telecom. Direct satellite broadcast company WinStar, which
offered to buy back its debt at a very attractive level, was another
strong performer.
Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PAST SIX
MONTHS?
A. To help mitigate the effects of rising interest rates, I recently
began to reduce the fund's stake in securities with a credit quality
rating higher than B, because they tend to be the most sensitive to
interest-rate changes. At the same time, I reduced the fund's exposure
to the lowest-quality tiers in order to maintain the overall credit
quality of the fund.
Q. WHAT'S YOUR OUTLOOK?
A. From a valuation standpoint, high-yield bonds look attractive when
viewed from a historical perspective. Spreads on high-yield bonds -
the amount of yield investors demanded over Treasury bond yields - are
quite wide. In fact, they're as wide as they've been since the autumn
of 1998 when investors were concerned that global economic and
financial market difficulties would spell trouble for the high-yield
market. To the extent that investors embrace the value that high-yield
bonds offer and as long as the economy is on track to achieve a soft
landing, they could perform well.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: seeks a combination of
a high level of income and
potential for capital gains
START DATE: January 5, 1987
SIZE: as of April 30, 2000,
more than $3.9 billion
MANAGER: Margaret Eagle,
since 1987; joined Fidelity
in 1980
MARGARET EAGLE ON THE
PROSPECTS FOR
TELECOMMUNICATIONS
COMPANIES:
"In my view, telecommunications
companies offer some of the best
opportunities available in the
high-yield market today. In
addition to building out the
infrastructure that will define
communications over the next
decade, one of the telecom
sector's most exciting areas of
growth is providing Internet services
such as Web-hosting for commercial
applications.
"While recent stock market
volatility has raised concerns
about these companies' ability to
fund their growth plans, I
generally emphasize
telecommunications companies
that have sufficient funds to
sustain their build-out plans until
2001. Many of these companies took
advantage of strong stock market
conditions in early 2000 to raise
additional equity. At the end of the
period, telecommunications
companies made up
approximately 34% of the fund's
net assets, which is a reflection of
my conviction about the strength
of the telecom sector."
NOTE TO SHAREHOLDERS:
Effective June 1, 2000, Tom Soviero
became Portfolio Manager of
Fidelity Advisor High Yield Fund.
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
TOP FIVE HOLDINGS AS OF APRIL
30, 2000
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
EQUIVALENTS) MONTHS AGO
WinStar Communications, Inc. 3.3 2.3
United Pan-Europe 2.5 1.2
Communications NV
Intermedia Communications, Inc. 2.5 2.0
EchoStar Communications Corp. 2.4 1.6
CSC Holdings, Inc. 2.1 2.0
12.8 9.1
TOP FIVE MARKET SECTORS AS OF
APRIL 30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Media & Leisure 29.6 33.1
Utilities 28.9 26.8
Basic Industries 8.3 8.0
Technology 7.6 3.8
Energy 4.2 5.4
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa, Aa, A 0.5 0.0
Baa 0.5 0.6
Ba 5.1 8.0
B 55.2 53.1
Caa, Ca, C 13.5 13.7
D 0.2 0.0
Not Rated 5.6 5.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 2000 AND OCTOBER 31, 1999
ACCOUNT FOR 5.6% AND 5.4 % RESPECTIVELY OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Nonconvertible Bonds 77.4% Nonconvertible Bonds 77.6%
Convertible Bonds, Preferred Convertible Bonds, Preferred
Stocks 11.2% Stocks 12.4%
Common Stocks 4.7% Common Stocks 3.9%
Other Investments 1.3% Other Investments 1.4%
Short-Term Investments and Short-Term Investments and
Net Other Assets 5.4% Net Other Assets 4.7%
* FOREIGN INVESTMENTS 12.6% ** FOREIGN INVESTMENTS 8.8%
Row: 1, Col: 1, Value: 77.40000000000001 Row: 1, Col: 1, Value: 77.59999999999999
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 11.2 Row: 1, Col: 3, Value: 12.4
Row: 1, Col: 4, Value: 0.0 Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 4.7 Row: 1, Col: 5, Value: 3.9
Row: 1, Col: 6, Value: 0.0 Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.3 Row: 1, Col: 7, Value: 1.4
Row: 1, Col: 8, Value: 5.4 Row: 1, Col: 8, Value: 4.7
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 78.1%
MOODY'S RATINGS (UNAUDITED) (B) 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 - 0.4%
MEDICAL FACILITIES MANAGEMENT
- 0.4%
Total Renal Care Holdings,
Inc.:
7% 5/15/09 B1 2,000 1,100
7% 5/15/09 (e) B3 24,020 13,451
14,551
MEDIA & LEISURE - 0.0%
RESTAURANTS - 0.0%
CKE Restaurants, Inc. 4.25% B1 5,740 2,332
3/15/04
TOTAL CONVERTIBLE BONDS 27,551
NONCONVERTIBLE BONDS - 77.4%
BASIC INDUSTRIES - 8.2%
CHEMICALS & PLASTICS - 4.6%
Avecia Group PLC 11% 7/1/09 B2 28,890 29,251
Huntsman Corp. 9.5% 7/1/07 (e) B2 37,590 34,207
Huntsman ICI Chemicals LLC B2 23,790 23,731
10.125% 7/1/09
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 7,905 7,786
9.875% 5/1/07 Ba3 32,710 32,219
10.875% 5/1/09 B2 42,730 42,089
Sterling Chemicals, Inc.:
11.25% 4/1/07 Caa3 8,180 6,871
11.75% 8/15/06 Caa3 5,035 4,406
180,560
PACKAGING & CONTAINERS - 1.6%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 17,510 15,365
9.75% 6/15/07 Caa1 6,340 5,658
9.875% 2/15/08 Caa2 28,165 21,969
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS -
CONTINUED
Packaging Corp. of America B2 $ 19,740 $ 19,839
9.625% 4/1/09
Sweetheart Cup, Inc. 10.5% Caa1 2,525 2,310
9/1/03
65,141
PAPER & FOREST PRODUCTS - 2.0%
APP China Group Ltd. 14% B3 5,575 4,516
3/15/10 unit (e)
APP Finance II Mauritius Ltd.:
12% 2/15/04 B3 370 207
12% 3/15/04 B3 7,420 4,155
Container Corp. of America
gtd.:
9.75% 4/1/03 B2 3,490 3,507
11.25% 5/1/04 B2 4,550 4,641
Millar Western Forest B3 17,375 16,767
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc.:
11.5% 6/1/04 B3 6,750 6,868
yankee 10.625% 4/15/05 Caa1 18,190 17,190
Stone Container Corp. 12.58% B2 18,740 19,677
8/1/16 (f)
77,528
TOTAL BASIC INDUSTRIES 323,229
CONSTRUCTION & REAL ESTATE -
0.8%
CONSTRUCTION - 0.2%
Blount, Inc. 13% 8/1/09 B3 7,160 7,035
REAL ESTATE INVESTMENT TRUSTS
- 0.6%
Ocwen Asset Investment Corp. - 30,010 24,608
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 31,643
ESTATE
DURABLES - 0.7%
HOME FURNISHINGS - 0.6%
Sealy Corp., Inc. 10% - 13,392 12,723
12/18/08 pay-in-kind (h)
Sealy Mattress Co.:
0% 12/15/07 (d) B3 6,930 4,851
9.875% 12/15/07 B3 5,550 5,273
22,847
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
DURABLES - CONTINUED
TEXTILES & APPAREL - 0.1%
Pillowtex Corp.:
9% 12/15/07 Ca $ 5,340 $ 2,083
10% 11/15/06 Ca 4,370 1,748
3,831
TOTAL DURABLES 26,678
ENERGY - 3.8%
COAL - 0.3%
P&L Coal Holdings Corp. B2 15,310 13,626
9.625% 5/15/08
ENERGY SERVICES - 1.5%
Parker Drilling Co. 9.75% B1 3,511 3,300
11/15/06
R&B Falcon Corp.:
6.95% 4/15/08 Ba3 320 266
9.5% 12/15/08 Ba3 25,820 25,045
12.25% 3/15/06 Ba3 16,570 18,061
RBF Finance Co. 11.375% Ba3 10,650 11,342
3/15/09
58,014
OIL & GAS - 2.0%
Chesapeake Energy Corp. B3 15,765 15,056
9.625% 5/1/05
Cross Timbers Oil Co.:
8.75% 11/1/09 B2 10,660 9,861
9.25% 4/1/07 B2 2,940 2,837
Lomak Petroleum, Inc. 8.75% B3 8,777 7,504
1/15/07
Plains Resources, Inc.:
Series B 10.25% 3/15/06 B2 2,780 2,697
10.25% 3/15/06 (e) B2 9,340 9,153
Swift Energy Co. 10.25% 8/1/09 B2 12,560 12,246
Tesoro Petroleum Corp. 9% B1 16,330 15,350
7/1/08
Vintage Petroleum, Inc.:
9% 12/15/05 B1 1,620 1,596
9.75% 6/30/09 B1 3,590 3,626
79,926
TOTAL ENERGY 151,566
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 3.2%
CREDIT & OTHER FINANCE - 3.2%
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 $ 27,115 $ 18,709
10% 3/15/04 Caa3 3,800 2,470
APP International Finance Co. B3 7,235 5,860
11.75% 10/1/05
Arch Escrow Corp. 13.75% B3 26,120 21,941
4/15/08
Denbury Management, Inc. 9% B3 27,120 23,730
3/1/08
Dobson/Sygnet Communications - 8,070 8,393
Co. 12.25% 12/15/08
GS Escrow Corp. 7.125% 8/1/05 Ba1 9,700 8,420
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 6,670 5,003
7.6% 8/1/07 Ba2 6,970 4,182
Ocwen Capital Trust 10.875% B2 4,780 2,964
8/1/27
Stone Container Finance Co. B2 8,330 8,663
11.5% 8/15/06 (e)
Venetian Casino Resort Caa1 15,770 15,376
LLC/Las Vegas Sands, Inc.
12.25% 11/15/04
125,711
HEALTH - 2.3%
DRUGS & PHARMACEUTICALS - 0.4%
Global Health Sciences, Inc. Caa1 41,010 14,354
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- 0.2%
Graham-Field Health Products, C 13,670 3,144
Inc. 9.75% 8/15/07 (c)
PharMerica, Inc. 8.375% 4/1/08 B3 8,500 5,100
8,244
MEDICAL FACILITIES MANAGEMENT
- 1.7%
Everest Healthcare Services, B3 3,740 3,118
Inc. 9.75% 5/1/08
Fountain View, Inc. 11.25% Caa1 9,470 5,209
4/15/08
Hanger Orthopedic Group, Inc. B3 3,390 2,661
11.25% 6/15/09
Harborside Healthcare Corp. B3 24,000 5,280
0% 8/1/08 (d)
Oxford Health Plans, Inc. 11% Caa1 29,600 30,192
5/15/05
Unilab Corp. 12.75% 10/1/09 B3 20,624 20,572
67,032
TOTAL HEALTH 89,630
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.2%
ELECTRICAL EQUIPMENT - 0.3%
L-3 Communications Corp.:
8% 8/1/08 B2 $ 10,600 $ 9,328
10.375% 5/1/07 B2 2,600 2,613
11,941
POLLUTION CONTROL - 1.9%
Allied Waste North America, B2 109,600 75,076
Inc. 10% 8/1/09
TOTAL INDUSTRIAL MACHINERY & 87,017
EQUIPMENT
MEDIA & LEISURE - 21.1%
BROADCASTING - 17.7%
ACME Television LLC/ACME B3 11,102 10,158
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp. B1 36,755 35,744
9.875% 3/1/07
Ascent Entertainment Group, Ba1 11,280 9,024
Inc. 0% 12/15/04 (d)
CapStar Broadcasting
Partners, Inc.:
0% 2/1/09 (d) B2 9,910 8,770
9.25% 7/1/07 B1 3,230 3,214
Chancellor Media Corp. 9% B1 17,475 17,693
10/1/08
Citadel Broadcasting Co.:
9.25% 11/15/08 B3 1,810 1,720
10.25% 7/1/07 B3 10,990 10,990
Classic Cable, Inc.:
9.375% 8/1/09 B3 3,995 3,745
10.5% 3/1/10 (e) B3 8,750 8,597
Comcast UK Cable Partners B2 5,370 5,102
Ltd. 0% 11/15/07 (d)
Diamond Cable Communications B3 34,145 32,011
PLC yankee 0% 12/15/05 (d)
EchoStar DBS Corp. 9.375% B2 56,555 54,434
2/1/09
Fox Family Worldwide, Inc. 0% B1 10,210 6,126
11/1/07 (d)
FrontierVision Holdings B1 36,450 31,803
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Holdings Caa1 22,460 19,596
LP/FrontierVision Holdings
Capital II Corp. 0% 9/15/07
(d)
Golden Sky DBS, Inc. 0% Caa1 24,025 15,977
3/1/07 (d)
Impsat Fiber Networks, Inc. B3 30,195 28,081
13.75% 2/15/05 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
International Cabletel, Inc. B3 $ 51,577 $ 47,967
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 17,035 10,562
10/15/07 (d)
NorthPoint Communication Caa1 37,905 33,735
Holdings, Inc. 12.875%
2/15/10 (e)
NTL Communications Corp.:
0% 10/1/08 (d) B3 30,780 20,238
11.5% 10/1/08 B3 35,980 36,340
NTL, Inc. 10% 2/15/07 B3 20,160 19,454
Olympus Communications B1 5,820 5,849
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp.:
9.625% 10/15/05 B3 2,770 2,715
9.75% 12/1/06 B3 7,495 7,345
12.5% 8/1/17 B3 12,450 12,948
Satelites Mexicanos SA de CV:
10.03% 6/30/04 (e)(f) B1 13,115 12,263
10.125% 11/1/04 B3 34,710 25,685
Telemundo Holdings, Inc. 0% Caa1 3,815 2,442
8/15/08 (d)
Telewest Communications PLC B1 5,360 5,414
11.25% 11/1/08
Telewest PLC:
yankee 9.625% 10/1/06 B1 9,260 8,843
0% 10/1/07 (d) B1 29,550 27,334
United International B3 25,735 17,307
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe
Communications NV:
0% 8/1/09 (d) B2 2,860 1,430
0% 11/1/09 (d)(e) B2 52,150 25,554
10.875% 8/1/09 B2 23,150 21,067
11.25% 11/1/09 (e) B2 31,010 28,529
11.25% 2/1/10 (e) B2 12,775 11,753
11.5% 2/1/10 (e) B2 17,030 15,753
703,312
ENTERTAINMENT - 1.5%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 16,990 9,345
9.5% 2/1/11 B3 6,690 3,613
Cinemark USA, Inc. 8.5% 8/1/08 B2 3,390 2,034
IMAX Corp. 7.875% 12/1/05 Ba2 5,120 4,698
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Livent, Inc. 9.375% 10/15/04 - $ 11,100 $ 2,220
(c)
Premier Parks, Inc. 9.25% B3 13,110 12,323
4/1/06
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa2 8,770 3,157
9.5% 6/1/08 Caa2 28,710 10,910
Waterford Gaming B1 10,564 10,036
LLC/Waterford Gaming Finance
Corp. 9.5% 3/15/10 (e)
58,336
LODGING & GAMING - 1.7%
Florida Panthers Holdings, B2 17,210 15,661
Inc. 9.875% 4/15/09
Horseshoe Gaming LLC 8.625% B2 37,840 35,475
5/15/09
Mohegan Tribal Gaming Ba3 3,630 3,449
Authority 8.75% 1/1/09
Signature Resorts, Inc. 9.75% Caa2 22,680 6,804
10/1/07
Sun International Hotels
Ltd./Sun International North
America, Inc.:
yankee 9% 3/15/07 Ba3 2,800 2,520
8.625% 12/15/07 Ba3 3,690 3,284
67,193
RESTAURANTS - 0.2%
NE Restaurant, Inc. 10.75% B3 8,990 7,012
7/15/08
TOTAL MEDIA & LEISURE 835,853
NONDURABLES - 0.9%
FOODS - 0.4%
Del Monte Corp. 12.25% 4/15/07 B3 6,355 6,641
Del Monte Foods Co. 0% Caa1 7,584 5,650
12/15/07 (d)
Gorges/Quik-To-Fix Foods, Caa1 18,290 5,487
Inc. 11.5% 12/1/06
17,778
HOUSEHOLD PRODUCTS - 0.5%
AKI Holding Corp. 0% 7/1/09 Caa1 17,930 8,248
(d)
AKI, Inc. 10.5% 7/1/08 B2 13,150 11,046
19,294
TOTAL NONDURABLES 37,072
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - 1.0%
GENERAL MERCHANDISE STORES -
0.2%
Kmart Corp. 7.95% 2/1/23 Baa3 $ 8,850 $ 7,213
GROCERY STORES - 0.8%
Jitney-Jungle Stores of C 70,419 704
America, Inc. 10.375%
9/15/07 (c)
Pathmark Stores, Inc.:
9.625% 5/1/03 (c) Caa3 21,250 15,088
11.625% 6/15/02 Ca 35,245 9,869
12.625% 6/15/02 Ca 20,260 5,673
31,334
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
U.S. Office Products Co. Ca 4,745 1,471
9.75% 6/15/08
TOTAL RETAIL & WHOLESALE 40,018
SERVICES - 1.7%
LEASING & RENTAL - 0.0%
Anthony Crane Rentals B3 2,250 1,598
LP/Anthony Credit Capital
Corp. 10.375% 8/1/08
PRINTING - 0.7%
Sullivan Graphics, Inc. Caa1 15,420 15,574
12.75% 8/1/05
World Color Press, Inc. Baa3 11,330 10,197
8.375% 11/15/08
25,771
SERVICES - 1.0%
Apcoa, Inc. 9.25% 3/15/08 Caa1 3,520 1,654
Iron Mountain, Inc. 8.75% B2 6,990 6,239
9/30/09
Medaphis Corp. 9.5% 2/15/05 Caa1 7,330 5,571
SITEL Corp. 9.25% 3/15/06 B3 17,150 15,778
Young American Corp. 11.625% Caa1 15,920 11,661
2/15/06
40,903
TOTAL SERVICES 68,272
TECHNOLOGY - 6.9%
COMPUTER SERVICES & SOFTWARE
- 5.0%
Colo.com 13.875% 3/15/10 unit - 18,640 19,013
(e)
Concentric Network Corp. B- 27,280 28,917
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 32,560 20,024
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Covad Communications Group,
Inc.: - continued
12% 2/15/10 (e) B3 $ 8,245 $ 7,812
12.5% 2/15/09 B3 25,410 24,711
Exodus Communications, Inc. B- 24,725 24,725
10.75% 12/15/09
Federal Data Corp. 10.125% B3 4,270 2,776
8/1/05
PSINet, Inc.:
10% 2/15/05 B3 1,375 1,210
10.5% 12/1/06 B3 39,230 34,915
11% 8/1/09 B3 35,065 31,383
Verio, Inc. 11.25% 12/1/08 B3 4,050 4,010
199,496
COMPUTERS & OFFICE EQUIPMENT
- 0.5%
Globix Corp. 12.5% 2/1/10 (e) - 22,630 19,801
ELECTRONIC INSTRUMENTS - 0.9%
Fisher Scientific B3 21,815 20,070
International, Inc. 9% 2/1/08
Telecommunications Techniques B3 15,185 13,932
Co. LLC 9.75% 5/15/08
34,002
ELECTRONICS - 0.5%
Details, Inc. 10% 11/15/05 B3 3,555 3,271
Intersil Corp. 13.25% 8/15/09 B3 11,445 12,933
Stellex Industries, Inc. 9.5% B3 3,750 1,875
11/1/07
18,079
TOTAL TECHNOLOGY 271,378
TRANSPORTATION - 0.2%
RAILROADS - 0.1%
TFM SA de CV 10.25% 6/15/07 B2 4,610 4,011
SHIPPING - 0.1%
International Shipholding Ba3 5,810 5,113
Corp. 7.75% 10/15/07
TOTAL TRANSPORTATION 9,124
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - 24.4%
CELLULAR - 8.8%
Arch Communications Group, B3 $ 3,825 $ 3,060
Inc. 12.75% 7/1/07
Clearnet Communications, Inc. B3 7,240 4,208
0% 5/1/09 (d)
ESAT Holdings Ltd. 0% 2/1/07 Aa1 15,520 14,317
(d)
ICO Global Communications D 14,125 8,616
Holdings Ltd. 15% 8/1/05
unit (c)
Intercel, Inc. 0% 2/1/06 (d) B2 5,190 4,762
Leap Wireless International, Caa2 18,260 17,164
Inc. 12.5% 4/15/10 unit (e)
McCaw International Ltd. 0% Caa1 47,100 34,619
4/15/07 (d)
Metrocall, Inc.:
9.75% 11/1/07 B3 2,170 1,530
10.375% 10/1/07 B3 5,335 3,895
11% 9/15/08 B3 2,155 1,595
Microcell Telecommunications,
Inc.:
0% 6/1/06 (d) B3 6,395 5,756
0% 6/1/09 (d) B3 8,385 5,220
Millicom International Caa1 20,340 17,187
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 9/15/07 (d) B1 21,280 15,960
12% 11/1/08 B1 22,320 23,882
Nextel International, Inc. 0% Caa1 1,255 797
4/15/08 (d)
Omnipoint Corp.:
Series A, 11.625% 8/15/06 B2 5,910 6,265
11.5% 9/15/09 (e) B2 8,050 8,614
11.625% 8/15/06 B2 2,510 2,648
Orbital Imaging Corp. 11.625% CCC+ 16,476 7,249
3/1/05
PageMart Nationwide, Inc. 15% B3 10,235 10,133
2/1/05
Paging Network, Inc.:
8.875% 2/1/06 Caa3 1,695 924
10% 10/15/08 (c) Caa3 17,995 9,807
10.125% 8/1/07 (c) Caa3 16,510 8,998
ProNet, Inc. 11.875% 6/15/05 B3 5,825 5,126
Rogers Cantel, Inc. 8.8% Ba2 10,630 10,471
10/1/07
Rogers Communications, Inc. Ba3 9,700 9,409
8.875% 7/15/07
TeleCorp PCS, Inc. 0% 4/15/09 B3 35,670 23,364
(d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Tritel PCS, Inc. 0% 5/15/09 B3 $ 50,540 $ 32,977
(d)
Triton PCS, Inc. 0% 5/1/08 (d) B3 16,300 11,614
US Unwired, Inc. 0% 11/1/09 Caa1 23,625 13,289
(d)(e)
USA Mobile Communication, B3 13,915 11,132
Inc. II 9.5% 2/1/04
Voicestream Wireless B2 16,310 16,473
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(e)
351,061
TELEPHONE SERVICES - 15.6%
360networks, Inc. 13% 5/1/08 B3 31,970 31,490
(e)
Allegiance Telecom, Inc.:
0% 2/15/08 (d) B3 16,681 11,635
12.875% 5/15/08 B3 19,580 21,146
e.spire Communications, Inc. - 16,890 9,796
13.75% 7/15/07
Esat Telecom Group PLC:
0% 2/1/07 (d) Aa1 7,530 6,946
11.875% 12/1/08 Caa1 4,680 5,476
FirstWorld Communications, - 22,465 9,772
Inc. 0% 4/15/08 (d)
Focal Communications Corp. B3 5,775 5,789
11.875% 1/15/10 (e)
Global Crossing Holdings Ltd. Ba2 21,190 20,554
9.5% 11/15/09 (e)
Globenet Communication Group Caa1 30,660 30,813
Ltd. 13% 7/15/07
GST Equipment Funding, Inc. - 12,810 7,046
13.25% 5/1/07
GST Telecommunications, Inc. - 26,920 12,114
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 44,455 20,005
Hermes Europe Railtel BV B3 20,320 17,983
11.5% 8/15/07
Hyperion Telecommunications,
Inc.:
0% 4/15/03 (d) B3 9,665 8,940
12% 11/1/07 Caa1 1,690 1,711
ICG Holdings, Inc.:
0% 9/15/05 (d) B3 13,540 12,795
0% 5/1/06 (d) B3 14,265 11,448
ICG Services, Inc.:
0% 2/15/08 (d) B3 86,370 44,481
0% 5/1/08 (d) B3 4,670 2,312
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Intermedia Communications,
Inc.:
0% 5/15/06 (d) B2 $ 2,000 $ 1,880
0% 7/15/07 (d) B2 20,880 15,817
0% 3/1/09 (d) B3 17,000 9,903
8.6% 6/1/08 B2 11,320 10,358
KMC Telecom Holdings, Inc.:
0% 2/15/08 (d) Caa2 28,410 14,205
13.5% 5/15/09 Caa2 10,070 9,164
Logix Communications - 13,108 5,243
Enterprises, Inc. 12.25%
6/15/08
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 24,497 23,395
10% 12/15/09 B2 9,740 9,302
Netia Holdings BV 10.25% B3 2,955 2,512
11/1/07
NEXTLINK Communications LLC B2 28,040 29,021
12.5% 4/15/06
NEXTLINK Communications, Inc. B2 10,590 10,378
10.75% 6/1/09
NorthEast Optic Network, Inc. - 2,305 2,224
12.75% 8/15/08
Ono Finance PLC 13% 5/1/09 Caa1 9,975 10,025
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 16,270 8,135
12.75% 4/15/09 B3 16,860 14,331
Splitrock Services, Inc. - 22,500 23,794
11.75% 7/15/08
Viatel, Inc. 11.25% 4/15/08 B3 13,290 11,695
WinStar Communications, Inc.:
0% 4/15/10 (d)(e) B3 33,138 14,995
12.5% 4/15/08 (e) B3 22,276 21,775
12.75% 4/15/10 (e) B3 70,622 67,267
Worldwide Fiber, Inc. 12% B3 10,205 9,491
8/1/09
617,162
TOTAL UTILITIES 968,223
TOTAL NONCONVERTIBLE BONDS 3,065,414
TOTAL CORPORATE BONDS 3,092,965
(Cost $3,561,085)
ASSET-BACKED SECURITIES - 0.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S) VALUE (NOTE 1) (000S)
Airplanes pass through trust Ba2 $ 18,188 $ 14,551
10.875% 3/15/19 (Cost
$19,159)
COMMERCIAL MORTGAGE
SECURITIES - 0.6%
Bardell Associates Note Trust - 1,563 1,661
12.5%, 11/1/08 (h)
First Chicago/Lennar Trust I - 10,700 7,831
Series 1997-CHL1 Class E,
8.1256% 4/1/39 (f)
Resolution Trust Corp. Series Baa3 3,032 2,456
1991-M2 Class A3, 7.3307%
9/25/20 (f)
Structured Asset Securities
Corp.:
Series 1995-C1:
Class E, 7.375% 9/25/24 (e) BB 4,000 3,653
Class F, 7.375% 9/25/24 (e) - 2,500 1,948
Series 1996-CFL Class G, B+ 9,260 8,074
7.75% 2/25/28 (e)
TOTAL COMMERCIAL MORTGAGE 25,623
SECURITIES
(Cost $24,440)
</TABLE>
COMMON STOCKS - 4.7%
SHARES
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.0%
Trivest 1992 Special Fund 3 287
Ltd. (g)
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd. 2,010 1
warrants 10/15/03 (a)
Gaylord Container Corp. Class 512,500 2,627
A (a)
2,628
TOTAL BASIC INDUSTRIES 2,915
CONSTRUCTION & REAL ESTATE -
0.0%
CONSTRUCTION - 0.0%
Capital Pacific Holdings, 24,095 6
Inc. warrants 5/1/02 (a)(e)
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Arena Brands Holdings Corp. 42,253 1,056
Class B
ENERGY - 0.0%
OIL & GAS - 0.0%
Plains Resources, Inc. (a) 70,500 1,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
AMRESCO, Inc. (a) 118,000 $ 103
SAVINGS & LOANS - 0.0%
Ocwen Financial Corp. (a) 116,760 847
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (a)(e) 900 79
TOTAL FINANCE 1,029
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- 0.1%
Oxford Health Plans, Inc. (a) 180,000 3,420
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 407,000 2,493
(a)
MEDIA & LEISURE - 2.9%
BROADCASTING - 2.9%
Classic Communications, Inc. 28,500 306
(a)(e)
CS Wireless Systems, Inc. 439 0
(a)(e)
EchoStar Communications Corp. 1,457,296 92,798
Class A (a)
NTL, Inc. (a) 122,813 9,395
NTL, Inc. warrants 10/14/08 53,424 3,099
(a)
Pegasus Communications Corp. 6,509 6,932
unit
Telewest Communications PLC 16,363 1,023
sponsored ADR (a)
UIH Australia/Pacific, Inc. 19,690 394
warrants 5/15/06 (a)
113,947
ENTERTAINMENT - 0.0%
Livent, Inc. (a) 125,200 1
LODGING & GAMING - 0.0%
Sunterra Corp. (a) 275,500 568
TOTAL MEDIA & LEISURE 114,516
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Kroger Co. (a) 59,400 1,103
TECHNOLOGY - 0.5%
COMPUTER SERVICES & SOFTWARE
- 0.3%
Concentric Network Corp. (a) 102,600 4,463
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- CONTINUED
Concentric Network Corp. 8,680 $ 3,741
warrants 12/15/07 (a)(e)
DecisionOne Corp. 63,872 1
DecisionOne Corp.:
warrants 4/18/07 36,096 0
warrants 4/18/07 62,195 0
warrants 4/18/07 36,890 0
PSINet, Inc. (a) 200,000 4,638
12,843
ELECTRONICS - 0.2%
Intersil Holding Corp. 16,220 7,299
warrants 8/15/09 (a)(e)
TOTAL TECHNOLOGY 20,142
UTILITIES - 1.0%
CELLULAR - 0.1%
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 19,560 78
.47) (a)
warrants 1/15/07 (CV ratio 18,480 111
.6) (a)
McCaw International Ltd. 66,290 166
warrants 4/16/07 (a)(e)
Orbital Imaging Corp. 5,486 27
warrants 3/1/05 (a)(e)
Powertel, Inc. warrants 85,408 3,075
2/1/06 (a)
3,457
TELEPHONE SERVICES - 0.9%
Adelphia Business Solution, 87,200 3,052
Inc. Class A (a)
FirstWorld Communications, 21,135 2,114
Inc. warrants 4/15/08 (a)(e)
GST Telecommunications, Inc. 356,900 1,205
(a)
Intermedia Communications, 2,500 378
Inc. warrants 6/1/00 (a)
KMC Telecom Holdings, Inc. 37,830 95
warrants 4/15/08 (a)(e)
McLeodUSA, Inc. Class A (a) 404,950 10,124
Metromedia Fiber Network, 300,000 9,263
Inc. Class A (a)
MGC Communications, Inc. 28,787 1,411
(a)(e)
Ono Finance PLC rights 850 128
5/31/09 (a)(e)
RSL Communications Ltd./RSL 25,710 1,337
Communications PLC warrants
11/15/06 (a)(e)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Versatel Telecom 7,060 $ 3,530
International NV warrants
5/15/08 (a)(e)
Viatel, Inc. (a) 34,546 1,321
33,958
TOTAL UTILITIES 37,415
TOTAL COMMON STOCKS 185,095
(Cost $103,770)
PREFERRED STOCKS - 10.5%
CONVERTIBLE PREFERRED STOCKS
- 0.4%
ENERGY - 0.4%
OIL & GAS - 0.4%
Chesapeake Energy Corp. $3.50 297,500 14,801
(a)
NONCONVERTIBLE PREFERRED
STOCKS - 10.1%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- 0.3%
California Federal Preferred 533,897 11,345
Capital Corp. $2.2812
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd. 33,881 69
Series 1
FINANCE - 0.2%
INSURANCE - 0.2%
American Annuity Group 10,340 8,531
Capital Trust II 8.875%
HEALTH - 0.3%
MEDICAL FACILITIES MANAGEMENT
- 0.3%
Fresenius Medical Care 9,847 9,404
Capital Trust 9%
MEDIA & LEISURE - 5.6%
BROADCASTING - 4.7%
Adelphia Communications Corp. 228,536 24,225
$13.00
Benedek Communications Corp. 11,712 8,198
11.5% pay-in-kind
Citadel Broadcasting Co. 85,567 9,198
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 612,372 64,452
Series H, 11.75% pay-in-kind 196,927 20,923
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Granite Broadcasting Corp. 21,935 $ 19,083
12.75% pay-in-kind
NTL, Inc. 13% pay-in-kind 36,652 37,752
Pegasus Communications Corp. 2,350 2,503
12.75% pay-in-kind
186,334
PUBLISHING - 0.9%
PRIMEDIA, Inc.:
$9.20 76,000 6,688
8.625% 6,185 529
Series D, $10.00 309,863 28,972
36,189
TOTAL MEDIA & LEISURE 222,523
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 110,124 110
Corp. $3.52 pay-in-kind
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- 0.2%
Concentric Network Corp. 8,410 8,452
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- 0.0%
Ampex Corp. 8% non-cumulative 159 248
TOTAL TECHNOLOGY 8,700
UTILITIES - 3.5%
CELLULAR - 0.9%
Nextel Communications, Inc.:
11.125% pay-in-kind 11,901 11,484
Series D, 13% pay-in-kind 22,236 23,237
34,721
TELEPHONE SERVICES - 2.6%
e.spire Communications, Inc.:
$127.50 pay-in-kind 32,505 7,476
14.75% pay-in-kind 8,736 2,184
ICG Holdings, Inc. 14.25% 12,306 10,029
pay-in-kind
Intermedia Communications, 64,607 61,054
Inc. 13.5% pay-in-kind
NEXTLINK Communications, Inc. 1 0
14% pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1) (000S)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Source Media, Inc. 13.50% 119,854 $ 929
pay-in-kind
WinStar Communications, Inc. 16,106 23,354
14.25%
105,026
TOTAL UTILITIES 139,747
TOTAL NONCONVERTIBLE 400,429
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 415,230
(Cost $471,122)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.3%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT (000S)
Lyondell Chemical Co. sr. - $ 2,860 2,910
secured Tranche E term loan
9.9875% 5/17/06 (f)
Oxford Health Plans, Inc. sr. B3 3,000 3,038
secured term loan 10.47%
5/13/03 (f)
Synthetic Industries, Inc. - 6,200 6,138
term loan 13% 12/13/00 (f)
TOTAL PURCHASED BANK DEBT 12,086
(Cost $11,998)
</TABLE>
CASH EQUIVALENTS - 3.8%
MATURITY AMOUNT (000S)
Investments in repurchase $ 150,316 150,245
agreements (U.S. Government
Obligations), in a joint
trading account at 5.69%,
dated 4/28/00 due 5/1/00
(Cost $150,245)
TOTAL INVESTMENT PORTFOLIO - 3,895,795
98.4%
(Cost $4,341,819)
NET OTHER ASSETS - 1.6% 64,694
NET ASSETS - 100% $ 3,960,489
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) 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.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $542,241,000 or 13.7% of net assets.
(f) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(g) Share amount represents number of units held.
(h) 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 4/19/94 $ 1,589
Trust 12.5%, 11/1/08
Sealy Corp., Inc. 10% 2/23/98 - 3/31/00 $ 12,677
12/18/08 pay-in-kind
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 0.5% AAA, AA, A 0.0%
Baa 0.5% BBB 0.3%
Ba 5.0% BB 4.2%
B 53.6% B 57.3%
Caa 12.7% CCC 8.0%
Ca, C 0.6% CC, C 1.4%
D 0.3%
The percentage not rated by Moody's or S&P amounted to 5.6%. FMR has
determined that unrated debt securities that are lower quality account
for 5.6% of the total value of investment in securities.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 87.4%
Canada 3.5
Netherlands 3.2
United Kingdom 2.8
Mexico 1.1
Others (individually less 2.0
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost
of investment securities for income tax purposes was $4,344,717,000.
Net unrealized depreciation aggregated $448,922,000, of which
$160,215,000 related to appreciated investment securities and
$609,137,000 related to depreciated investment securities.
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)
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 3,895,795
value (including repurchase
agreements of $150,245)
(cost $4,341,819) - See
accompanying schedule
Receivable for investments 12,732
sold
Receivable for fund shares 11,681
sold
Dividends receivable 1,331
Interest receivable 77,075
Other receivables 948
TOTAL ASSETS 3,999,562
LIABILITIES
Payable to custodian bank $ 815
Payable for investments 14,626
purchased
Payable for fund shares 11,608
redeemed
Distributions payable 7,676
Accrued management fee 1,910
Other payables and accrued 2,438
expenses
TOTAL LIABILITIES 39,073
NET ASSETS $ 3,960,489
Net Assets consist of:
Paid in capital $ 4,424,518
Undistributed net investment 76,510
income
Accumulated undistributed net (94,523)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (446,016)
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 3,960,489
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
AMOUNTS IN THOUSANDS (EXCEPT
PER-SHARE AMOUNTS)
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.76
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share ($239,660
(divided by) 22,283 shares)
Maximum offering price per $11.30
share (100/95.25 of $10.76)
CLASS T: NET ASSET VALUE and $10.77
redemption price per share
($2,185,534 (divided by)
202,835 shares)
Maximum offering price per $11.16
share (100/96.50 of $10.77)
CLASS B: NET ASSET VALUE and $10.73
offering price per share
($1,129,022 (divided by)
105,217 shares) A
CLASS C: NET ASSET VALUE and $10.75
offering price per share
($280,569 (divided by)
26,097 shares) A
INSTITUTIONAL CLASS: NET $10.53
ASSET VALUE, offering price
and redemption price per
share ($125,704 (divided by)
11,933 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS SIX
MONTHS ENDED APRIL 30, 2000
(UNAUDITED)
INVESTMENT INCOME $ 24,139
Dividends
Interest 194,210
TOTAL INCOME 218,349
EXPENSES
Management fee $ 12,183
Transfer agent fees 3,586
Distribution fees 9,984
Accounting fees and expenses 422
Non-interested trustees' 7
compensation
Custodian fees and expenses 59
Registration fees 110
Audit 30
Legal 38
Miscellaneous 20
Total expenses before 26,439
reductions
Expense reductions (29) 26,410
NET INVESTMENT INCOME 191,939
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (58,074)
Foreign currency transactions (4) (58,078)
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (99,488)
Assets and liabilities in (26) (99,514)
foreign currencies
NET GAIN (LOSS) (157,592)
NET INCREASE (DECREASE) IN $ 34,347
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 191,939 $ 358,470
income
Net realized gain (loss) (58,078) (56,481)
Change in net unrealized (99,514) 120,312
appreciation (depreciation)
NET INCREASE (DECREASE) IN 34,347 422,301
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (168,331) (352,867)
From net investment income
From net realized gain - (40,674)
In excess of net realized - (29,684)
gain
Return of capital - (16,824)
TOTAL DISTRIBUTIONS (168,331) (440,049)
Share transactions - net (61,747) 568,709
increase (decrease)
TOTAL INCREASE (DECREASE) (195,731) 550,961
IN NET ASSETS
NET ASSETS
Beginning of period 4,156,220 3,605,259
End of period (including $ 3,960,489 $ 4,156,220
undistributed net investment
income of $76,510 and
$52,902, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 11.120 $ 11.090 $ 12.930 $ 12.300 $ 12.010
of period
Income from Investment
Operations
Net investment income D .525 1.022 1.111 1.058 .163
Net realized and unrealized (.421) .287 (1.603) .710 .267
gain (loss)
Total from investment .104 1.309 (.492) 1.768 .430
operations
Less Distributions
From net investment income (.464) (1.030) (1.048) (1.078) (.140)
From net realized gain - (.120) (.300) (.060) -
In excess of net realized - (.080) - - -
gain
Return of capital - (.049) - - -
Total distributions (.464) (1.279) (1.348) (1.138) (.140)
Net asset value, end of $ 10.760 $ 11.120 $ 11.090 $ 12.930 $ 12.300
period
TOTAL RETURN B, C .87% 11.98% (4.55)% 15.18% 3.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 240 $ 221 $ 117 $ 44 $ 4
(in millions)
Ratio of expenses to average .93% A .95% 1.01% 1.15% 1.25% A, F
net assets
Ratio of expenses to average .93% A .95% 1.00% G 1.14% G 1.25% A
net assets after expense
reductions
Ratio of net investment 9.45% A 8.89% 9.03% 8.58% 9.06% A
income to average net assets
Portfolio turnover rate 63% A 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910 $ 11.220
period
Income from Investment
Operations
Net investment income D .522 1.021 1.119 1.086 1.105 .930
Net realized and unrealized (.433) .274 (1.612) .686 .364 .680
gain (loss)
Total from investment .089 1.295 (.493) 1.772 1.469 1.610
operations
Less Distributions
From net investment income (.459) (1.017) (1.037) (1.082) (1.069) (.920)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.048) - - - -
Total distributions (.459) (1.265) (1.337) (1.142) (1.069) (.920)
Net asset value, end of period $ 10.770 $ 11.140 $ 11.110 $ 12.940 $ 12.310 $ 11.910
TOTAL RETURN B, C .73% 11.83% (4.54)% 15.21% 12.92% 15.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 2,186 $ 2,351 $ 2,322 $ 2,208 $ 1,709 $ 1,200
millions)
Ratio of expenses to average 1.03% A 1.04% 1.07% 1.09% 1.12% 1.15%
net assets
Ratio of expenses to average 1.03% A 1.04% 1.07% 1.08% E 1.11% E 1.15%
net assets after expense
reductions
Ratio of net investment 9.35% A 8.80% 8.91% 8.72% 9.20% 8.32%
income to average net assets
Portfolio turnover rate 63% A 61% 75% 105% 121% 112%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890 $ 11.210
period
Income from Investment
Operations
Net investment income D .483 .938 1.024 .998 1.017 .794
Net realized and unrealized (.421) .276 (1.588) .674 .361 .721
gain (loss)
Total from investment .062 1.214 (.564) 1.672 1.378 1.515
operations
Less Distributions
From net investment income (.422) (.949) (.956) (1.002) (.988) (.835)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.045) - - - -
Total distributions (.422) (1.194) (1.256) (1.062) (.988) (.835)
Net asset value, end of period $ 10.730 $ 11.090 $ 11.070 $ 12.890 $ 12.280 $ 11.890
TOTAL RETURN B, C .49% 11.10% (5.10)% 14.34% 12.10% 14.12%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 1,129 $ 1,192 $ 923 $ 593 $ 344 $ 156
millions)
Ratio of expenses to average 1.69% A 1.70% 1.74% 1.74% 1.79% 2.01%
net assets
Ratio of expenses to average 1.69% A 1.69% E 1.74% 1.74% 1.79% 2.01%
net assets after expense
reductions
Ratio of net investment 8.69% A 8.15% 8.25% 8.04% 8.52% 7.46%
income to average net assets
Portfolio turnover rate 63% A 61% 75% 105% 121% 112%
</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 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>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.110 $ 11.090 $ 12.970
period
Income from Investment
Operations
Net investment income D .478 .926 .988
Net realized and unrealized (.422) .280 (1.639)
gain (loss)
Total from investment .056 1.206 (.651)
operations
Less Distributions
From net investment income (.416) (.941) (.929)
From net realized gain - (.120) (.300)
In excess of net realized gain - (.080) -
Return of capital - (.045) -
Total distributions (.416) (1.186) (1.229)
Net asset value, end of period $ 10.750 $ 11.110 $ 11.090
TOTAL RETURN B, C .44% 11.00% (5.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 281 $ 269 $ 130
millions)
Ratio of expenses to average 1.78% A 1.78% 1.86% A
net assets
Ratio of expenses to average 1.78% A 1.78% 1.86% A
net assets after expense
reductions
Ratio of net investment 8.60% A 8.06% 8.21% A
income to average net assets
Portfolio turnover rate 63% A 61% 75%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760 $ 11.560
period
Income from Investment
Operations
Net investment income D .522 1.024 1.123 1.094 1.070 .390
Net realized and unrealized (.421) .269 (1.562) .671 .368 .193
gain (loss)
Total from investment .101 1.293 (.439) 1.765 1.438 .583
operations
Less Distributions
From net investment income (.471) (1.044) (1.071) (1.115) (1.078) (.383)
From net realized gain - (.120) (.300) (.060) - -
In excess of net realized gain - (.080) - - - -
Return of capital - (.049) - - - -
Total distributions (.471) (1.293) (1.371) (1.175) (1.078) (.383)
Net asset value, end of period $ 10.530 $ 10.900 $ 10.900 $ 12.710 $ 12.120 $ 11.760
TOTAL RETURN B, C .86% 12.05% (4.21)% 15.42% 12.81% 5.07%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in $ 126 $ 123 $ 113 $ 76 $ 38 $ 0.1
millions)
Ratio of expenses to average .80% A .82% .83% .85% 1.10% .70% A
net assets
Ratio of expenses to average .80% A .81% F .83% .85% 1.05% F .70% A
net assets after expense
reductions
Ratio of net investment 9.58% A 9.03% 9.12% 8.96% 9.26% 8.77% A
income to average net assets
Portfolio turnover rate 63% A 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor High Yield Fund (the fund) is a fund of Fidelity
Advisor Series II (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional
Class shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Class B shares will automatically
convert to Class A shares after a holding period of seven years from
the initial date of purchase. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market
(sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities (including restricted
securities) for which market quotations are not readily available are
valued at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain. The fund may place a debt obligation on non-accrual status
and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a
portion of interest has become doubtful based on consistently applied
procedures, under the general supervision of the Board of Trustees of
the fund. A debt obligation is removed from non-accrual status when
the issuer resumes interest payments or when collectibility of
interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or are invested in a
cross-section of other Fidelity funds. Deferred amounts remain in the
fund until distributed in accordance with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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, Federal Agency,
or other obligations found to be satisfactory by FMR 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, restricted securities (excluding 144A
issues) amounted to $14,384,000 or 0.4% 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 $12,086,000 or 0.3% of net
assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,257,346,000 and $1,356,549,000, 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 annualized rate of .58% of
average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted separate Distribution and
Service 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 $ 181,000 $ 1,000
CLASS T 2,963,000 61,000
CLASS B 5,393,000 3,906,000
CLASS C 1,447,000 789,000
$ 9,984,000 $ 4,757,000
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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 267,000 $ 104,000
CLASS T 603,000 236,000
CLASS B 2,128,000 2,128,000*
CLASS C 93,000 93,000*
$ 3,091,000 $ 2,561,000
* 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 $ 207,000 .17 *
CLASS T 1,964,000 .17 *
CLASS B 1,059,000 .18 *
CLASS C 233,000 .16 *
INSTITUTIONAL CLASS 123,000 .19 *
$ 3,586,000
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. Fidelity Service Company, Inc., an affiliate of FMR,
maintains the fund's accounting records. The fee is based on the level
of average net assets for the month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR 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 $3,000 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 the fund's expenses. During the period, the fund's
custodian fees were reduced by $26,000 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 10,058 $ 14,241
Class T 96,784 218,969
Class B 45,166 91,163
Class C 10,756 16,708
Institutional Class 5,567 11,786
Total $ 168,331 $ 352,867
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
Class T - 25,543
Class B - 10,501
Class C - 1,751
Institutional Class - 1,433
Total $ - $ 40,674
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
$ 168,331 $ 440,049
</TABLE>
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNTS IN THOUSANDS SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 13,700 $ 83,630
7,457
Reinvestment of distributions 563 1,173 6,269
Shares redeemed (5,612) (5,559) (63,033)
Net increase (decrease) 2,408 9,314 $ 26,866
CLASS T Shares sold 47,995 101,408 $ 538,926
Reinvestment of distributions 6,641 18,746 74,042
Shares redeemed (62,912) (118,096) (705,582)
Net increase (decrease) (8,278) 2,058 $ (92,614)
CLASS B Shares sold 14,558 43,832 $ 162,842
Reinvestment of distributions 2,529 6,459 28,086
Shares redeemed (19,358) (26,213) (216,274)
Net increase (decrease) (2,271) 24,078 $ (25,346)
CLASS C Shares sold 8,600 20,267 $ 96,469
Reinvestment of distributions 531 1,004 5,903
Shares redeemed (7,206) (8,802) (80,646)
Net increase (decrease) 1,925 12,469 $ 21,726
INSTITUTIONAL CLASS Shares 3,479 11,210 $ 38,336
sold
Reinvestment of distributions 377 981 4,106
Shares redeemed (3,173) (11,277) (34,821)
Net increase (decrease) 683 914 $ 7,621
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
AMOUNTS IN THOUSANDS DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 158,674
Reinvestment of distributions 13,495
Shares redeemed (64,643)
Net increase (decrease) $ 107,526
CLASS T Shares sold $ 1,178,382
Reinvestment of distributions 216,117
Shares redeemed (1,367,579)
Net increase (decrease) $ 26,920
CLASS B Shares sold $ 507,464
Reinvestment of distributions 74,128
Shares redeemed (302,213)
Net increase (decrease) $ 279,379
CLASS C Shares sold $ 234,940
Reinvestment of distributions 11,541
Shares redeemed (101,978)
Net increase (decrease) $ 144,503
INSTITUTIONAL CLASS Shares $ 127,339
sold
Reinvestment of distributions 11,076
Shares redeemed (128,034)
Net increase (decrease) $ 10,381
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Robert A. Lawrence, Vice President
Margaret L. Eagle, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Maria F. Dwyer, Deputy 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications and 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
HYI-SANN-0600 103977
1.703463.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE BOND
FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 2000
(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 37 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 46 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 1.23% 0.97% 30.02% 98.39%
FIDELITY ADV INT BOND - CL A -2.57% -2.82% 25.14% 90.95%
(INCL. 3.75% SALES CHARGE)
LB Int Govt/Corp Bond 1.07% 1.54% 35.03% 105.16%
Short-Intermediate Investment 1.29% 1.68% 30.86% 91.55%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class A's performance stacked up against its
peers, you can compare it to the short-intermediate investment grade
debt funds average, which reflects the performance of mutual funds
with similar objectives tracked by Lipper Inc. The past six months
average represents a peer group of 111 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL A 0.97% 5.39% 7.09%
FIDELITY ADV INT BOND - CL A -2.82% 4.59% 6.68%
(INCL. 3.75% SALES CHARGE)
LB Int Gov/Corp Bond 1.54% 6.19% 7.45%
Short-Intermediate Investment 1.68% 5.52% 6.71%
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
1990/04/30 9625.00 10000.00
1990/05/31 9853.61 9871.56
1990/06/30 9985.35 10356.59
1990/07/31 10118.66 10500.27
1990/08/31 10034.19 10457.17
1990/09/30 10108.37 10537.93
1990/10/31 10203.63 10660.28
1990/11/30 10380.25 10447.81
1990/12/31 10539.30 10970.07
1991/01/31 10617.65 11081.31
1991/02/28 10702.80 11169.91
1991/03/31 10770.61 11245.89
1991/04/30 10890.74 11368.46
1991/05/31 10948.84 11438.34
1991/06/30 10952.13 11446.39
1991/07/31 11075.31 11573.96
1991/08/31 11307.82 11794.93
1991/09/30 11517.85 11997.82
1991/10/31 11654.14 12134.76
1991/11/30 11765.64 12274.08
1991/12/31 12136.81 12573.85
1992/01/31 11981.51 12460.00
1992/02/29 12012.59 12509.20
1992/03/31 11969.35 12460.00
1992/04/30 12036.61 12569.50
1992/05/31 12256.58 12764.34
1992/06/30 12429.41 12953.30
1992/07/31 12721.96 13210.84
1992/08/31 12839.58 13342.98
1992/09/30 12988.95 13524.11
1992/10/31 12797.25 13348.64
1992/11/30 12829.92 13297.92
1992/12/31 13001.83 13476.00
1993/01/31 13260.98 13738.11
1993/02/28 13525.57 13954.72
1993/03/31 13614.41 14010.23
1993/04/30 13698.00 14123.00
1993/05/31 13707.63 14091.65
1993/06/30 13979.39 14312.83
1993/07/31 14087.67 14347.88
1993/08/31 14397.56 14575.38
1993/09/30 14438.80 14635.90
1993/10/31 14516.54 14675.08
1993/11/30 14433.42 14593.23
1993/12/31 14496.16 14660.06
1994/01/31 14649.26 14822.90
1994/02/28 14366.12 14603.68
1994/03/31 14087.84 14362.69
1994/04/30 14031.83 14264.94
1994/05/31 13983.41 14274.52
1994/06/30 13979.53 14276.48
1994/07/31 14112.20 14481.99
1994/08/31 14110.52 14527.27
1994/09/30 14040.48 14393.60
1994/10/31 14041.34 14391.64
1994/11/30 14081.59 14326.33
1994/12/31 14138.61 14377.05
1995/01/31 14292.30 14619.35
1995/02/28 14469.00 14922.61
1995/03/31 14542.94 15007.95
1995/04/30 14686.31 15193.21
1995/05/31 15045.06 15652.55
1995/06/30 15134.08 15757.48
1995/07/31 15125.98 15759.66
1995/08/31 15247.38 15903.12
1995/09/30 15354.74 16018.29
1995/10/31 15508.85 16196.80
1995/11/30 15690.69 16409.71
1995/12/31 15862.64 16581.69
1996/01/31 15993.74 16724.72
1996/02/29 15796.15 16528.36
1996/03/31 15734.97 16443.24
1996/04/30 15655.46 16385.11
1996/05/31 15636.34 16372.70
1996/06/30 15779.53 16546.64
1996/07/31 15820.88 16595.84
1996/08/31 15847.39 16608.90
1996/09/30 16020.88 16840.32
1996/10/31 16274.35 17137.91
1996/11/30 16462.09 17363.88
1996/12/31 16372.62 17252.64
1997/01/31 16441.86 17319.69
1997/02/28 16457.37 17352.78
1997/03/31 16354.94 17233.05
1997/04/30 16535.40 17435.51
1997/05/31 16639.00 17580.28
1997/06/30 16803.74 17740.72
1997/07/31 17111.88 18101.67
1997/08/31 17046.64 18010.67
1997/09/30 17222.77 18220.09
1997/10/31 17386.35 18421.90
1997/11/30 17418.64 18462.61
1997/12/31 17551.91 18610.21
1998/01/31 17765.66 18854.03
1998/02/28 17757.61 18839.66
1998/03/31 17824.66 18900.19
1998/04/30 17889.11 18994.88
1998/05/31 18023.01 19134.21
1998/06/30 18122.06 19256.34
1998/07/31 18172.08 19324.26
1998/08/31 18375.16 19627.95
1998/09/30 18713.88 20121.04
1998/10/31 18675.24 20101.23
1998/11/30 18724.54 20099.71
1998/12/31 18809.06 20180.47
1999/01/31 18929.35 20291.28
1999/02/28 18724.81 19993.03
1999/03/31 18845.34 20142.22
1999/04/30 18911.20 20204.07
1999/05/31 18749.66 20048.55
1999/06/30 18725.81 20062.54
1999/07/31 18706.65 20044.85
1999/08/31 18687.15 20060.07
1999/09/30 18863.52 20247.21
1999/10/31 18862.72 20299.45
1999/11/30 18896.51 20324.68
1999/12/31 18896.59 20258.30
2000/01/31 18825.10 20184.26
2000/02/29 18972.49 20350.57
2000/03/31 19147.26 20562.65
2000/04/28 19094.65 20516.07
IMATRL PRASUN SHR__CHT 20000430 20000519 153601 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class A on April
30, 1990, and the current 3.75% sales charge was paid. As the chart
shows, by April 30, 2000, the value of the investment would have grown
to $19,095 - a 90.95% increase on the initial investment. For
comparison, look at how the Lehman Brothers Intermediate
Government/Corporate Bond Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $20,516 - a 105.16% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER
31,
2000 1999 1998 1997 1996
Dividend returns 2.98% 5.36% 5.71% 6.16% 1.00%
Capital returns -1.75% -4.36% 1.70% 0.67% 1.64%
Total returns 1.23% 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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.20(cents) 30.47(cents) 59.59(cents)
Annualized dividend rate 6.20% 5.99% 5.79%
30-day annualized yield 6.47% - -
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 $10.20 over the past one
month, $10.21 over the past six months and $10.30 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 APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 1.07% 0.85% 29.62% 97.78%
FIDELITY ADV INT BOND - CL T -1.71% -1.92% 26.06% 92.34%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 1.07% 1.54% 35.03% 105.16%
Short-Intermediate Investment 1.29% 1.68% 30.86% 91.55%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class T's performance stacked up against its
peers, you can compare it to the short-intermediate investment grade
debt funds average, which reflects the performance of mutual funds
with similar objectives tracked by Lipper Inc. The past six months
average represents a peer group of 111 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL T 0.85% 5.33% 7.06%
FIDELITY ADV INT BOND - CL T -1.92% 4.74% 6.76%
(INCL. 2.75% SALES CHARGE)
LB Int Govt/Corp Bond 1.54% 6.19% 7.45%
Short-Intermediate Investment 1.68% 5.52% 6.71%
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
1990/04/30 9725.00 10000.00
1990/05/31 9955.98 9871.56
1990/06/30 10089.09 10356.59
1990/07/31 10223.79 10500.27
1990/08/31 10138.44 10457.17
1990/09/30 10213.39 10537.93
1990/10/31 10309.64 10660.28
1990/11/30 10488.10 10447.81
1990/12/31 10648.80 10970.07
1991/01/31 10727.96 11081.31
1991/02/28 10814.00 11169.91
1991/03/31 10882.51 11245.89
1991/04/30 11003.89 11368.46
1991/05/31 11062.59 11438.34
1991/06/30 11065.92 11446.39
1991/07/31 11190.37 11573.96
1991/08/31 11425.31 11794.93
1991/09/30 11637.52 11997.82
1991/10/31 11775.22 12134.76
1991/11/30 11887.88 12274.08
1991/12/31 12262.91 12573.85
1992/01/31 12105.99 12460.00
1992/02/29 12137.39 12509.20
1992/03/31 12093.71 12460.00
1992/04/30 12161.66 12569.50
1992/05/31 12383.92 12764.34
1992/06/30 12558.55 12953.30
1992/07/31 12854.13 13210.84
1992/08/31 12972.98 13342.98
1992/09/30 13123.90 13524.11
1992/10/31 12930.21 13348.64
1992/11/30 12963.22 13297.92
1992/12/31 13136.91 13476.00
1993/01/31 13398.75 13738.11
1993/02/28 13666.09 13954.72
1993/03/31 13755.86 14010.23
1993/04/30 13840.32 14123.00
1993/05/31 13850.05 14091.65
1993/06/30 14124.63 14312.83
1993/07/31 14234.03 14347.88
1993/08/31 14547.15 14575.38
1993/09/30 14588.81 14635.90
1993/10/31 14667.36 14675.08
1993/11/30 14583.38 14593.23
1993/12/31 14646.77 14660.06
1994/01/31 14801.46 14822.90
1994/02/28 14515.38 14603.68
1994/03/31 14234.21 14362.69
1994/04/30 14177.62 14264.94
1994/05/31 14128.69 14274.52
1994/06/30 14124.77 14276.48
1994/07/31 14258.82 14481.99
1994/08/31 14257.12 14527.27
1994/09/30 14186.35 14393.60
1994/10/31 14187.22 14391.64
1994/11/30 14227.89 14326.33
1994/12/31 14285.51 14377.05
1995/01/31 14440.79 14619.35
1995/02/28 14619.33 14922.61
1995/03/31 14694.03 15007.95
1995/04/30 14838.89 15193.21
1995/05/31 15201.37 15652.55
1995/06/30 15291.31 15757.48
1995/07/31 15283.13 15759.66
1995/08/31 15405.80 15903.12
1995/09/30 15514.27 16018.29
1995/10/31 15669.99 16196.80
1995/11/30 15853.71 16409.71
1995/12/31 16027.45 16581.69
1996/01/31 16159.91 16724.72
1996/02/29 15960.27 16528.36
1996/03/31 15898.45 16443.24
1996/04/30 15818.11 16385.11
1996/05/31 15798.79 16372.70
1996/06/30 15943.47 16546.64
1996/07/31 15985.25 16595.84
1996/08/31 16012.04 16608.90
1996/09/30 16203.09 16840.32
1996/10/31 16458.27 17137.91
1996/11/30 16662.87 17363.88
1996/12/31 16573.81 17252.64
1997/01/31 16627.12 17319.69
1997/02/28 16641.16 17352.78
1997/03/31 16537.42 17233.05
1997/04/30 16718.81 17435.51
1997/05/31 16822.85 17580.28
1997/06/30 16971.94 17740.72
1997/07/31 17299.04 18101.67
1997/08/31 17216.17 18010.67
1997/09/30 17409.46 18220.09
1997/10/31 17573.65 18421.90
1997/11/30 17588.95 18462.61
1997/12/31 17738.62 18610.21
1998/01/31 17953.74 18854.03
1998/02/28 17944.61 18839.66
1998/03/31 18011.51 18900.19
1998/04/30 18075.25 18994.88
1998/05/31 18192.77 19134.21
1998/06/30 18292.25 19256.34
1998/07/31 18342.11 19324.26
1998/08/31 18546.33 19627.95
1998/09/30 18886.75 20121.04
1998/10/31 18846.30 20101.23
1998/11/30 18892.55 20099.71
1998/12/31 18975.81 20180.47
1999/01/31 19112.47 20291.28
1999/02/28 18886.72 19993.03
1999/03/31 19006.40 20142.22
1999/04/30 19071.34 20204.07
1999/05/31 18924.15 20048.55
1999/06/30 18899.27 20062.54
1999/07/31 18859.96 20044.85
1999/08/31 18856.65 20060.07
1999/09/30 19032.92 20247.21
1999/10/31 19030.65 20299.45
1999/11/30 19061.99 20324.68
1999/12/31 19041.94 20258.30
2000/01/31 18967.75 20184.26
2000/02/29 19114.88 20350.57
2000/03/31 19289.50 20562.65
2000/04/28 19234.38 20516.07
IMATRL PRASUN SHR__CHT 20000430 20000519 154112 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class T on April
30, 1990, and the current 2.75% sales charge was paid. As the chart
shows, by April 30, 2000, the value of the investment would have grown
to $19,234 - a 92.34% 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 $20,516 - a 105.16% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.91% 5.25% 5.64% 6.12% 6.53% 6.46%
Capital returns -1.84% -4.27% 1.60% 0.66% -1.50% 3.99%
Total returns 1.07% 0.98% 7.24% 6.78% 5.03% 10.45%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.09(cents) 29.86(cents) 58.45(cents)
Annualized dividend rate 6.07% 5.87% 5.67%
30-day annualized yield 6.39% - -
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 $10.21 over the past one
month, $10.21 over the past six months and $10.30 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current 2.75% sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class B shares took place on June 30, 1994.
Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996)
that is reflected in returns after June 30, 1994. Returns between
September 10, 1992 (the date Class T shares were first offered) and
June 30, 1994 are those of Class T and reflect Class T shares' 0.25%
12b-1 fee. Returns prior to September 10, 1992 are those of the
Institutional Class, the original class of the fund, which does not
bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected,
returns prior to June 30, 1994 would have been lower. Class B shares'
contingent deferred sales charges included in the past six month, past
one year, past five year and past 10 year total return figures are 3%,
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL B 0.74% 0.21% 25.54% 89.84%
FIDELITY ADV INT BOND - CL B -2.20% -2.65% 25.54% 89.84%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 1.07% 1.54% 35.03% 105.16%
Short-Intermediate Investment 1.29% 1.68% 30.86% 91.55%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class B's performance stacked up against its
peers, you can compare it to the short-intermediate investment grade
debt funds average, which reflects the performance of mutual funds
with similar objectives tracked by Lipper Inc. The past six months
average represents a peer group of 111 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL B 0.21% 4.65% 6.62%
FIDELITY ADV INT BOND - CL B -2.65% 4.65% 6.62%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 1.54% 6.19% 7.45%
Short-Intermediate Investment 1.68% 5.52% 6.71%
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
1990/04/30 10000.00 10000.00
1990/05/31 10237.51 9871.56
1990/06/30 10374.39 10356.59
1990/07/31 10512.90 10500.27
1990/08/31 10425.13 10457.17
1990/09/30 10502.20 10537.93
1990/10/31 10601.17 10660.28
1990/11/30 10784.68 10447.81
1990/12/31 10949.93 10970.07
1991/01/31 11031.33 11081.31
1991/02/28 11119.80 11169.91
1991/03/31 11190.24 11245.89
1991/04/30 11315.06 11368.46
1991/05/31 11375.41 11438.34
1991/06/30 11378.84 11446.39
1991/07/31 11506.81 11573.96
1991/08/31 11748.39 11794.93
1991/09/30 11966.60 11997.82
1991/10/31 12108.20 12134.76
1991/11/30 12224.04 12274.08
1991/12/31 12609.67 12573.85
1992/01/31 12448.32 12460.00
1992/02/29 12480.61 12509.20
1992/03/31 12435.69 12460.00
1992/04/30 12505.57 12569.50
1992/05/31 12734.11 12764.34
1992/06/30 12913.68 12953.30
1992/07/31 13217.62 13210.84
1992/08/31 13339.83 13342.98
1992/09/30 13495.01 13524.11
1992/10/31 13295.84 13348.64
1992/11/30 13329.78 13297.92
1992/12/31 13508.39 13476.00
1993/01/31 13777.64 13738.11
1993/02/28 14052.54 13954.72
1993/03/31 14144.84 14010.23
1993/04/30 14231.69 14123.00
1993/05/31 14241.69 14091.65
1993/06/30 14524.05 14312.83
1993/07/31 14636.54 14347.88
1993/08/31 14958.51 14575.38
1993/09/30 15001.35 14635.90
1993/10/31 15082.12 14675.08
1993/11/30 14995.76 14593.23
1993/12/31 15060.95 14660.06
1994/01/31 15220.01 14822.90
1994/02/28 14925.84 14603.68
1994/03/31 14636.72 14362.69
1994/04/30 14578.53 14264.94
1994/05/31 14528.22 14274.52
1994/06/30 14524.19 14276.48
1994/07/31 14646.24 14481.99
1994/08/31 14633.76 14527.27
1994/09/30 14551.13 14393.60
1994/10/31 14527.47 14391.64
1994/11/30 14559.53 14326.33
1994/12/31 14593.80 14377.05
1995/01/31 14742.92 14619.35
1995/02/28 14917.00 14922.61
1995/03/31 14997.74 15007.95
1995/04/30 15121.81 15193.21
1995/05/31 15496.55 15652.55
1995/06/30 15593.07 15757.48
1995/07/31 15561.05 15759.66
1995/08/31 15677.42 15903.12
1995/09/30 15779.46 16018.29
1995/10/31 15929.16 16196.80
1995/11/30 16105.77 16409.71
1995/12/31 16273.66 16581.69
1996/01/31 16385.17 16724.72
1996/02/29 16189.78 16528.36
1996/03/31 16102.59 16443.24
1996/04/30 16026.94 16385.11
1996/05/31 15981.94 16372.70
1996/06/30 16135.35 16546.64
1996/07/31 16152.36 16595.84
1996/08/31 16169.74 16608.90
1996/09/30 16354.27 16840.32
1996/10/31 16619.10 17137.91
1996/11/30 16800.94 17363.88
1996/12/31 16701.34 17252.64
1997/01/31 16762.23 17319.69
1997/02/28 16767.06 17352.78
1997/03/31 16651.09 17233.05
1997/04/30 16808.13 17435.51
1997/05/31 16919.03 17580.28
1997/06/30 17059.64 17740.72
1997/07/31 17361.80 18101.67
1997/08/31 17284.66 18010.67
1997/09/30 17452.79 18220.09
1997/10/31 17607.64 18421.90
1997/11/30 17612.94 18462.61
1997/12/31 17753.76 18610.21
1998/01/31 17975.58 18854.03
1998/02/28 17957.21 18839.66
1998/03/31 18013.73 18900.19
1998/04/30 18067.76 18994.88
1998/05/31 18174.58 19134.21
1998/06/30 18280.78 19256.34
1998/07/31 18302.42 19324.26
1998/08/31 18495.87 19627.95
1998/09/30 18825.80 20121.04
1998/10/31 18775.19 20101.23
1998/11/30 18813.27 20099.71
1998/12/31 18886.45 20180.47
1999/01/31 18995.49 20291.28
1999/02/28 18778.04 19993.03
1999/03/31 18887.54 20142.22
1999/04/30 18944.47 20204.07
1999/05/31 18770.78 20048.55
1999/06/30 18753.92 20062.54
1999/07/31 18704.76 20044.85
1999/08/31 18691.39 20060.07
1999/09/30 18838.11 20247.21
1999/10/31 18843.89 20299.45
1999/11/30 18846.43 20324.68
1999/12/31 18834.63 20258.30
2000/01/31 18751.27 20184.26
2000/02/29 18886.70 20350.57
2000/03/31 19048.98 20562.65
2000/04/28 18984.03 20516.07
IMATRL PRASUN SHR__CHT 20000430 20000601 115834 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class B on April
30, 1990. As the chart shows, by April 30, 2000 the value of the
investment would have been $18,984 - an 89.84% 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 $20,516 - a 105.16% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.58% 4.65% 4.93% 5.38% 5.83% 5.66%
Capital returns -1.84% -4.28% 1.70% 0.57% -1.50% 3.99%
Total returns 0.74% 0.37% 6.63% 5.95% 4.33% 9.65%
</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, if
any, paid by the class are reinvested and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.53(cents) 26.53(cents) 51.80(cents)
Annualized dividend rate 5.41% 5.22% 5.03%
30-day annualized yield 5.91% - -
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average share price of $10.19 over the past one
month, $10.20 over the past six months and $10.29 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge.
FIDELITY ADVISOR INTERMEDIATE BOND FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
The initial offering of Class C shares took place on November 3, 1997.
Class C shares bear a 1.00% 12b-1 fee that is reflected in returns
after November 3, 1997. Returns between June 30, 1994 (the date Class
B shares were first offered) and November 3, 1997 are those of Class B
and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1,
1996). Returns between September 10, 1992 (the date Class T shares
were first offered) and June 30, 1994 are those of Class T and reflect
Class T shares' 0.25% 12b-1 fee. Returns prior to September 10, 1992
are those of the Institutional Class, the original class of the fund,
which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been
reflected, returns between November 3, 1997 and January 1, 1996 and
prior to June 30, 1994 would have been lower. Class C shares'
contingent deferred sales charge included in the past six month, past
one year, past five year and past 10 year total return figures are 1%,
1%, 0% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses, the past five year and past 10 year total returns
would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 0.80% 0.13% 25.01% 89.04%
FIDELITY ADV INT BOND - CL C -0.18% -0.83% 25.01% 89.04%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 1.07% 1.54% 35.03% 105.16%
Short-Intermediate Investment 1.29% 1.68% 30.86% 91.55%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to those of the
Lehman Brothers Intermediate Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and 10
years. To measure how Class C's performance stacked up against its
peers, you can compare it to the short-intermediate investment grade
debt funds average, which reflects the performance of mutual funds
with similar objectives tracked by Lipper Inc. The past six months
average represents a peer group of 111 mutual funds. These benchmarks
include reinvested dividends and capital gains, if any, and exclude
the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - CL C 0.13% 4.57% 6.57%
FIDELITY ADV INT BOND - CL C -0.83% 4.57% 6.57%
(INCL. CONTINGENT DEFERRED
SALES CHARGE)
LB Int Govt/Corp Bond 1.54% 6.19% 7.45%
Short-Intermediate Investment 1.68% 5.52% 6.71%
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
1990/04/30 10000.00 10000.00
1990/05/31 10237.51 9871.56
1990/06/30 10374.39 10356.59
1990/07/31 10512.90 10500.27
1990/08/31 10425.13 10457.17
1990/09/30 10502.20 10537.93
1990/10/31 10601.17 10660.28
1990/11/30 10784.68 10447.81
1990/12/31 10949.93 10970.07
1991/01/31 11031.33 11081.31
1991/02/28 11119.80 11169.91
1991/03/31 11190.24 11245.89
1991/04/30 11315.06 11368.46
1991/05/31 11375.41 11438.34
1991/06/30 11378.84 11446.39
1991/07/31 11506.81 11573.96
1991/08/31 11748.39 11794.93
1991/09/30 11966.60 11997.82
1991/10/31 12108.20 12134.76
1991/11/30 12224.04 12274.08
1991/12/31 12609.67 12573.85
1992/01/31 12448.32 12460.00
1992/02/29 12480.61 12509.20
1992/03/31 12435.69 12460.00
1992/04/30 12505.57 12569.50
1992/05/31 12734.11 12764.34
1992/06/30 12913.68 12953.30
1992/07/31 13217.62 13210.84
1992/08/31 13339.83 13342.98
1992/09/30 13495.01 13524.11
1992/10/31 13295.84 13348.64
1992/11/30 13329.78 13297.92
1992/12/31 13508.39 13476.00
1993/01/31 13777.64 13738.11
1993/02/28 14052.54 13954.72
1993/03/31 14144.84 14010.23
1993/04/30 14231.69 14123.00
1993/05/31 14241.69 14091.65
1993/06/30 14524.05 14312.83
1993/07/31 14636.54 14347.88
1993/08/31 14958.51 14575.38
1993/09/30 15001.35 14635.90
1993/10/31 15082.12 14675.08
1993/11/30 14995.76 14593.23
1993/12/31 15060.95 14660.06
1994/01/31 15220.01 14822.90
1994/02/28 14925.84 14603.68
1994/03/31 14636.72 14362.69
1994/04/30 14578.53 14264.94
1994/05/31 14528.22 14274.52
1994/06/30 14524.19 14276.48
1994/07/31 14646.24 14481.99
1994/08/31 14633.76 14527.27
1994/09/30 14551.13 14393.60
1994/10/31 14527.47 14391.64
1994/11/30 14559.53 14326.33
1994/12/31 14593.80 14377.05
1995/01/31 14742.92 14619.35
1995/02/28 14917.00 14922.61
1995/03/31 14997.74 15007.95
1995/04/30 15121.81 15193.21
1995/05/31 15496.55 15652.55
1995/06/30 15593.07 15757.48
1995/07/31 15561.05 15759.66
1995/08/31 15677.42 15903.12
1995/09/30 15779.46 16018.29
1995/10/31 15929.16 16196.80
1995/11/30 16105.77 16409.71
1995/12/31 16273.66 16581.69
1996/01/31 16385.17 16724.72
1996/02/29 16189.78 16528.36
1996/03/31 16102.59 16443.24
1996/04/30 16026.94 16385.11
1996/05/31 15981.94 16372.70
1996/06/30 16135.35 16546.64
1996/07/31 16152.36 16595.84
1996/08/31 16169.74 16608.90
1996/09/30 16354.27 16840.32
1996/10/31 16619.10 17137.91
1996/11/30 16800.94 17363.88
1996/12/31 16701.34 17252.64
1997/01/31 16762.23 17319.69
1997/02/28 16767.06 17352.78
1997/03/31 16651.09 17233.05
1997/04/30 16808.13 17435.51
1997/05/31 16919.03 17580.28
1997/06/30 17059.64 17740.72
1997/07/31 17361.80 18101.67
1997/08/31 17284.66 18010.67
1997/09/30 17452.79 18220.09
1997/10/31 17607.64 18421.90
1997/11/30 17608.43 18462.61
1997/12/31 17745.99 18610.21
1998/01/31 17949.00 18854.03
1998/02/28 17914.48 18839.66
1998/03/31 17969.46 18900.19
1998/04/30 18021.84 18994.88
1998/05/31 18126.72 19134.21
1998/06/30 18231.22 19256.34
1998/07/31 18251.33 19324.26
1998/08/31 18442.48 19627.95
1998/09/30 18787.46 20121.04
1998/10/31 18718.19 20101.23
1998/11/30 18755.80 20099.71
1998/12/31 18827.61 20180.47
1999/01/31 18953.35 20291.28
1999/02/28 18717.27 19993.03
1999/03/31 18825.00 20142.22
1999/04/30 18879.89 20204.07
1999/05/31 18705.41 20048.55
1999/06/30 18687.09 20062.54
1999/07/31 18636.87 20044.85
1999/08/31 18622.14 20060.07
1999/09/30 18766.90 20247.21
1999/10/31 18753.41 20299.45
1999/11/30 18772.76 20324.68
1999/12/31 18760.05 20258.30
2000/01/31 18675.45 20184.26
2000/02/29 18808.88 20350.57
2000/03/31 18969.34 20562.65
2000/04/28 18903.66 20516.07
IMATRL PRASUN SHR__CHT 20000430 20000519 160416 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Class C on April
30, 1990. As the chart shows, by April 30, 2000 the value of the
investment would have been $18,904 - an 89.04% 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 $20,516 - an 105.16% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
2000 1999 1998
Dividend returns 2.55% 4.56% 4.77%
Capital returns -1.75% -4.37% 1.80%
Total returns 0.80% 0.19% 6.57%
</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
PERIOD ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.47(cents) 26.12(cents) 50.93(cents)
Annualized dividend rate 5.34% 5.14% 4.95%
30-day annualized yield 5.85% - -
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 $10.19 over the past one
month, $10.20 over the past six months and $10.29 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Andrew Dudley)
NOTE TO SHAREHOLDERS: Andrew Dudley became Portfolio Manager of
Fidelity Advisor Intermediate Bond Fund on December 29, 1999.
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six months that ended April 30, 2000, the fund's Class A,
Class T, Class B and Class C shares returned 1.23%, 1.07%, 0.74% and
0.80%, respectively. By comparison, the Lehman Brothers Intermediate
Government/Corporate Bond Index returned 1.07% during the same time
frame, while the short-intermediate investment grade debt funds
average return tracked by Lipper Inc. was 1.29%. For the 12-month
period, the fund's Class A, Class T, Class B and Class C shares
returned 0.97%, 0.85%, 0.21% and 0.13%, respectively. During the same
12-month period, the Lehman Brothers Intermediate Government/Corporate
Bond Index returned 1.54%, while the short-intermediate investment
grade debt funds average return was 1.68%.
Q. WHAT FACTORS AFFECTED PERFORMANCE?
A. The fund's performance reflected the changing environment in the
fixed-income market. As interest rates climbed in anticipation of the
Federal Reserve Board's actions to tighten monetary policy by raising
short-term rates, prices tended to decline, resulting in total returns
that were less than the yields of short-term securities. The fund
consistently emphasized spread sectors - such as government agencies
and corporate, asset-backed and mortgage securities - that offered a
spread or yield advantage over Treasury securities. The fund had a
particularly heavy weighting in mortgages in late 1999, and this
contributed to performance.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE SIX-MONTH
PERIOD?
A. The fixed-income markets were in transition. In late 1999, the
spread sectors rebounded from a summer slump in which they
underperformed Treasuries. This slump was caused by the heavy issuance
of new corporate debt, concerns about potential Y2K problems and the
reaction of mortgage spreads to market volatility. Sentiment reversed
during the final two months of 1999 and in early January, as the
spread sectors rebounded in relation to Treasuries. Since mid-January,
however, spread sectors underperformed Treasuries. The fixed-income
markets became unsettled by questions about the pricing relationships
between Treasury securities and the spread sectors. As their yield
spreads relative to Treasuries widened, non-Treasuries suffered
greater price losses. The negative price impact caused by this
transition, however, was less noticeable among shorter-maturity
securities relative to longer-maturity securities.
Q. WHAT WERE YOUR PRINCIPAL STRATEGIES, ESPECIALLY WITH RESPECT TO
ALLOCATIONS TO THE SPREAD SECTORS?
A. Since I became the fund's manager at the end of 1999, I have
continued its emphasis on non-Treasury securities, but I have shifted
the emphasis to include a higher allocation to the corporate sector.
Specifically, I have focused on shorter-term corporate securities,
where there was less price risk from volatility in the spread sectors.
I also decreased the weighting in mortgage securities after that
sector enjoyed very strong performance in late 1999, using some of the
proceeds to fund investments in shorter corporate securities. At the
end of the six-month period, 56.2% of the fund's net assets were
invested in corporate and asset-backed securities. I believed that
because of the attractive values in non-Treasury securities,
particularly the higher quality ones, investors would eventually
return to them. Consistent with our style, we have not tried to
anticipate the direction of interest-rate changes and we kept the
fund's interest-rate sensitivity, or duration, close to that of the
Lehman Brothers Intermediate Government/Corporate Bond Index.
Q. DID ANY AREAS HURT PERFORMANCE?
A. Our security selection in the consumer retail sector detracted from
performance. The market had become extremely sensitive to negative
credit surprises, and we were hurt by securities that dramatically
suffered in that environment.
Q. WHAT IS YOUR OUTLOOK?
A. I think we may be in for a rocky ride in spread sectors. We have
entered a period of heightened volatility as the market tries to find
a new equilibrium in the relationship between the prices of Treasuries
and of non-Treasuries. While non-Treasury securities recently have
underperformed Treasuries, I don't think this trend necessarily will
be prolonged. Short-term volatility can create opportunity to invest
in securities that are mispriced in relation to their underlying
value. In this changing environment, I believe we can find attractive
opportunities among non-Treasury securities that have investment value
not reflected by current pricing.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income;
may also seek capital
appreciation
START DATE: February 2, 1984
SIZE: as of April 30, 2000,
more than $515 million
MANAGER: Andrew Dudley,
since December 1999;
joined Fidelity in 1996
ANDREW DUDLEY ON CHANGING
ASSUMPTIONS IN THE
FIXED-INCOME MARKET:
"During recent years, the market has
operated on relatively stable
assumptions about the long-term
relationships between Treasuries and
spread products. However, several
developments have raised questions
about the validity of the traditional
assumptions. First, federal budget
surpluses have meant there is less
need for government borrowing. This
translates into reduced supply of
Treasury securities, which has
altered the perceived supply/demand
relationship and supported the prices
of Treasuries. At the same time,
support seems to be growing for a
re-evaluation of the implied
government guarantee behind agency
securities, including Fannie Mae and
Freddie Mac. This has created doubts
about pricing for agency securities
and encouraged spread volatility.
Meanwhile, equity market volatility
and relatively weak demand for
so-called old economy stocks has had
an impact on the market's
perception of credit quality. Some
large-cap, old economy companies
have marginally increased leverage
in order to buoy equity performance,
often funding stock buy-back programs
with new debt. While this trend is in
the interests of shareholders, it has
undermined the relative pricing of
corporate bonds.
"Together, all these factors are
changing the dynamics of the
relationships between the prices of
Treasury and non-Treasury securities
and contributing to the
underperformance of the latter. In the
long run, I think the market will move
to a new equilibrium, but it doesn't
appear that we've reached that place
yet."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 41.6 58.2
Aa 4.7 1.8
A 25.0 18.9
Baa 20.5 12.9
Ba and Below 0.9 3.0
Not Rated 0.7 0.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS BA OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 5.5 6.1
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 APRIL 30, 2000
6 MONTHS AGO
Years 3.5 3.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 47.1% Corporate Bonds 30.4%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 31.6% Obligations 50.0%
Asset-Backed Securities 9.1% Asset-Backed Securities 7.2%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 4.2% Related Securities 2.2%
Other Investments 5.6% Other Investments 3.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.4% Net Other Assets 6.4%
* FOREIGN INVESTMENTS 13.3% ** FOREIGN INVESTMENTS 8.8%
Row: 1, Col: 1, Value: 47.1 Row: 1, Col: 1, Value: 30.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 31.6 Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 9.1 Row: 1, Col: 4, Value: 7.2
Row: 1, Col: 5, Value: 4.2 Row: 1, Col: 5, Value: 2.2
Row: 1, Col: 6, Value: 5.6 Row: 1, Col: 6, Value: 3.8
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.4 Row: 1, Col: 8, Value: 6.4
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 47.1%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.6%
DEFENSE ELECTRONICS - 0.6%
Raytheon Co. 7.9% 3/1/03 (c) Baa2 $ 3,000,000 $ 2,978,190
BASIC INDUSTRIES - 1.4%
CHEMICALS & PLASTICS - 1.4%
Monsanto Co. 5.75% 12/1/05 A2 5,000,000 4,607,000
Praxair, Inc. 6.15% 4/15/03 A3 2,640,000 2,513,702
7,120,702
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 255,000 242,130
9/15/04
TOTAL BASIC INDUSTRIES 7,362,832
CONSTRUCTION & REAL ESTATE -
3.1%
REAL ESTATE - 0.8%
Arden Realty LP 8.875% 3/1/05 Baa3 1,090,000 1,090,709
(c)
Duke Realty LP 7.3% 6/30/03 Baa1 3,000,000 2,926,110
4,016,819
REAL ESTATE INVESTMENT TRUSTS
- 2.3%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 640,000 597,030
7.9% 1/15/03 Baa2 2,700,000 2,692,305
Equity Office Properties Baa1 3,250,000 3,055,163
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 389,727
Spieker Properties LP:
6.8% 5/1/04 Baa2 535,000 504,890
6.875% 2/1/05 Baa2 5,000,000 4,722,050
11,961,165
TOTAL CONSTRUCTION & REAL 15,977,984
ESTATE
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
1.5%
Daimler-Chrysler North A1 5,000,000 4,952,500
America Holding Corp. 7.4%
1/20/05
TRW, Inc. 6.5% 6/1/02 Baa1 3,000,000 2,899,020
7,851,520
ENERGY - 1.1%
OIL & GAS - 1.1%
Apache Finance Property Ltd. Baa1 700,000 627,375
6.5% 12/15/07
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Canada Occidental Petroleum Baa2 $ 2,000,000 $ 1,924,300
Ltd. 7.125% 2/4/04
Conoco, Inc. 5.9% 4/15/04 A3 600,000 566,700
Oryx Energy Co. 8.125% Baa1 2,465,000 2,463,768
10/15/05
5,582,143
FINANCE - 24.3%
BANKS - 10.9%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,712,023
6.625% 10/31/01
Australia & New Zealand A1 1,200,000 1,139,760
Banking Group Ltd. yankee
6.25% 2/1/04
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,488,350
Bank of America Corp. 7.8% Aa3 4,500,000 4,486,995
2/15/10
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,083,904
BanPonce Financial Corp. A3 3,850,000 3,820,124
6.75% 8/9/01
Barclays Bank PLC yankee A1 2,400,000 2,376,576
5.95% 7/15/01
Capital One Bank 6.76% 7/23/02 Baa2 4,500,000 4,371,885
Capital One Financial Corp. Baa3 1,390,000 1,276,354
7.125% 8/1/08
First Union National Bank, A1 1,800,000 1,785,186
North Carolina 7.875% 2/15/10
HSBC Finance Nederland BV A2 250,000 247,413
7.4% 4/15/03 (c)
Kansallis-Osake-Pankki (NY A2 650,000 676,754
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 1,165,000 1,104,397
7.375% 9/17/04 Baa2 1,110,000 1,050,338
yankee 6.5% 11/15/02 Baa2 170,000 160,863
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 427,275
Midland Bank PLC 8.625% Aa3 2,700,000 2,786,616
12/15/04
NationsBank Corp. 8.125% Aa3 3,000,000 3,033,750
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 4,961,950
Sanwa Finance Aruba AEC 8.35% Baa1 3,800,000 3,769,866
7/15/09
Sumitomo Bank International Baa1 2,000,000 2,043,500
Finance NV 8.5% 6/15/09
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 1,958,860
Union Planters National Bank A3 1,500,000 1,489,365
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 4,760,500
56,012,604
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 9.5%
Associates Corp. of North
America:
5.875% 7/15/02 Aa3 $ 3,000,000 $ 2,897,730
6% 4/15/03 Aa3 1,350,000 1,293,813
Bell Atlantic Financial A1 3,000,000 2,969,100
Service, Inc. 7.6% 3/15/07
CIT Group, Inc. 5.5% 2/15/04 A1 290,000 267,977
Daimler-Chrysler NA Holding A1 350,000 344,397
Corp. 6.59% 6/18/02
Duke Capital Corp. 7.5% A3 3,600,000 3,463,596
10/1/09
ERP Operating LP:
6.55% 11/15/01 A3 470,000 459,994
7.1% 6/23/04 A3 5,000,000 4,771,900
Finova Capital Corp.:
6.11% 2/18/03 Baa1 500,000 454,020
7.25% 11/8/04 Baa1 2,700,000 2,474,415
Ford Motor Credit Co.:
6.625% 6/30/03 A2 5,500,000 5,334,725
7.75% 11/15/02 A2 100,000 100,094
General Electric Capital Aaa 5,400,000 5,330,664
Corp. 6.65% 9/3/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 1,275,000 1,106,802
HSBC Capital Funding LP A1 2,000,000 2,013,740
9.547% 12/31/49 (b)(c)
Newcourt Credit Group, Inc. A1 1,265,000 1,214,577
6.875% 2/16/05
PNC Funding Corp. 6.95% 9/1/02 A2 5,000,000 4,928,250
Popular North America, Inc. A3 2,250,000 2,237,175
7.375% 9/15/01
RBSG Capital Corp. 10.125% A2 1,500,000 1,611,960
3/1/04
Sears Roebuck Acceptance A3 1,725,000 1,637,594
Corp. 6% 3/20/03
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,092,894
5.875% 5/1/04 Baa1 2,265,000 2,128,035
Trizec Finance Ltd. yankee Baa3 590,000 601,800
10.875% 10/15/05
48,735,252
INSURANCE - 0.4%
Allstate Corp. 7.875% 5/1/05 A1 1,180,000 1,173,062
The St. Paul Companies, Inc. A1 1,100,000 1,085,150
7.875% 4/15/05
2,258,212
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 889,578
6.2% 4/2/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 3.3%
Amvescap PLC yankee 6.6% A3 $ 700,000 $ 650,538
5/15/05
DLJ, Inc. 8% 3/1/05 A3 3,600,000 3,584,880
Goldman Sachs Group, Inc. A1 4,550,000 4,506,320
7.5% 1/28/05
Lehman Brothers Holdings, A3 2,740,000 2,702,818
Inc. 7.75% 1/15/05
Merrill Lynch & Co., Inc. Aa3 2,750,000 2,799,665
8.3% 11/1/02
Morgan Stanley Dean Witter & Aa3 3,000,000 2,967,990
Co. 7.125% 1/15/03
17,212,211
TOTAL FINANCE 125,107,857
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
Tyco International Group SA Baa1 4,000,000 3,927,440
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.3%
WMX Technologies, Inc. 7.1% Ba1 1,810,000 1,639,969
8/1/26
TOTAL INDUSTRIAL MACHINERY & 5,567,409
EQUIPMENT
MEDIA & LEISURE - 2.8%
BROADCASTING - 1.0%
British Sky Broadcasting Baa3 3,000,000 2,785,680
Group PLC 7.3% 10/15/06
Continental Cablevision, Inc. Baa2 875,000 891,126
8.3% 5/15/06
Shaw Communications, Inc. Baa2 1,475,000 1,437,860
8.25% 4/11/10
5,114,666
ENTERTAINMENT - 0.8%
Walt Disney Co. 7.3% 2/8/05 A2 4,000,000 3,985,200
PUBLISHING - 1.0%
News America Holdings, Inc. Baa3 2,765,000 2,795,830
8.5% 2/15/05
Time Warner Entertainment Co. Baa2 2,700,000 2,568,402
LP 7.25% 9/1/08
5,364,232
TOTAL MEDIA & LEISURE 14,464,098
NONDURABLES - 0.7%
BEVERAGES - 0.5%
Seagram JE & Sons, Inc. Baa3 2,635,000 2,448,442
6.625% 12/15/05
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - CONTINUED
TOBACCO - 0.2%
RJ Reynolds Tobacco Holdings, Baa2 $ 1,300,000 $ 1,141,478
Inc. 7.375% 5/15/03
TOTAL NONDURABLES 3,589,920
RETAIL & WHOLESALE - 1.0%
DRUG STORES - 0.4%
Rite Aid Corp.:
6.5% 12/15/05 (c) Caa1 4,905,000 2,060,100
7.125% 1/15/07 Caa1 650,000 266,500
2,326,600
GENERAL MERCHANDISE STORES -
0.3%
Federated Department Stores, Baa1 1,375,000 1,395,763
Inc. 8.5% 6/15/03
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,480,000 1,476,122
TOTAL RETAIL & WHOLESALE 5,198,485
TECHNOLOGY - 0.4%
COMPUTERS & OFFICE EQUIPMENT
- 0.4%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,922,020
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 435,000 416,078
7.73% 9/15/12 Baa1 175,736 166,036
Delta Air Lines, Inc. 7.7% Baa3 2,000,000 1,910,400
12/15/05
2,492,514
UTILITIES - 8.6%
CELLULAR - 1.3%
Cable & Wireless A2 3,760,000 3,699,426
Communications PLC 6.375%
3/6/03
Vodafone AirTouch PLC 7.625% A2 3,000,000 2,988,090
2/15/05 (c)
6,687,516
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 3.7%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 $ 2,000,000 $ 1,817,820
7.05% 12/11/07 (c) Baa2 5,000,000 4,713,600
DR Investments UK PLC yankee A2 5,000,000 4,927,200
7.1% 5/15/02 (c)
NSTAR Companies 8% 2/15/10 A2 2,400,000 2,349,840
Philadelphia Electric Co.:
6.5% 5/1/03 Baa1 1,000,000 962,020
8% 4/1/02 Baa1 2,600,000 2,604,160
Texas Utilities Electric Co. A3 1,475,000 1,479,219
8% 6/1/02
18,853,859
GAS - 1.1%
CMS Panhandle Holding Co. Baa3 1,000,000 929,200
6.125% 3/15/04
Enron Corp.:
6.5% 8/1/02 Baa1 1,000,000 972,150
9.875% 6/15/03 Baa1 3,800,000 4,008,848
5,910,198
TELEPHONE SERVICES - 2.5%
MCI WorldCom, Inc. 6.4% A3 900,000 854,757
8/15/05
Telecomunicaciones de Puerto
Rico, Inc.:
6.15% 5/15/02 Baa2 3,650,000 3,516,666
6.65% 5/15/06 Baa2 1,330,000 1,223,933
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 3,745,000 3,556,027
7.7% 7/20/29 Baa1 1,000,000 940,570
US West Communications 7.2% A2 3,000,000 2,938,770
11/1/04 (c)
13,030,723
TOTAL UTILITIES 44,482,296
TOTAL NONCONVERTIBLE BONDS 242,577,268
(Cost $251,527,806)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.4%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 6.8%
Fannie Mae:
6.5% 8/15/04 Aaa 3,000,000 2,917,020
6.5% 4/29/09 Aaa 19,100,000 17,670,556
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Farm Credit Systems Financial Aaa $ 1,800,000 $ 1,907,712
Assistance Corp. 9.375%
7/21/03
Freddie Mac:
6.25% 7/15/04 Aaa 7,010,000 6,757,009
6.875% 1/15/05 Aaa 5,500,000 5,420,910
Government Trust Certificates Aaa 426,667 434,416
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E, 9.4%
5/15/02
35,107,623
U.S. TREASURY OBLIGATIONS -
9.6%
U.S. Treasury Bonds:
12% 8/15/13 Aaa 7,690,000 10,276,993
14% 11/15/11 Aaa 1,510,000 2,085,446
U.S. Treasury Notes:
4% 10/31/00 Aaa 11,800,000 11,665,362
5.5% 5/31/03 Aaa 700,000 678,342
5.5% 2/15/08 Aaa 9,765,000 9,213,430
6.625% 4/30/02 Aaa 4,800,000 4,792,512
7.5% 11/15/01 Aaa 6,190,000 6,259,638
7.875% 8/15/01 Aaa 4,500,000 4,565,385
49,537,108
TOTAL U.S. GOVERNMENT AND 84,644,731
GOVERNMENT AGENCY OBLIGATIONS
(Cost $86,037,915)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 15.2%
FANNIE MAE - 10.7%
5.5% 9/1/10 to 5/1/11 Aaa 1,373,499 1,278,654
6% 3/1/11 to 2/1/14 Aaa 12,151,000 11,386,124
6.5% 10/1/27 to 2/1/30 Aaa 8,433,505 7,879,656
7% 12/1/23 to 12/1/28 Aaa 3,031,325 2,912,036
7.5% 8/1/17 to 6/1/29 Aaa 21,333,612 20,905,255
8% 12/1/29 to 4/1/30 Aaa 1,399,860 1,397,662
8% 5/1/30 (d) Aaa 5,000,000 4,990,625
8.5% 6/1/11 to 9/1/25 Aaa 1,387,994 1,405,819
9.5% 2/1/25 Aaa 1,418,670 1,492,256
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
10% 1/1/20 Aaa $ 29,899 $ 31,740
10.5% 7/1/11 to 8/1/20 Aaa 205,534 221,354
11% 8/1/15 Aaa 1,213,849 1,309,439
12.5% 2/1/11 to 4/1/15 Aaa 54,891 61,397
55,272,017
FREDDIE MAC - 3.1%
8.5% 9/1/24 to 8/1/27 Aaa 1,323,920 1,343,558
8.5% 5/1/30 (d) Aaa 13,820,000 14,027,300
9.5% 1/1/17 Aaa 14,151 14,731
10% 4/1/06 to 8/1/10 Aaa 112,233 115,110
10.25% 12/1/09 Aaa 24,532 25,560
10.5% 5/1/21 Aaa 307,295 328,855
11% 12/1/11 Aaa 15,944 16,877
11.5% 10/1/15 Aaa 55,350 59,563
11.75% 10/1/10 Aaa 33,592 35,885
15,967,439
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.4%
6.5% 2/15/29 Aaa 4,593,540 4,302,125
7.5% 2/15/28 to 10/15/28 Aaa 314,116 309,036
8% 2/15/02 to 6/15/25 Aaa 1,825,937 1,840,614
8.5% 4/15/17 to 12/15/21 Aaa 378,711 386,112
11% 8/20/15 to 8/20/19 Aaa 236,140 254,951
7,092,838
TOTAL U.S. GOVERNMENT AGENCY 78,332,294
- MORTGAGE SECURITIES
(Cost $80,535,580)
ASSET-BACKED SECURITIES - 9.1%
American Express Credit A1 1,100,000 1,045,473
Account Master Trust 6.1%
12/15/06
Americredit Automobile Aaa 4,000,000 3,985,000
Receivables Trust 7.15%
8/15/04
Capital One Master Trust 7.1% Aaa 4,000,000 3,975,625
4/17/06
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Chase Manhattan Grantor Trust A3 $ 150,356 $ 149,087
6.76% 9/15/02
Chevy Chase Auto Receivables Aaa 121,734 120,507
Trust 6.6% 12/15/02
Citibank Credit Card Master A1 10,000,000 9,986,719
Trust I 6.45% 8/15/02
Conseco Finance Aaa 3,500,000 3,455,430
Securitizations Corp. 7.3%
5/1/31
Contimortgage Home Equity Aaa 439,402 437,755
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,928,750
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 12/15/02 Baa2 590,000 580,560
7.03% 11/15/03 Aaa 332,000 330,496
MBNA Master Credit Card Trust Aaa 4,500,000 4,493,672
II 7.35% 7/16/07
Orix Credit Alliance Aaa 2,500,000 2,485,156
Receivables Trust 7.12%
5/15/04
Premier Auto Trust 5.59% Aaa 5,000,000 4,817,150
2/9/04
Sears Credit Account Master Aaa 5,100,000 5,031,456
Trust II 7% 7/15/08
West Penn Funding LLC 6.81% Aaa 4,500,000 4,376,074
9/25/08
TOTAL ASSET-BACKED SECURITIES 47,198,910
(Cost $47,709,628)
COMMERCIAL MORTGAGE
SECURITIES - 4.2%
Commercial Mortgage Asset Aaa 3,669,243 3,617,644
Trust sequential pay Series
1999 C2 Class A1, 7.285%
12/17/07
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 4,000,000 3,752,500
1997-SPICE Class D, 7.332%
4/20/08
Series 1995-WF1 Class A-2, AAA 3,000,126 2,948,561
6.648% 12/21/27
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 1,600,000 1,585,500
(c)(e)
Class E, 6.7625% 1/10/13 Baa2 2,970,000 2,941,228
(c)(e)
Equitable Life Assurance A2 1,000,000 971,445
Society of the United States
Series 174 Class C1, 7.52%
5/15/06 (c)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Heller Financial Commercial Aaa $ 3,669,741 $ 3,676,049
Mortgage Asset Corp.
sequential pay Series
2000-PH1 Class A1, 7.715%
9/15/08
Thirteen Affiliates of Aaa 2,500,000 2,336,817
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (c)
TOTAL COMMERCIAL MORTGAGE 21,829,744
SECURITIES
(Cost $22,122,702)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (F) - 3.7%
Canadian Government 6.125% Aa2 5,000,000 4,895,000
7/15/02
Chile Republic 6.875% 4/28/09 Baa1 1,350,000 1,226,475
Korean Republic yankee:
8.75% 4/15/03 Baa2 550,000 556,188
8.875% 4/15/08 Baa2 2,000,000 2,073,080
New Brunswick Province yankee A1 2,250,000 2,235,938
7.125% 10/1/02
Quebec Province 5.75% 2/15/09 A2 5,000,000 4,429,950
United Mexican States 9.875% Baa3 3,400,000 3,512,200
2/1/10
TOTAL FOREIGN GOVERNMENT AND 18,928,831
GOVERNMENT AGENCY OBLIGATIONS
(Cost $19,185,966)
SUPRANATIONAL OBLIGATIONS -
1.9%
Inter-American Development Aaa 10,000,000 9,585,500
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
CASH EQUIVALENTS - 6.9%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 35,427,282 $ 35,410,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $35,410,000)
TOTAL INVESTMENT PORTFOLIO - 538,507,278
104.5%
(Cost $552,466,697)
NET OTHER ASSETS - (4.5)% (23,106,622)
NET ASSETS - 100% $ 515,400,656
</TABLE>
LEGEND
(a) S&P 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 $33,610,622 or 6.5% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.7% AAA, AA, A 60.9%
Baa 20.5% BBB 21.5%
Ba 0.5% BB 1.7%
B 0.0% B 0.4%
Caa 0.4% 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 0.7%.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 86.7%
United Kingdom 4.9
Canada 3.3
Multi-National 1.9
Japan 1.1
Others (individually less 2.1
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $552,466,697. Net unrealized depreciation
aggregated $13,959,419, of which $249,510 related to appreciated
investment securities and $14,208,929 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
APRIL 30, 2000
ASSETS
Investment in securities, at $ 538,507,278
value (including repurchase
agreements of $35,410,000)
(cost $552,466,697) - See
accompanying schedule
Cash 15,457
Receivable for investments 8,242,637
sold
Receivable for fund shares 1,354,327
sold
Interest receivable 8,326,394
TOTAL ASSETS 556,446,093
LIABILITIES
Payable for investments $ 13,658,514
purchased Regular delivery
Delayed delivery 19,162,238
Payable for fund shares 1,735,822
redeemed
Distributions payable 324,852
Accrued management fee 184,037
Distribution fees payable 130,524
Other payables and accrued 127,250
expenses
Collateral on securities 5,722,200
loaned, at value
TOTAL LIABILITIES 41,045,437
NET ASSETS $ 515,400,656
Net Assets consist of:
Paid in capital $ 553,364,640
Distributions in excess of (1,159,576)
net investment income
Accumulated undistributed net (22,844,989)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (13,959,419)
(depreciation) on investments
NET ASSETS $ 515,400,656
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000
CALCULATION OF MAXIMUM $10.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($34,490,226 (divided by)
3,408,705 shares)
Maximum offering price per $10.51
share (100/96.25 of $10.12)
CLASS T: NET ASSET VALUE and $10.12
redemption price per share
($302,764,791 (divided by)
29,911,239 shares)
Maximum offering price per $10.41
share (100/97.25 of $10.12)
CLASS B: NET ASSET VALUE and $10.11
offering price per share
($64,616,445 (divided by)
6,391,219 shares) A
CLASS C: NET ASSET VALUE and $10.11
offering price per share
($16,656,866 (divided by)
1,647,703 shares) A
INSTITUTIONAL CLASS: NET $10.13
ASSET VALUE, offering price
and redemption price per
share ($96,872,328 (divided
by) 9,560,244 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000
INVESTMENT INCOME $ 18,518,357
Interest
Security lending 40,422
Total income 18,558,779
EXPENSES
Management fee $ 1,154,977
Transfer agent fees 549,408
Distribution fees 792,338
Accounting and security 80,185
lending fees
Non-interested trustees' 824
compensation
Custodian fees and expenses 22,138
Registration fees 43,907
Audit 20,814
Legal 4,985
Miscellaneous 2,399
Total expenses before 2,671,975
reductions
Expense reductions (173) 2,671,802
NET INVESTMENT INCOME 15,886,977
REALIZED AND UNREALIZED GAIN (7,914,574)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (2,240,407)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (10,154,981)
NET INCREASE (DECREASE) IN $ 5,731,996
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 15,886,977 $ 30,133,116
income
Net realized gain (loss) (7,914,574) (4,437,550)
Change in net unrealized (2,240,407) (20,620,170)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,731,996 5,075,396
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (15,680,507) (29,409,259)
from net investment income
Share transactions - net (51,391,068) 91,347,340
increase (decrease)
TOTAL INCREASE (DECREASE) (61,339,579) 67,013,477
IN NET ASSETS
NET ASSETS
Beginning of period 576,740,235 509,726,758
End of period (including $ 515,400,656 $ 576,740,235
distributions in excess of
net investment income of
$1,159,576 and $1,366,046,
respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 H 1997 I 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.300 $ 10.770 $ 10.560 $ 10.590 $ 10.350
of period
Income from Investment
Operations
Net investment income D .303 .580 .537 .615 .159
Net realized and unrealized (.178) (.474) .207 (.023) .235
gain (loss)
Total from investment .125 .106 .744 .592 .394
operations
Less Distributions
From net investment income (.305) (.576) (.534) (.622) (.154)
Net asset value, end of $ 10.120 $ 10.300 $ 10.770 $ 10.560 $ 10.590
period
TOTAL RETURN B, C 1.23% 1.00% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 34,490 $ 22,628 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .86% A .87% .90% A, E .90% E .90% A, E
net assets
Ratio of expenses to average .86% A .86% F .90% A .90% .90% A
net assets after expense
reductions
Ratio of net investment 6.03% A 5.58% 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 NOVEMBER 30, 1996
H ELEVEN MONTHS ENDED OCTOBER 31
I YEAR ENDED NOVEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.310 $ 10.770 $ 10.560 $ 10.610 $ 10.760
period
Income from Investment
Operations
Net investment income .301 D .576 D .537 D .625 D .671 D
Net realized and unrealized (.192) (.473) .201 (.058) (.147)
gain (loss)
Total from investment .109 .103 .738 .567 .524
operations
Less Distributions
From net investment income (.299) (.563) (.528) (.617) (.674)
In excess of net investment - - - - -
income
Total distributions (.299) (.563) (.528) (.617) (.674)
Net asset value, end of period $ 10.120 $ 10.310 $ 10.770 $ 10.560 $ 10.610
TOTAL RETURN B, C 1.07% .98% 7.15% 5.56% 5.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 302,765 $ 315,350 $ 287,734 $ 278,869 $ 262,103
(000 omitted)
Ratio of expenses to average .97% A .97% .98% A .96% .97%
net assets
Ratio of expenses to average .97% A .97% .98% A .96% .96% F
net assets after expense
reductions
Ratio of net investment 5.92% A 5.48% 5.48% A 5.97% 6.38%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEARS ENDED OCTOBER 31,
1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.260 $ 11.140
period
Income from Investment
Operations
Net investment income .649 .609
Net realized and unrealized .491 (.876)
gain (loss)
Total from investment 1.140 (.267)
operations
Less Distributions
From net investment income (.640) (.555)
In excess of net investment - (.058)
income
Total distributions (.640) (.613)
Net asset value, end of period $ 10.760 $ 10.260
TOTAL RETURN B, C 11.43% (2.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 228,439 $ 141,866
(000 omitted)
Ratio of expenses to average .94% E 1.02% E
net assets
Ratio of expenses to average .94% 1.02%
net assets after expense
reductions
Ratio of net investment 6.20% 6.04%
income to average net assets
Portfolio turnover rate 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.300 $ 10.760 $ 10.540 $ 10.590 $ 10.750
period
Income from Investment
Operations
Net investment income .267 D .506 D .468 D .551 D .597 D
Net realized and unrealized (.192) (.467) .214 (.057) (.153)
gain (loss)
Total from investment .075 .039 .682 .494 .444
operations
Less Distributions
From net investment income (.265) (.499) (.462) (.544) (.604)
In excess of net investment - - - - -
income
Total distributions (.265) (.499) (.462) (.544) (.604)
Net asset value, end of period $ 10.110 $ 10.300 $ 10.760 $ 10.540 $ 10.590
TOTAL RETURN B, C .74% .37% 6.60% 4.83% 4.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 64,616 $ 64,532 $ 39,657 $ 22,201 $ 18,972
(000 omitted)
Ratio of expenses to average 1.61% A 1.61% 1.65% A, E 1.65% E 1.66% E
net assets
Ratio of net investment 5.27% A 4.83% 4.79% A 5.27% 5.69%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B YEARS ENDED OCTOBER 31,
1995 H 1994 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.250 $ 10.430
period
Income from Investment
Operations
Net investment income .579 .204
Net realized and unrealized .483 (.178)
gain (loss)
Total from investment 1.062 .026
operations
Less Distributions
From net investment income (.562) (.187)
In excess of net investment - (.019)
income
Total distributions (.562) (.206)
Net asset value, end of period $ 10.750 $ 10.250
TOTAL RETURN B, C 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,830 $ 3,156
(000 omitted)
Ratio of expenses to average 1.70% E 1.65% A, E
net assets
Ratio of net investment 5.44% 5.42% A
income to average net assets
Portfolio turnover rate 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 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 JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994
G ELEVEN MONTHS ENDED OCTOBER 31
H YEAR ENDED NOVEMBER 30
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 H 1997 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.290 $ 10.760 $ 10.560 $ 10.570
period
Income from Investment
Operations
Net investment income D .263 .492 .453 .031
Net realized and unrealized (.182) (.472) .199 (.005)
gain (loss)
Total from investment .081 .020 .652 .026
operations
Less Distributions
From net investment income (.261) (.490) (.452) (.036)
Net asset value, end of period $ 10.110 $ 10.290 $ 10.760 $ 10.560
TOTAL RETURN B, C .80% .19% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 16,657 $ 17,099 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.69% A 1.71% 1.75% A, E 1.75% A, E
net assets
Ratio of expenses to average 1.69% A 1.71% 1.75% A 1.73% A, F
net assets after expense
reductions
Ratio of net investment 5.19% A 4.73% 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 NOVEMBER 30, 1997
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
INSTITUTIONAL CLASS
(UNAUDITED) 1999 1998 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.310 $ 10.780 $ 10.570 $ 10.620 $ 10.770
period
Income from Investment
Operations
Net investment income .319 D .610 D .566 D .658 D .705 D
Net realized and unrealized (.186) (.485) .201 (.060) (.151)
gain (loss)
Total from investment .133 .125 .767 .598 .554
operations
Less Distributions
From net investment income (.313) (.595) (.557) (.648) (.704)
In excess of net investment - - - - -
income
Total distributions (.313) (.595) (.557) (.648) (.704)
Net asset value, end of period $ 10.130 $ 10.310 $ 10.780 $ 10.570 $ 10.620
TOTAL RETURN B, C 1.31% 1.19% 7.44% 5.86% 5.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 96,872 $ 157,131 $ 168,019 $ 177,427 $ 211,866
(000 omitted)
Ratio of expenses to average .65% A .66% .68% A .67% .66%
net assets
Ratio of net investment 6.24% A 5.78% 5.78% A 6.27% 6.69%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INSTITUTIONAL CLASS
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.270 $ 11.160
period
Income from Investment
Operations
Net investment income .671 .602
Net realized and unrealized .499 (.833)
gain (loss)
Total from investment 1.170 (.231)
operations
Less Distributions
From net investment income (.670) (.597)
In excess of net investment - (.062)
income
Total distributions (.670) (.659)
Net asset value, end of period $ 10.770 $ 10.270
TOTAL RETURN B, C 11.73% (2.10)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 208,861 $ 172,122
(000 omitted)
Ratio of expenses to average .67% E .61%
net assets
Ratio of net investment 6.47% 6.45%
income to average net assets
Portfolio turnover rate 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond (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 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 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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.
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.
2. OPERATING POLICIES - CONTINUED
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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $485,031,010 and $511,909,462, respectively, of which U.S.
government and government agency obligations aggregated $264,210,414
and $384,229,555, 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 annualized 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 and
Service 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 $ 19,700 $ 25
CLASS T 387,226 8,156
CLASS B 298,609 216,230
CLASS C 86,803 55,236
$ 792,338 $ 279,647
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 $ 49,509 $ 21,455
CLASS T 51,159 20,092
CLASS B 82,160 82,160*
CLASS C 4,996 4,996*
$ 187,824 $ 128,703
* 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 $ 27,778 .21
CLASS T 339,597 .22
CLASS B 70,888 .21
CLASS C 16,819 .19
INSTITUTIONAL CLASS 94,326 .16
$ 549,408
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.,
an affiliate of FMR, maintains the fund's accounting records and
administers the security lending program. The security lending fee is
based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
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 loans were
outstanding amounted to $17,693,375. The weighted average interest
rate was 5.89%. Interest earned from the interfund lending program
amounted to $23,165 and is included in interest income on the
Statement of Operations. At period end there were no interfund loans
outstanding.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $5,610,000. The fund received cash collateral of
$5,722,200 which was invested in cash equivalents.
7. 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 $173 under this arrangement.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED
OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 784,582 $ 868,429
Class T 9,040,635 16,224,315
Class B 1,726,725 2,508,941
Class C 443,749 528,467
Institutional Class 3,684,816 9,279,107
Total $ 15,680,507 $ 29,409,259
9. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 2,797,965 3,357,531 $ 28,556,714
Reinvestment of distributions 70,508 72,714 717,441
Shares redeemed (1,656,066) (1,997,004) (16,895,887)
Net increase (decrease) 1,212,407 1,433,241 $ 12,378,268
CLASS T Shares sold 8,066,494 17,948,549 $ 82,335,104
Reinvestment of distributions 803,061 1,383,474 8,178,673
Shares redeemed (9,551,028) (15,455,120) (97,434,426)
Net increase (decrease) (681,473) 3,876,903 $ (6,920,649)
CLASS B Shares sold 1,985,059 4,797,807 $ 20,279,776
Reinvestment of distributions 138,684 191,805 1,410,565
Shares redeemed (2,000,550) (2,406,744) (20,380,255)
Net increase (decrease) 123,193 2,582,868 $ 1,310,086
CLASS C Shares sold 748,996 1,681,953 $ 7,647,720
Reinvestment of distributions 31,975 38,404 325,233
Shares redeemed (794,275) (626,095) (8,085,233)
Net increase (decrease) (13,304) 1,094,262 $ (112,280)
INSTITUTIONAL CLASS Shares 1,018,444 5,199,325 $ 10,412,769
sold
Reinvestment of distributions 177,591 401,855 1,810,400
Shares redeemed (6,870,051) (5,956,114) (70,269,662)
Net increase (decrease) (5,674,016) (354,934) $ (58,046,493)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 35,356,066
Reinvestment of distributions 761,419
Shares redeemed (20,973,090)
Net increase (decrease) $ 15,144,395
CLASS T Shares sold $ 189,451,401
Reinvestment of distributions 14,555,972
Shares redeemed (162,894,381)
Net increase (decrease) $ 41,112,992
CLASS B Shares sold $ 50,576,586
Reinvestment of distributions 2,011,162
Shares redeemed (25,318,778)
Net increase (decrease) $ 27,268,970
CLASS C Shares sold $ 17,687,270
Reinvestment of distributions 402,151
Shares redeemed (6,595,292)
Net increase (decrease) $ 11,494,129
INSTITUTIONAL CLASS Shares $ 54,855,022
sold
Reinvestment of distributions 4,235,018
Shares redeemed (62,763,186)
Net increase (decrease) $ (3,673,146)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money
Management, Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
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GROWTH FUNDS
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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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTB-SANN-0600 103599
1.704556.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(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 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 32 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 1.31% 1.15% 31.65% 103.10%
LB Int Govt/Corp Bond 1.07% 1.54% 35.03% 105.16%
Short-Intermediate Investment 1.29% 1.68% 30.86% 91.55%
Grade Debt Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Lehman Brothers Intermediate
Government/Corporate Bond Index - a market value-weighted index of
government and investment-grade corporate fixed-rate debt issues with
maturities between one and 10 years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the short-intermediate investment grade debt funds average, which
reflects the performance of mutual funds with similar objectives
tracked by Lipper Inc. The past six months average represents a peer
group of 111 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT BOND - INST CL 1.15% 5.65% 7.34%
LB Int Govt/Corp Bond 1.54% 6.19% 7.45%
Short-Intermediate Investment 1.68% 5.52% 6.71%
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
1990/04/30 10000.00 10000.00
1990/05/31 10237.51 9871.56
1990/06/30 10374.39 10356.59
1990/07/31 10512.90 10500.27
1990/08/31 10425.13 10457.17
1990/09/30 10502.20 10537.93
1990/10/31 10601.17 10660.28
1990/11/30 10784.68 10447.81
1990/12/31 10949.93 10970.07
1991/01/31 11031.33 11081.31
1991/02/28 11119.80 11169.91
1991/03/31 11190.24 11245.89
1991/04/30 11315.06 11368.46
1991/05/31 11375.41 11438.34
1991/06/30 11378.84 11446.39
1991/07/31 11506.81 11573.96
1991/08/31 11748.39 11794.93
1991/09/30 11966.60 11997.82
1991/10/31 12108.20 12134.76
1991/11/30 12224.04 12274.08
1991/12/31 12609.67 12573.85
1992/01/31 12448.32 12460.00
1992/02/29 12480.61 12509.20
1992/03/31 12435.69 12460.00
1992/04/30 12505.57 12569.50
1992/05/31 12734.11 12764.34
1992/06/30 12913.68 12953.30
1992/07/31 13217.62 13210.84
1992/08/31 13339.83 13342.98
1992/09/30 13509.76 13524.11
1992/10/31 13313.54 13348.64
1992/11/30 13350.43 13297.92
1992/12/31 13532.15 13476.00
1993/01/31 13817.41 13738.11
1993/02/28 14083.12 13954.72
1993/03/31 14178.65 14010.23
1993/04/30 14270.46 14123.00
1993/05/31 14287.38 14091.65
1993/06/30 14575.86 14312.83
1993/07/31 14710.09 14347.88
1993/08/31 15041.16 14575.38
1993/09/30 15089.92 14635.90
1993/10/31 15176.40 14675.08
1993/11/30 15108.87 14593.23
1993/12/31 15167.18 14660.06
1994/01/31 15332.96 14822.90
1994/02/28 15026.62 14603.68
1994/03/31 14740.55 14362.69
1994/04/30 14704.01 14264.94
1994/05/31 14665.51 14274.52
1994/06/30 14667.31 14276.48
1994/07/31 14809.80 14481.99
1994/08/31 14811.50 14527.27
1994/09/30 14742.90 14393.60
1994/10/31 14746.14 14391.64
1994/11/30 14791.70 14326.33
1994/12/31 14855.00 14377.05
1995/01/31 15019.17 14619.35
1995/02/28 15193.10 14922.61
1995/03/31 15288.62 15007.95
1995/04/30 15427.79 15193.21
1995/05/31 15822.79 15652.55
1995/06/30 15919.66 15757.48
1995/07/31 15915.55 15759.66
1995/08/31 16047.70 15903.12
1995/09/30 16149.81 16018.29
1995/10/31 16331.53 16196.80
1995/11/30 16527.13 16409.71
1995/12/31 16712.56 16581.69
1996/01/31 16839.11 16724.72
1996/02/29 16651.00 16528.36
1996/03/31 16574.56 16443.24
1996/04/30 16510.07 16385.11
1996/05/31 16477.29 16372.70
1996/06/30 16647.69 16546.64
1996/07/31 16695.32 16595.84
1996/08/31 16711.47 16608.90
1996/09/30 16931.19 16840.32
1996/10/31 17201.84 17137.91
1996/11/30 17419.83 17363.88
1996/12/31 17331.27 17252.64
1997/01/31 17391.09 17319.69
1997/02/28 17409.88 17352.78
1997/03/31 17305.51 17233.05
1997/04/30 17499.15 17435.51
1997/05/31 17612.16 17580.28
1997/06/30 17772.36 17740.72
1997/07/31 18101.84 18101.67
1997/08/31 18036.71 18010.67
1997/09/30 18243.49 18220.09
1997/10/31 18402.84 18421.90
1997/11/30 18440.72 18462.61
1997/12/31 18585.04 18610.21
1998/01/31 18815.12 18854.03
1998/02/28 18810.12 18839.66
1998/03/31 18884.63 18900.19
1998/04/30 18956.24 18994.88
1998/05/31 19102.03 19134.21
1998/06/30 19211.06 19256.34
1998/07/31 19268.07 19324.26
1998/08/31 19487.30 19627.95
1998/09/30 19849.49 20121.04
1998/10/31 19811.96 20101.23
1998/11/30 19865.40 20099.71
1998/12/31 19957.58 20180.47
1999/01/31 20087.65 20291.28
1999/02/28 19874.35 19993.03
1999/03/31 20004.98 20142.22
1999/04/30 20078.56 20204.07
1999/05/31 19909.98 20048.55
1999/06/30 19907.80 20062.54
1999/07/31 19871.50 20044.85
1999/08/31 19853.95 20060.07
1999/09/30 20044.74 20247.21
1999/10/31 20047.31 20299.45
1999/11/30 20085.22 20324.68
1999/12/31 20088.42 20258.30
2000/01/31 20014.31 20184.26
2000/02/29 20174.22 20350.57
2000/03/31 20363.09 20562.65
2000/04/28 20310.04 20516.07
IMATRL PRASUN SHR__CHT 20000430 20000519 161910 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Bond Fund - Institutional
Class on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have grown to $20,310 - a 103.10%
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 $20,516 - a 105.16%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.06% 5.55% 5.96% 6.41% 6.83% 6.77%
Capital returns -1.75% -4.36% 1.70% 0.57% -1.50% 3.98%
Total returns 1.31% 1.19% 7.66% 6.98% 5.33% 10.75%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.34(cents) 31.30(cents) 61.48(cents)
Annualized dividend rate 6.36% 6.14% 5.96%
30-day annualized yield 6.90% - -
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 $10.22 over the past one
month, $10.22 over the past six months and $10.31 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Andrew Dudley)
NOTE TO SHAREHOLDERS: Andrew Dudley became Portfolio Manager of
Fidelity Advisor Intermediate Bond Fund on December 29, 1999.
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six months that ended April 30, 2000, the fund's
Institutional Class shares returned 1.31%. By comparison, the Lehman
Brothers Intermediate Government/Corporate Bond Index returned 1.07%
during the same time frame, while the short-intermediate investment
grade debt funds average return tracked by Lipper Inc. was 1.29%. For
the 12-month period, the fund's Institutional Class shares returned
1.15%. During the same 12-month period, the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 1.54%, while the
short-intermediate investment grade debt funds average return was
1.68%.
Q. WHAT FACTORS AFFECTED PERFORMANCE?
A. The fund's performance reflected the changing environment in the
fixed-income market. As interest rates climbed in anticipation of the
Federal Reserve Board's actions to tighten monetary policy by raising
short-term rates, prices tended to decline, resulting in total returns
that were less than the yields of short-term securities. The fund
consistently emphasized spread sectors - such as government agencies
and corporate, asset-backed and mortgage securities - that offered a
spread or yield advantage over Treasury securities. The fund had a
particularly heavy weighting in mortgages in late 1999, and this
contributed to performance.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE SIX-MONTH
PERIOD?
A. The fixed-income markets were in transition. In late 1999, the
spread sectors rebounded from a summer slump in which they
underperformed Treasuries. This slump was caused by the heavy issuance
of new corporate debt, concerns about potential Y2K problems and the
reaction of mortgage spreads to market volatility. Sentiment reversed
during the final two months of 1999 and in early January, as the
spread sectors rebounded in relation to Treasuries. Since mid-January,
however, spread sectors underperformed Treasuries. The fixed-income
markets became unsettled by questions about the pricing relationships
between Treasury securities and the spread sectors. As their yield
spreads relative to Treasuries widened, non-Treasuries suffered
greater price losses. The negative price impact caused by this
transition, however, was less noticeable among shorter-maturity
securities relative to longer-maturity securities.
Q. WHAT WERE YOUR PRINCIPAL STRATEGIES, ESPECIALLY WITH RESPECT TO
ALLOCATIONS TO THE SPREAD SECTORS?
A. Since I became the fund's manager at the end of 1999, I have
continued its emphasis on non-Treasury securities, but I have shifted
the emphasis to include a higher allocation to the corporate sector.
Specifically, I have focused on shorter-term corporate securities,
where there was less price risk from volatility in the spread sectors.
I also decreased the weighting in mortgage securities after that
sector enjoyed very strong performance in late 1999, using some of the
proceeds to fund investments in shorter corporate securities. At the
end of the six-month period, 56.2% of the fund's net assets were
invested in corporate and asset-backed securities. I believed that
because of the attractive values in non-Treasury securities,
particularly the higher quality ones, investors would eventually
return to them. Consistent with our style, we have not tried to
anticipate the direction of interest-rate changes and we kept the
fund's interest-rate sensitivity, or duration, close to that of the
Lehman Brothers Intermediate Government/Corporate Bond Index.
Q. DID ANY AREAS HURT PERFORMANCE?
A. Our security selection in the consumer retail sector detracted from
performance. The market had become extremely sensitive to negative
credit surprises, and we were hurt by securities that dramatically
suffered in that environment.
Q. WHAT IS YOUR OUTLOOK?
A. I think we may be in for a rocky ride in spread sectors. We have
entered a period of heightened volatility as the market tries to find
a new equilibrium in the relationship between the prices of Treasuries
and of non-Treasuries. While non-Treasury securities recently have
underperformed Treasuries, I don't think this trend necessarily will
be prolonged. Short-term volatility can create opportunity to invest
in securities that are mispriced in relation to their underlying
value. In this changing environment, I believe we can find attractive
opportunities among non-Treasury securities that have investment value
not reflected by current pricing.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income;
may also seek capital
appreciation
START DATE: February 2, 1984
SIZE: as of April 30, 2000,
more than $515 million
MANAGER: Andrew Dudley,
since December 1999;
joined Fidelity in 1996
ANDREW DUDLEY ON CHANGING
ASSUMPTIONS IN THE
FIXED-INCOME MARKET:
"During recent years, the market has
operated on relatively stable
assumptions about the long-term
relationships between Treasuries and
spread products. However, several
developments have raised questions
about the validity of the traditional
assumptions. First, federal budget
surpluses have meant there is less
need for government borrowing. This
translates into reduced supply of
Treasury securities, which has
altered the perceived supply/demand
relationship and supported the prices
of Treasuries. At the same time,
support seems to be growing for a
re-evaluation of the implied
government guarantee behind agency
securities, including Fannie Mae and
Freddie Mac. This has created doubts
about pricing for agency securities
and encouraged spread volatility.
Meanwhile, equity market volatility
and relatively weak demand for
so-called old economy stocks has had
an impact on the market's
perception of credit quality. Some
large-cap, old economy companies
have marginally increased leverage
in order to buoy equity performance,
often funding stock buy-back programs
with new debt. While this trend is in
the interests of shareholders, it has
undermined the relative pricing of
corporate bonds.
"Together, all these factors are
changing the dynamics of the
relationships between the prices of
Treasury and non-Treasury securities
and contributing to the
underperformance of the latter. In the
long run, I think the market will move
to a new equilibrium, but it doesn't
appear that we've reached that place
yet."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 41.6 58.2
Aa 4.7 1.8
A 25.0 18.9
Baa 20.5 12.9
Ba and Below 0.9 3.0
Not Rated 0.7 0.0
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. SECURITIES RATED AS BA OR BELOW
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING
AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 5.5 6.1
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 APRIL 30, 2000
6 MONTHS AGO
Years 3.5 3.4
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 47.1% Corporate Bonds 30.4%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 31.6% Obligations 50.0%
Asset-Backed Securities 9.1% Asset-Backed Securities 7.2%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 4.2% Related Securities 2.2%
Other Investments 5.6% Other Investments 3.8%
Short-Term Investments and Short-Term Investments and
Net Other Assets 2.4% Net Other Assets 6.4%
* FOREIGN INVESTMENTS 13.3% ** FOREIGN INVESTMENTS 8.8%
Row: 1, Col: 1, Value: 47.1 Row: 1, Col: 1, Value: 30.4
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 31.6 Row: 1, Col: 3, Value: 50.0
Row: 1, Col: 4, Value: 9.1 Row: 1, Col: 4, Value: 7.2
Row: 1, Col: 5, Value: 4.2 Row: 1, Col: 5, Value: 2.2
Row: 1, Col: 6, Value: 5.6 Row: 1, Col: 6, Value: 3.8
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.4 Row: 1, Col: 8, Value: 6.4
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 47.1%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.6%
DEFENSE ELECTRONICS - 0.6%
Raytheon Co. 7.9% 3/1/03 (c) Baa2 $ 3,000,000 $ 2,978,190
BASIC INDUSTRIES - 1.4%
CHEMICALS & PLASTICS - 1.4%
Monsanto Co. 5.75% 12/1/05 A2 5,000,000 4,607,000
Praxair, Inc. 6.15% 4/15/03 A3 2,640,000 2,513,702
7,120,702
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 255,000 242,130
9/15/04
TOTAL BASIC INDUSTRIES 7,362,832
CONSTRUCTION & REAL ESTATE -
3.1%
REAL ESTATE - 0.8%
Arden Realty LP 8.875% 3/1/05 Baa3 1,090,000 1,090,709
(c)
Duke Realty LP 7.3% 6/30/03 Baa1 3,000,000 2,926,110
4,016,819
REAL ESTATE INVESTMENT TRUSTS
- 2.3%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 640,000 597,030
7.9% 1/15/03 Baa2 2,700,000 2,692,305
Equity Office Properties Baa1 3,250,000 3,055,163
Trust 6.5% 1/15/04
ProLogis Trust 6.7% 4/15/04 Baa1 415,000 389,727
Spieker Properties LP:
6.8% 5/1/04 Baa2 535,000 504,890
6.875% 2/1/05 Baa2 5,000,000 4,722,050
11,961,165
TOTAL CONSTRUCTION & REAL 15,977,984
ESTATE
DURABLES - 1.5%
AUTOS, TIRES, & ACCESSORIES -
1.5%
Daimler-Chrysler North A1 5,000,000 4,952,500
America Holding Corp. 7.4%
1/20/05
TRW, Inc. 6.5% 6/1/02 Baa1 3,000,000 2,899,020
7,851,520
ENERGY - 1.1%
OIL & GAS - 1.1%
Apache Finance Property Ltd. Baa1 700,000 627,375
6.5% 12/15/07
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Canada Occidental Petroleum Baa2 $ 2,000,000 $ 1,924,300
Ltd. 7.125% 2/4/04
Conoco, Inc. 5.9% 4/15/04 A3 600,000 566,700
Oryx Energy Co. 8.125% Baa1 2,465,000 2,463,768
10/15/05
5,582,143
FINANCE - 24.3%
BANKS - 10.9%
ABN-Amro Bank NV, Chicago A1 2,750,000 2,712,023
6.625% 10/31/01
Australia & New Zealand A1 1,200,000 1,139,760
Banking Group Ltd. yankee
6.25% 2/1/04
Banc One Corp. 7.25% 8/1/02 A1 2,500,000 2,488,350
Bank of America Corp. 7.8% Aa3 4,500,000 4,486,995
2/15/10
BankBoston Corp. 6.625% 2/1/04 A3 3,200,000 3,083,904
BanPonce Financial Corp. A3 3,850,000 3,820,124
6.75% 8/9/01
Barclays Bank PLC yankee A1 2,400,000 2,376,576
5.95% 7/15/01
Capital One Bank 6.76% 7/23/02 Baa2 4,500,000 4,371,885
Capital One Financial Corp. Baa3 1,390,000 1,276,354
7.125% 8/1/08
First Union National Bank, A1 1,800,000 1,785,186
North Carolina 7.875% 2/15/10
HSBC Finance Nederland BV A2 250,000 247,413
7.4% 4/15/03 (c)
Kansallis-Osake-Pankki (NY A2 650,000 676,754
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 1,165,000 1,104,397
7.375% 9/17/04 Baa2 1,110,000 1,050,338
yankee 6.5% 11/15/02 Baa2 170,000 160,863
MBNA Corp. 6.34% 6/2/03 Baa2 450,000 427,275
Midland Bank PLC 8.625% Aa3 2,700,000 2,786,616
12/15/04
NationsBank Corp. 8.125% Aa3 3,000,000 3,033,750
6/15/02
Provident Bank 6.125% 12/15/00 A3 5,000,000 4,961,950
Sanwa Finance Aruba AEC 8.35% Baa1 3,800,000 3,769,866
7/15/09
Sumitomo Bank International Baa1 2,000,000 2,043,500
Finance NV 8.5% 6/15/09
U.S. Bancorp 7.5% 6/1/26 A2 2,000,000 1,958,860
Union Planters National Bank A3 1,500,000 1,489,365
6.81% 8/20/01
Wachovia Corp. 6.605% 10/1/25 A1 5,000,000 4,760,500
56,012,604
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 9.5%
Associates Corp. of North
America:
5.875% 7/15/02 Aa3 $ 3,000,000 $ 2,897,730
6% 4/15/03 Aa3 1,350,000 1,293,813
Bell Atlantic Financial A1 3,000,000 2,969,100
Service, Inc. 7.6% 3/15/07
CIT Group, Inc. 5.5% 2/15/04 A1 290,000 267,977
Daimler-Chrysler NA Holding A1 350,000 344,397
Corp. 6.59% 6/18/02
Duke Capital Corp. 7.5% A3 3,600,000 3,463,596
10/1/09
ERP Operating LP:
6.55% 11/15/01 A3 470,000 459,994
7.1% 6/23/04 A3 5,000,000 4,771,900
Finova Capital Corp.:
6.11% 2/18/03 Baa1 500,000 454,020
7.25% 11/8/04 Baa1 2,700,000 2,474,415
Ford Motor Credit Co.:
6.625% 6/30/03 A2 5,500,000 5,334,725
7.75% 11/15/02 A2 100,000 100,094
General Electric Capital Aaa 5,400,000 5,330,664
Corp. 6.65% 9/3/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 1,275,000 1,106,802
HSBC Capital Funding LP A1 2,000,000 2,013,740
9.547% 12/31/49 (b)(c)
Newcourt Credit Group, Inc. A1 1,265,000 1,214,577
6.875% 2/16/05
PNC Funding Corp. 6.95% 9/1/02 A2 5,000,000 4,928,250
Popular North America, Inc. A3 2,250,000 2,237,175
7.375% 9/15/01
RBSG Capital Corp. 10.125% A2 1,500,000 1,611,960
3/1/04
Sears Roebuck Acceptance A3 1,725,000 1,637,594
Corp. 6% 3/20/03
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,160,000 1,092,894
5.875% 5/1/04 Baa1 2,265,000 2,128,035
Trizec Finance Ltd. yankee Baa3 590,000 601,800
10.875% 10/15/05
48,735,252
INSURANCE - 0.4%
Allstate Corp. 7.875% 5/1/05 A1 1,180,000 1,173,062
The St. Paul Companies, Inc. A1 1,100,000 1,085,150
7.875% 4/15/05
2,258,212
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 900,000 889,578
6.2% 4/2/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 3.3%
Amvescap PLC yankee 6.6% A3 $ 700,000 $ 650,538
5/15/05
DLJ, Inc. 8% 3/1/05 A3 3,600,000 3,584,880
Goldman Sachs Group, Inc. A1 4,550,000 4,506,320
7.5% 1/28/05
Lehman Brothers Holdings, A3 2,740,000 2,702,818
Inc. 7.75% 1/15/05
Merrill Lynch & Co., Inc. Aa3 2,750,000 2,799,665
8.3% 11/1/02
Morgan Stanley Dean Witter & Aa3 3,000,000 2,967,990
Co. 7.125% 1/15/03
17,212,211
TOTAL FINANCE 125,107,857
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.8%
Tyco International Group SA Baa1 4,000,000 3,927,440
yankee 6.125% 6/15/01
POLLUTION CONTROL - 0.3%
WMX Technologies, Inc. 7.1% Ba1 1,810,000 1,639,969
8/1/26
TOTAL INDUSTRIAL MACHINERY & 5,567,409
EQUIPMENT
MEDIA & LEISURE - 2.8%
BROADCASTING - 1.0%
British Sky Broadcasting Baa3 3,000,000 2,785,680
Group PLC 7.3% 10/15/06
Continental Cablevision, Inc. Baa2 875,000 891,126
8.3% 5/15/06
Shaw Communications, Inc. Baa2 1,475,000 1,437,860
8.25% 4/11/10
5,114,666
ENTERTAINMENT - 0.8%
Walt Disney Co. 7.3% 2/8/05 A2 4,000,000 3,985,200
PUBLISHING - 1.0%
News America Holdings, Inc. Baa3 2,765,000 2,795,830
8.5% 2/15/05
Time Warner Entertainment Co. Baa2 2,700,000 2,568,402
LP 7.25% 9/1/08
5,364,232
TOTAL MEDIA & LEISURE 14,464,098
NONDURABLES - 0.7%
BEVERAGES - 0.5%
Seagram JE & Sons, Inc. Baa3 2,635,000 2,448,442
6.625% 12/15/05
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - CONTINUED
TOBACCO - 0.2%
RJ Reynolds Tobacco Holdings, Baa2 $ 1,300,000 $ 1,141,478
Inc. 7.375% 5/15/03
TOTAL NONDURABLES 3,589,920
RETAIL & WHOLESALE - 1.0%
DRUG STORES - 0.4%
Rite Aid Corp.:
6.5% 12/15/05 (c) Caa1 4,905,000 2,060,100
7.125% 1/15/07 Caa1 650,000 266,500
2,326,600
GENERAL MERCHANDISE STORES -
0.3%
Federated Department Stores, Baa1 1,375,000 1,395,763
Inc. 8.5% 6/15/03
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 1,480,000 1,476,122
TOTAL RETAIL & WHOLESALE 5,198,485
TECHNOLOGY - 0.4%
COMPUTERS & OFFICE EQUIPMENT
- 0.4%
Comdisco, Inc. 5.95% 4/30/02 Baa1 2,000,000 1,922,020
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 435,000 416,078
7.73% 9/15/12 Baa1 175,736 166,036
Delta Air Lines, Inc. 7.7% Baa3 2,000,000 1,910,400
12/15/05
2,492,514
UTILITIES - 8.6%
CELLULAR - 1.3%
Cable & Wireless A2 3,760,000 3,699,426
Communications PLC 6.375%
3/6/03
Vodafone AirTouch PLC 7.625% A2 3,000,000 2,988,090
2/15/05 (c)
6,687,516
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 3.7%
Avon Energy Partners Holdings:
6.46% 3/4/08 (c) Baa2 $ 2,000,000 $ 1,817,820
7.05% 12/11/07 (c) Baa2 5,000,000 4,713,600
DR Investments UK PLC yankee A2 5,000,000 4,927,200
7.1% 5/15/02 (c)
NSTAR Companies 8% 2/15/10 A2 2,400,000 2,349,840
Philadelphia Electric Co.:
6.5% 5/1/03 Baa1 1,000,000 962,020
8% 4/1/02 Baa1 2,600,000 2,604,160
Texas Utilities Electric Co. A3 1,475,000 1,479,219
8% 6/1/02
18,853,859
GAS - 1.1%
CMS Panhandle Holding Co. Baa3 1,000,000 929,200
6.125% 3/15/04
Enron Corp.:
6.5% 8/1/02 Baa1 1,000,000 972,150
9.875% 6/15/03 Baa1 3,800,000 4,008,848
5,910,198
TELEPHONE SERVICES - 2.5%
MCI WorldCom, Inc. 6.4% A3 900,000 854,757
8/15/05
Telecomunicaciones de Puerto
Rico, Inc.:
6.15% 5/15/02 Baa2 3,650,000 3,516,666
6.65% 5/15/06 Baa2 1,330,000 1,223,933
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 3,745,000 3,556,027
7.7% 7/20/29 Baa1 1,000,000 940,570
US West Communications 7.2% A2 3,000,000 2,938,770
11/1/04 (c)
13,030,723
TOTAL UTILITIES 44,482,296
TOTAL NONCONVERTIBLE BONDS 242,577,268
(Cost $251,527,806)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 16.4%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 6.8%
Fannie Mae:
6.5% 8/15/04 Aaa 3,000,000 2,917,020
6.5% 4/29/09 Aaa 19,100,000 17,670,556
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
Farm Credit Systems Financial Aaa $ 1,800,000 $ 1,907,712
Assistance Corp. 9.375%
7/21/03
Freddie Mac:
6.25% 7/15/04 Aaa 7,010,000 6,757,009
6.875% 1/15/05 Aaa 5,500,000 5,420,910
Government Trust Certificates Aaa 426,667 434,416
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E, 9.4%
5/15/02
35,107,623
U.S. TREASURY OBLIGATIONS -
9.6%
U.S. Treasury Bonds:
12% 8/15/13 Aaa 7,690,000 10,276,993
14% 11/15/11 Aaa 1,510,000 2,085,446
U.S. Treasury Notes:
4% 10/31/00 Aaa 11,800,000 11,665,362
5.5% 5/31/03 Aaa 700,000 678,342
5.5% 2/15/08 Aaa 9,765,000 9,213,430
6.625% 4/30/02 Aaa 4,800,000 4,792,512
7.5% 11/15/01 Aaa 6,190,000 6,259,638
7.875% 8/15/01 Aaa 4,500,000 4,565,385
49,537,108
TOTAL U.S. GOVERNMENT AND 84,644,731
GOVERNMENT AGENCY OBLIGATIONS
(Cost $86,037,915)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 15.2%
FANNIE MAE - 10.7%
5.5% 9/1/10 to 5/1/11 Aaa 1,373,499 1,278,654
6% 3/1/11 to 2/1/14 Aaa 12,151,000 11,386,124
6.5% 10/1/27 to 2/1/30 Aaa 8,433,505 7,879,656
7% 12/1/23 to 12/1/28 Aaa 3,031,325 2,912,036
7.5% 8/1/17 to 6/1/29 Aaa 21,333,612 20,905,255
8% 12/1/29 to 4/1/30 Aaa 1,399,860 1,397,662
8% 5/1/30 (d) Aaa 5,000,000 4,990,625
8.5% 6/1/11 to 9/1/25 Aaa 1,387,994 1,405,819
9.5% 2/1/25 Aaa 1,418,670 1,492,256
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - CONTINUED
10% 1/1/20 Aaa $ 29,899 $ 31,740
10.5% 7/1/11 to 8/1/20 Aaa 205,534 221,354
11% 8/1/15 Aaa 1,213,849 1,309,439
12.5% 2/1/11 to 4/1/15 Aaa 54,891 61,397
55,272,017
FREDDIE MAC - 3.1%
8.5% 9/1/24 to 8/1/27 Aaa 1,323,920 1,343,558
8.5% 5/1/30 (d) Aaa 13,820,000 14,027,300
9.5% 1/1/17 Aaa 14,151 14,731
10% 4/1/06 to 8/1/10 Aaa 112,233 115,110
10.25% 12/1/09 Aaa 24,532 25,560
10.5% 5/1/21 Aaa 307,295 328,855
11% 12/1/11 Aaa 15,944 16,877
11.5% 10/1/15 Aaa 55,350 59,563
11.75% 10/1/10 Aaa 33,592 35,885
15,967,439
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.4%
6.5% 2/15/29 Aaa 4,593,540 4,302,125
7.5% 2/15/28 to 10/15/28 Aaa 314,116 309,036
8% 2/15/02 to 6/15/25 Aaa 1,825,937 1,840,614
8.5% 4/15/17 to 12/15/21 Aaa 378,711 386,112
11% 8/20/15 to 8/20/19 Aaa 236,140 254,951
7,092,838
TOTAL U.S. GOVERNMENT AGENCY 78,332,294
- MORTGAGE SECURITIES
(Cost $80,535,580)
ASSET-BACKED SECURITIES - 9.1%
American Express Credit A1 1,100,000 1,045,473
Account Master Trust 6.1%
12/15/06
Americredit Automobile Aaa 4,000,000 3,985,000
Receivables Trust 7.15%
8/15/04
Capital One Master Trust 7.1% Aaa 4,000,000 3,975,625
4/17/06
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Chase Manhattan Grantor Trust A3 $ 150,356 $ 149,087
6.76% 9/15/02
Chevy Chase Auto Receivables Aaa 121,734 120,507
Trust 6.6% 12/15/02
Citibank Credit Card Master A1 10,000,000 9,986,719
Trust I 6.45% 8/15/02
Conseco Finance Aaa 3,500,000 3,455,430
Securitizations Corp. 7.3%
5/1/31
Contimortgage Home Equity Aaa 439,402 437,755
Loan Trust 6.26% 7/15/12
Discover Card Master Trust I A2 2,000,000 1,928,750
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.4% 12/15/02 Baa2 590,000 580,560
7.03% 11/15/03 Aaa 332,000 330,496
MBNA Master Credit Card Trust Aaa 4,500,000 4,493,672
II 7.35% 7/16/07
Orix Credit Alliance Aaa 2,500,000 2,485,156
Receivables Trust 7.12%
5/15/04
Premier Auto Trust 5.59% Aaa 5,000,000 4,817,150
2/9/04
Sears Credit Account Master Aaa 5,100,000 5,031,456
Trust II 7% 7/15/08
West Penn Funding LLC 6.81% Aaa 4,500,000 4,376,074
9/25/08
TOTAL ASSET-BACKED SECURITIES 47,198,910
(Cost $47,709,628)
COMMERCIAL MORTGAGE
SECURITIES - 4.2%
Commercial Mortgage Asset Aaa 3,669,243 3,617,644
Trust sequential pay Series
1999 C2 Class A1, 7.285%
12/17/07
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 4,000,000 3,752,500
1997-SPICE Class D, 7.332%
4/20/08
Series 1995-WF1 Class A-2, AAA 3,000,126 2,948,561
6.648% 12/21/27
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 1,600,000 1,585,500
(c)(e)
Class E, 6.7625% 1/10/13 Baa2 2,970,000 2,941,228
(c)(e)
Equitable Life Assurance A2 1,000,000 971,445
Society of the United States
Series 174 Class C1, 7.52%
5/15/06 (c)
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Heller Financial Commercial Aaa $ 3,669,741 $ 3,676,049
Mortgage Asset Corp.
sequential pay Series
2000-PH1 Class A1, 7.715%
9/15/08
Thirteen Affiliates of Aaa 2,500,000 2,336,817
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (c)
TOTAL COMMERCIAL MORTGAGE 21,829,744
SECURITIES
(Cost $22,122,702)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (F) - 3.7%
Canadian Government 6.125% Aa2 5,000,000 4,895,000
7/15/02
Chile Republic 6.875% 4/28/09 Baa1 1,350,000 1,226,475
Korean Republic yankee:
8.75% 4/15/03 Baa2 550,000 556,188
8.875% 4/15/08 Baa2 2,000,000 2,073,080
New Brunswick Province yankee A1 2,250,000 2,235,938
7.125% 10/1/02
Quebec Province 5.75% 2/15/09 A2 5,000,000 4,429,950
United Mexican States 9.875% Baa3 3,400,000 3,512,200
2/1/10
TOTAL FOREIGN GOVERNMENT AND 18,928,831
GOVERNMENT AGENCY OBLIGATIONS
(Cost $19,185,966)
SUPRANATIONAL OBLIGATIONS -
1.9%
Inter-American Development Aaa 10,000,000 9,585,500
Bank yankee 6.29% 7/16/27
(Cost $9,937,100)
CASH EQUIVALENTS - 6.9%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 35,427,282 $ 35,410,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $35,410,000)
TOTAL INVESTMENT PORTFOLIO - 538,507,278
104.5%
(Cost $552,466,697)
NET OTHER ASSETS - (4.5)% (23,106,622)
NET ASSETS - 100% $ 515,400,656
</TABLE>
LEGEND
(a) S&P 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 $33,610,622 or 6.5% of net assets.
(d) Security purchased on a delayed delivery or when-issued basis.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.7% AAA, AA, A 60.9%
Baa 20.5% BBB 21.5%
Ba 0.5% BB 1.7%
B 0.0% B 0.4%
Caa 0.4% 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 0.7%.
Distribution of investments by country of issue, as a percentage of
total net assets, is as follows:
United States of America 86.7%
United Kingdom 4.9
Canada 3.3
Multi-National 1.9
Japan 1.1
Others (individually less 2.1
than 1%)
100.0%
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $552,466,697. Net unrealized depreciation
aggregated $13,959,419, of which $249,510 related to appreciated
investment securities and $14,208,929 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
APRIL 30, 2000
ASSETS
Investment in securities, at $ 538,507,278
value (including repurchase
agreements of $35,410,000)
(cost $552,466,697) - See
accompanying schedule
Cash 15,457
Receivable for investments 8,242,637
sold
Receivable for fund shares 1,354,327
sold
Interest receivable 8,326,394
TOTAL ASSETS 556,446,093
LIABILITIES
Payable for investments $ 13,658,514
purchased Regular delivery
Delayed delivery 19,162,238
Payable for fund shares 1,735,822
redeemed
Distributions payable 324,852
Accrued management fee 184,037
Distribution fees payable 130,524
Other payables and accrued 127,250
expenses
Collateral on securities 5,722,200
loaned, at value
TOTAL LIABILITIES 41,045,437
NET ASSETS $ 515,400,656
Net Assets consist of:
Paid in capital $ 553,364,640
Distributions in excess of (1,159,576)
net investment income
Accumulated undistributed net (22,844,989)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (13,959,419)
(depreciation) on investments
NET ASSETS $ 515,400,656
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000
CALCULATION OF MAXIMUM $10.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($34,490,226 (divided by)
3,408,705 shares)
Maximum offering price per $10.51
share (100/96.25 of $10.12)
CLASS T: NET ASSET VALUE and $10.12
redemption price per share
($302,764,791 (divided by)
29,911,239 shares)
Maximum offering price per $10.41
share (100/97.25 of $10.12)
CLASS B: NET ASSET VALUE and $10.11
offering price per share
($64,616,445 (divided by)
6,391,219 shares) A
CLASS C: NET ASSET VALUE and $10.11
offering price per share
($16,656,866 (divided by)
1,647,703 shares) A
INSTITUTIONAL CLASS: NET $10.13
ASSET VALUE, offering price
and redemption price per
share ($96,872,328 (divided
by) 9,560,244 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000
INVESTMENT INCOME $ 18,518,357
Interest
Security lending 40,422
Total income 18,558,779
EXPENSES
Management fee $ 1,154,977
Transfer agent fees 549,408
Distribution fees 792,338
Accounting and security 80,185
lending fees
Non-interested trustees' 824
compensation
Custodian fees and expenses 22,138
Registration fees 43,907
Audit 20,814
Legal 4,985
Miscellaneous 2,399
Total expenses before 2,671,975
reductions
Expense reductions (173) 2,671,802
NET INVESTMENT INCOME 15,886,977
REALIZED AND UNREALIZED GAIN (7,914,574)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (2,240,407)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (10,154,981)
NET INCREASE (DECREASE) IN $ 5,731,996
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31, 1999
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 15,886,977 $ 30,133,116
income
Net realized gain (loss) (7,914,574) (4,437,550)
Change in net unrealized (2,240,407) (20,620,170)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,731,996 5,075,396
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (15,680,507) (29,409,259)
from net investment income
Share transactions - net (51,391,068) 91,347,340
increase (decrease)
TOTAL INCREASE (DECREASE) (61,339,579) 67,013,477
IN NET ASSETS
NET ASSETS
Beginning of period 576,740,235 509,726,758
End of period (including $ 515,400,656 $ 576,740,235
distributions in excess of
net investment income of
$1,159,576 and $1,366,046,
respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 H 1997 I 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.300 $ 10.770 $ 10.560 $ 10.590 $ 10.350
of period
Income from Investment
Operations
Net investment income D .303 .580 .537 .615 .159
Net realized and unrealized (.178) (.474) .207 (.023) .235
gain (loss)
Total from investment .125 .106 .744 .592 .394
operations
Less Distributions
From net investment income (.305) (.576) (.534) (.622) (.154)
Net asset value, end of $ 10.120 $ 10.300 $ 10.770 $ 10.560 $ 10.590
period
TOTAL RETURN B, C 1.23% 1.00% 7.21% 5.81% 3.83%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 34,490 $ 22,628 $ 8,217 $ 3,819 $ 687
(000 omitted)
Ratio of expenses to average .86% A .87% .90% A, E .90% E .90% A, E
net assets
Ratio of expenses to average .86% A .86% F .90% A .90% .90% A
net assets after expense
reductions
Ratio of net investment 6.03% A 5.58% 5.51% A 5.93% 6.45% A
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 NOVEMBER 30, 1996
H ELEVEN MONTHS ENDED OCTOBER 31
I YEAR ENDED NOVEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.310 $ 10.770 $ 10.560 $ 10.610 $ 10.760
period
Income from Investment
Operations
Net investment income .301 D .576 D .537 D .625 D .671 D
Net realized and unrealized (.192) (.473) .201 (.058) (.147)
gain (loss)
Total from investment .109 .103 .738 .567 .524
operations
Less Distributions
From net investment income (.299) (.563) (.528) (.617) (.674)
In excess of net investment - - - - -
income
Total distributions (.299) (.563) (.528) (.617) (.674)
Net asset value, end of period $ 10.120 $ 10.310 $ 10.770 $ 10.560 $ 10.610
TOTAL RETURN B, C 1.07% .98% 7.15% 5.56% 5.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 302,765 $ 315,350 $ 287,734 $ 278,869 $ 262,103
(000 omitted)
Ratio of expenses to average .97% A .97% .98% A .96% .97%
net assets
Ratio of expenses to average .97% A .97% .98% A .96% .96% F
net assets after expense
reductions
Ratio of net investment 5.92% A 5.48% 5.48% A 5.97% 6.38%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEARS ENDED OCTOBER 31,
1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.260 $ 11.140
period
Income from Investment
Operations
Net investment income .649 .609
Net realized and unrealized .491 (.876)
gain (loss)
Total from investment 1.140 (.267)
operations
Less Distributions
From net investment income (.640) (.555)
In excess of net investment - (.058)
income
Total distributions (.640) (.613)
Net asset value, end of period $ 10.760 $ 10.260
TOTAL RETURN B, C 11.43% (2.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 228,439 $ 141,866
(000 omitted)
Ratio of expenses to average .94% E 1.02% E
net assets
Ratio of expenses to average .94% 1.02%
net assets after expense
reductions
Ratio of net investment 6.20% 6.04%
income to average net assets
Portfolio turnover rate 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.300 $ 10.760 $ 10.540 $ 10.590 $ 10.750
period
Income from Investment
Operations
Net investment income .267 D .506 D .468 D .551 D .597 D
Net realized and unrealized (.192) (.467) .214 (.057) (.153)
gain (loss)
Total from investment .075 .039 .682 .494 .444
operations
Less Distributions
From net investment income (.265) (.499) (.462) (.544) (.604)
In excess of net investment - - - - -
income
Total distributions (.265) (.499) (.462) (.544) (.604)
Net asset value, end of period $ 10.110 $ 10.300 $ 10.760 $ 10.540 $ 10.590
TOTAL RETURN B, C .74% .37% 6.60% 4.83% 4.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 64,616 $ 64,532 $ 39,657 $ 22,201 $ 18,972
(000 omitted)
Ratio of expenses to average 1.61% A 1.61% 1.65% A, E 1.65% E 1.66% E
net assets
Ratio of net investment 5.27% A 4.83% 4.79% A 5.27% 5.69%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B YEARS ENDED OCTOBER 31,
1995 H 1994 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.250 $ 10.430
period
Income from Investment
Operations
Net investment income .579 .204
Net realized and unrealized .483 (.178)
gain (loss)
Total from investment 1.062 .026
operations
Less Distributions
From net investment income (.562) (.187)
In excess of net investment - (.019)
income
Total distributions (.562) (.206)
Net asset value, end of period $ 10.750 $ 10.250
TOTAL RETURN B, C 10.62% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 15,830 $ 3,156
(000 omitted)
Ratio of expenses to average 1.70% E 1.65% A, E
net assets
Ratio of net investment 5.44% 5.42% A
income to average net assets
Portfolio turnover rate 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 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 JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO NOVEMBER 30, 1994
G ELEVEN MONTHS ENDED OCTOBER 31
H YEAR ENDED NOVEMBER 30
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 H 1997 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.290 $ 10.760 $ 10.560 $ 10.570
period
Income from Investment
Operations
Net investment income D .263 .492 .453 .031
Net realized and unrealized (.182) (.472) .199 (.005)
gain (loss)
Total from investment .081 .020 .652 .026
operations
Less Distributions
From net investment income (.261) (.490) (.452) (.036)
Net asset value, end of period $ 10.110 $ 10.290 $ 10.760 $ 10.560
TOTAL RETURN B, C .80% .19% 6.30% .25%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 16,657 $ 17,099 $ 6,100 $ 160
(000 omitted)
Ratio of expenses to average 1.69% A 1.71% 1.75% A, E 1.75% A, E
net assets
Ratio of expenses to average 1.69% A 1.71% 1.75% A 1.73% A, F
net assets after expense
reductions
Ratio of net investment 5.19% A 4.73% 4.67% A 4.42% A
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 NOVEMBER 30, 1997
H ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 1999 YEARS ENDED OCTOBER 31,
INSTITUTIONAL CLASS
(UNAUDITED) 1999 1998 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.310 $ 10.780 $ 10.570 $ 10.620 $ 10.770
period
Income from Investment
Operations
Net investment income .319 D .610 D .566 D .658 D .705 D
Net realized and unrealized (.186) (.485) .201 (.060) (.151)
gain (loss)
Total from investment .133 .125 .767 .598 .554
operations
Less Distributions
From net investment income (.313) (.595) (.557) (.648) (.704)
In excess of net investment - - - - -
income
Total distributions (.313) (.595) (.557) (.648) (.704)
Net asset value, end of period $ 10.130 $ 10.310 $ 10.780 $ 10.570 $ 10.620
TOTAL RETURN B, C 1.31% 1.19% 7.44% 5.86% 5.40%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 96,872 $ 157,131 $ 168,019 $ 177,427 $ 211,866
(000 omitted)
Ratio of expenses to average .65% A .66% .68% A .67% .66%
net assets
Ratio of net investment 6.24% A 5.78% 5.78% A 6.27% 6.69%
income to average net assets
Portfolio turnover rate 188% A 138% 176% A 138% 200%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INSTITUTIONAL CLASS
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.270 $ 11.160
period
Income from Investment
Operations
Net investment income .671 .602
Net realized and unrealized .499 (.833)
gain (loss)
Total from investment 1.170 (.231)
operations
Less Distributions
From net investment income (.670) (.597)
In excess of net investment - (.062)
income
Total distributions (.670) (.659)
Net asset value, end of period $ 10.770 $ 10.270
TOTAL RETURN B, C 11.73% (2.10)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 208,861 $ 172,122
(000 omitted)
Ratio of expenses to average .67% E .61%
net assets
Ratio of net investment 6.47% 6.45%
income to average net assets
Portfolio turnover rate 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Bond (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 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 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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.
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.
2. OPERATING POLICIES - CONTINUED
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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
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 $485,031,010 and $511,909,462, respectively, of which U.S.
government and government agency obligations aggregated $264,210,414
and $384,229,555, 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 annualized 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 and
Service 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 $ 19,700 $ 25
CLASS T 387,226 8,156
CLASS B 298,609 216,230
CLASS C 86,803 55,236
$ 792,338 $ 279,647
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 $ 49,509 $ 21,455
CLASS T 51,159 20,092
CLASS B 82,160 82,160*
CLASS C 4,996 4,996*
$ 187,824 $ 128,703
* 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 $ 27,778 .21
CLASS T 339,597 .22
CLASS B 70,888 .21
CLASS C 16,819 .19
INSTITUTIONAL CLASS 94,326 .16
$ 549,408
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.,
an affiliate of FMR, maintains the fund's accounting records and
administers the security lending program. The security lending fee is
based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
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 loans were
outstanding amounted to $17,693,375. The weighted average interest
rate was 5.89%. Interest earned from the interfund lending program
amounted to $23,165 and is included in interest income on the
Statement of Operations. At period end there were no interfund loans
outstanding.
6. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end, the value of the securities
loaned amounted to $5,610,000. The fund received cash collateral of
$5,722,200 which was invested in cash equivalents.
7. 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 $173 under this arrangement.
8. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED
OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 784,582 $ 868,429
Class T 9,040,635 16,224,315
Class B 1,726,725 2,508,941
Class C 443,749 528,467
Institutional Class 3,684,816 9,279,107
Total $ 15,680,507 $ 29,409,259
9. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 2,797,965 3,357,531 $ 28,556,714
Reinvestment of distributions 70,508 72,714 717,441
Shares redeemed (1,656,066) (1,997,004) (16,895,887)
Net increase (decrease) 1,212,407 1,433,241 $ 12,378,268
CLASS T Shares sold 8,066,494 17,948,549 $ 82,335,104
Reinvestment of distributions 803,061 1,383,474 8,178,673
Shares redeemed (9,551,028) (15,455,120) (97,434,426)
Net increase (decrease) (681,473) 3,876,903 $ (6,920,649)
CLASS B Shares sold 1,985,059 4,797,807 $ 20,279,776
Reinvestment of distributions 138,684 191,805 1,410,565
Shares redeemed (2,000,550) (2,406,744) (20,380,255)
Net increase (decrease) 123,193 2,582,868 $ 1,310,086
CLASS C Shares sold 748,996 1,681,953 $ 7,647,720
Reinvestment of distributions 31,975 38,404 325,233
Shares redeemed (794,275) (626,095) (8,085,233)
Net increase (decrease) (13,304) 1,094,262 $ (112,280)
INSTITUTIONAL CLASS Shares 1,018,444 5,199,325 $ 10,412,769
sold
Reinvestment of distributions 177,591 401,855 1,810,400
Shares redeemed (6,870,051) (5,956,114) (70,269,662)
Net increase (decrease) (5,674,016) (354,934) $ (58,046,493)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 35,356,066
Reinvestment of distributions 761,419
Shares redeemed (20,973,090)
Net increase (decrease) $ 15,144,395
CLASS T Shares sold $ 189,451,401
Reinvestment of distributions 14,555,972
Shares redeemed (162,894,381)
Net increase (decrease) $ 41,112,992
CLASS B Shares sold $ 50,576,586
Reinvestment of distributions 2,011,162
Shares redeemed (25,318,778)
Net increase (decrease) $ 27,268,970
CLASS C Shares sold $ 17,687,270
Reinvestment of distributions 402,151
Shares redeemed (6,595,292)
Net increase (decrease) $ 11,494,129
INSTITUTIONAL CLASS Shares $ 54,855,022
sold
Reinvestment of distributions 4,235,018
Shares redeemed (62,763,186)
Net increase (decrease) $ (3,673,146)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money
Management, Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications & 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
LTBI-SANN-0600 103603
1.704557.102
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
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - CLASS A, CLASS T, CLASS B
AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 2000
(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 30 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 39 Notes to the financial
statements.
PROXY VOTING RESULTS 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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.87% -0.50% 27.20% 75.12%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL -1.95% -4.23% 22.43% 68.55%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 2.20% 0.34% 32.12% n/a
Intermediate Municipal Debt 1.65% -1.17% 25.91% 80.42%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to those of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class A's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 130 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -0.50% 4.93% 5.76%
INCOME - CL A
FIDELITY ADV INT MUNICIPAL -4.23% 4.13% 5.36%
INCOME - CL A (INCL. 3.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 0.34% 5.73% n/a
Intermediate Municipal Debt -1.17% 4.71% 6.07%
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
1990/04/30 9625.00 10000.00
1990/05/31 9800.48 10218.30
1990/06/30 9881.63 10308.12
1990/07/31 10000.88 10459.65
1990/08/31 9942.73 10307.77
1990/09/30 9969.36 10313.65
1990/10/31 10080.85 10500.74
1990/11/30 10241.69 10711.91
1990/12/31 10269.33 10758.51
1991/01/31 10384.00 10902.88
1991/02/28 10478.54 10997.74
1991/03/31 10485.58 11001.70
1991/04/30 10580.63 11148.02
1991/05/31 10665.39 11247.13
1991/06/30 10671.87 11235.99
1991/07/31 10778.77 11372.85
1991/08/31 10864.89 11522.63
1991/09/30 10931.49 11672.65
1991/10/31 11048.88 11777.71
1991/11/30 11076.72 11810.57
1991/12/31 11259.76 12064.02
1992/01/31 11338.42 12091.53
1992/02/29 11351.42 12095.40
1992/03/31 11308.02 12099.87
1992/04/30 11387.11 12207.56
1992/05/31 11512.01 12351.24
1992/06/30 11663.09 12558.50
1992/07/31 11914.27 12935.00
1992/08/31 11826.18 12808.88
1992/09/30 11937.98 12892.65
1992/10/31 11853.04 12765.92
1992/11/30 12069.62 12994.56
1992/12/31 12084.20 13127.23
1993/01/31 12221.60 13279.90
1993/02/28 12560.93 13760.24
1993/03/31 12436.33 13614.79
1993/04/30 12523.80 13752.16
1993/05/31 12576.51 13829.45
1993/06/30 12709.06 14060.26
1993/07/31 12723.50 14078.68
1993/08/31 12957.60 14371.80
1993/09/30 13091.65 14535.50
1993/10/31 13103.94 14563.55
1993/11/30 13001.79 14435.24
1993/12/31 13223.94 14739.97
1994/01/31 13346.63 14908.30
1994/02/28 13013.38 14522.18
1994/03/31 12504.93 13930.83
1994/04/30 12615.62 14048.97
1994/05/31 12728.53 14170.77
1994/06/30 12637.05 14084.19
1994/07/31 12813.13 14342.35
1994/08/31 12861.57 14391.98
1994/09/30 12717.53 14180.70
1994/10/31 12524.15 13928.85
1994/11/30 12250.48 13677.02
1994/12/31 12472.23 13978.05
1995/01/31 12786.09 14377.54
1995/02/28 13110.54 14795.64
1995/03/31 13253.95 14965.64
1995/04/30 13250.15 14983.30
1995/05/31 13552.77 15461.42
1995/06/30 13479.96 15326.91
1995/07/31 13567.70 15472.21
1995/08/31 13751.09 15668.39
1995/09/30 13838.94 15767.57
1995/10/31 13986.55 15996.84
1995/11/30 14147.71 16262.22
1995/12/31 14242.79 16418.50
1996/01/31 14337.82 16542.46
1996/02/29 14290.98 16430.80
1996/03/31 14150.34 16220.82
1996/04/30 14105.16 16174.91
1996/05/31 14103.64 16168.44
1996/06/30 14212.49 16344.51
1996/07/31 14323.39 16493.25
1996/08/31 14322.37 16489.29
1996/09/30 14448.16 16720.14
1996/10/31 14589.51 16909.25
1996/11/30 14842.54 17218.69
1996/12/31 14786.54 17146.37
1997/01/31 14829.21 17178.77
1997/02/28 14952.98 17336.47
1997/03/31 14777.49 17105.38
1997/04/30 14889.81 17248.55
1997/05/31 15047.99 17507.97
1997/06/30 15205.25 17694.43
1997/07/31 15584.02 18184.57
1997/08/31 15449.84 18014.18
1997/09/30 15623.31 18228.00
1997/10/31 15710.70 18345.21
1997/11/30 15795.29 18453.08
1997/12/31 15972.28 18722.31
1998/01/31 16104.44 18915.52
1998/02/28 16095.93 18921.20
1998/03/31 16108.07 18937.85
1998/04/30 16043.91 18852.44
1998/05/31 16254.25 19150.87
1998/06/30 16310.67 19226.33
1998/07/31 16324.03 19274.59
1998/08/31 16550.83 19572.38
1998/09/30 16730.26 19816.25
1998/10/31 16725.26 19815.86
1998/11/30 16764.62 19885.41
1998/12/31 16790.89 19935.52
1999/01/31 16990.66 20172.55
1999/02/28 16900.94 20084.40
1999/03/31 16897.34 20112.32
1999/04/30 16938.93 20162.40
1999/05/31 16852.56 20045.66
1999/06/30 16620.34 19757.00
1999/07/31 16677.76 19828.91
1999/08/31 16606.65 19670.28
1999/09/30 16647.78 19678.35
1999/10/31 16545.57 19465.03
1999/11/30 16701.91 19672.14
1999/12/31 16613.96 19525.58
2000/01/31 16577.74 19440.65
2000/02/29 16669.43 19666.16
2000/03/31 16914.52 20096.06
2000/04/28 16854.84 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000518 125905 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class A on April 30, 1990, and the current 3.75% sales charge was
paid. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $16,855 - a 68.55% 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 $19,977 -
a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996
Dividend returns 2.17% 3.98% 4.37% 4.65% 0.75%
Capital returns -0.30% -5.05% 2.09% 3.03% 1.08%
Total returns 1.87% -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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.40(cents) 21.80(cents) 43.31(cents)
Annualized dividend rate 4.06% 4.31% 4.23%
30-day annualized yield 4.32% - -
30-day annualized 6.75% - -
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 $10.18 over the past one month, $10.14 over the past six months and
$10.24 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 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 4.25% and 6.64%, respectively.
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME FUND - CLASS T
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class T shares
took place on September 10, 1992. Class T shares bear a 0.25% 12b-1
fee that is reflected in returns after September 10, 1992. Returns
prior to that date are those of Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class T
shares' 12b-1 fee been reflected, returns prior to September 10, 1992
would have been lower. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.85% -0.54% 26.91% 74.71%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL -0.95% -3.27% 23.42% 69.91%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 2.20% 0.34% 32.12% n/a
Intermediate Municipal Debt 1.65% -1.17% 25.91% 80.42%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to those of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class T's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 130 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -0.54% 4.88% 5.74%
INCOME - CL T
FIDELITY ADV INT MUNICIPAL -3.27% 4.30% 5.44%
INCOME - CL T (INCL. 2.75%
SALES CHARGE)
LB 1-17 Year Municipal Bond 0.34% 5.73% n/a
Intermediate Municipal Debt -1.17% 4.71% 6.07%
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
1990/04/30 9725.00 10000.00
1990/05/31 9902.31 10218.30
1990/06/30 9984.29 10308.12
1990/07/31 10104.78 10459.65
1990/08/31 10046.03 10307.77
1990/09/30 10072.94 10313.65
1990/10/31 10185.58 10500.74
1990/11/30 10348.09 10711.91
1990/12/31 10376.02 10758.51
1991/01/31 10491.88 10902.88
1991/02/28 10587.41 10997.74
1991/03/31 10594.52 11001.70
1991/04/30 10690.56 11148.02
1991/05/31 10776.20 11247.13
1991/06/30 10782.75 11235.99
1991/07/31 10890.75 11372.85
1991/08/31 10977.78 11522.63
1991/09/30 11045.06 11672.65
1991/10/31 11163.67 11777.71
1991/11/30 11191.81 11810.57
1991/12/31 11376.74 12064.02
1992/01/31 11456.22 12091.53
1992/02/29 11469.36 12095.40
1992/03/31 11425.50 12099.87
1992/04/30 11505.42 12207.56
1992/05/31 11631.61 12351.24
1992/06/30 11784.27 12558.50
1992/07/31 12038.06 12935.00
1992/08/31 11949.05 12808.88
1992/09/30 12062.01 12892.65
1992/10/31 11976.19 12765.92
1992/11/30 12195.02 12994.56
1992/12/31 12209.75 13127.23
1993/01/31 12348.58 13279.90
1993/02/28 12691.43 13760.24
1993/03/31 12565.54 13614.79
1993/04/30 12653.92 13752.16
1993/05/31 12707.17 13829.45
1993/06/30 12841.10 14060.26
1993/07/31 12855.69 14078.68
1993/08/31 13092.22 14371.80
1993/09/30 13227.66 14535.50
1993/10/31 13240.08 14563.55
1993/11/30 13136.87 14435.24
1993/12/31 13361.33 14739.97
1994/01/31 13485.30 14908.30
1994/02/28 13148.58 14522.18
1994/03/31 12634.86 13930.83
1994/04/30 12746.69 14048.97
1994/05/31 12860.78 14170.77
1994/06/30 12768.35 14084.19
1994/07/31 12946.25 14342.35
1994/08/31 12995.20 14391.98
1994/09/30 12849.66 14180.70
1994/10/31 12654.27 13928.85
1994/11/30 12377.75 13677.02
1994/12/31 12601.81 13978.05
1995/01/31 12918.93 14377.54
1995/02/28 13246.75 14795.64
1995/03/31 13391.65 14965.64
1995/04/30 13387.81 14983.30
1995/05/31 13693.58 15461.42
1995/06/30 13620.01 15326.91
1995/07/31 13708.67 15472.21
1995/08/31 13893.96 15668.39
1995/09/30 13982.72 15767.57
1995/10/31 14131.86 15996.84
1995/11/30 14294.70 16262.22
1995/12/31 14390.77 16418.50
1996/01/31 14486.79 16542.46
1996/02/29 14439.46 16430.80
1996/03/31 14297.36 16220.82
1996/04/30 14251.71 16174.91
1996/05/31 14250.17 16168.44
1996/06/30 14360.16 16344.51
1996/07/31 14472.21 16493.25
1996/08/31 14471.17 16489.29
1996/09/30 14597.22 16720.14
1996/10/31 14753.09 16909.25
1996/11/30 14993.12 17218.69
1996/12/31 14950.34 17146.37
1997/01/31 14977.66 17178.77
1997/02/28 15100.51 17336.47
1997/03/31 14921.91 17105.38
1997/04/30 15034.10 17248.55
1997/05/31 15207.20 17507.97
1997/06/30 15349.96 17694.43
1997/07/31 15730.98 18184.57
1997/08/31 15594.13 18014.18
1997/09/30 15767.99 18228.00
1997/10/31 15839.89 18345.21
1997/11/30 15924.03 18453.08
1997/12/31 16116.41 18722.31
1998/01/31 16248.38 18915.52
1998/02/28 16238.63 18921.20
1998/03/31 16249.60 18937.85
1998/04/30 16198.95 18852.44
1998/05/31 16394.63 19150.87
1998/06/30 16451.53 19226.33
1998/07/31 16480.46 19274.59
1998/08/31 16693.84 19572.38
1998/09/30 16874.85 19816.25
1998/10/31 16869.88 19815.86
1998/11/30 16909.64 19885.41
1998/12/31 16935.50 19935.52
1999/01/31 17136.87 20172.55
1999/02/28 17029.83 20084.40
1999/03/31 17041.39 20112.32
1999/04/30 17082.69 20162.40
1999/05/31 16994.89 20045.66
1999/06/30 16760.02 19757.00
1999/07/31 16817.32 19828.91
1999/08/31 16744.91 19670.28
1999/09/30 16785.70 19678.35
1999/10/31 16681.92 19465.03
1999/11/30 16838.81 19672.14
1999/12/31 16750.44 19525.58
2000/01/31 16713.27 19440.65
2000/02/29 16805.05 19666.16
2000/03/31 17051.39 20096.06
2000/04/28 16990.50 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000518 132654 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class T on April 30, 1990, and the current 2.75% sales charge was
paid. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $16,991 - a 69.91% 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 $19,977 -
a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices,
for example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.15% 3.94% 4.32% 4.54% 4.59% 4.94%
Capital returns -0.30% -5.05% 2.18% 2.83% -0.19% 6.74%
Total returns 1.85% -1.11% 6.50% 7.37% 4.40% 11.68%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.36(cents) 21.60(cents) 42.86(cents)
Annualized dividend rate 4.02% 4.27% 4.19%
30-day annualized yield 4.31% - -
30-day annualized 6.73% - -
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, $10.14 over the past six months and
$10.24 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 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 4.18% and 6.53%, respectively.
FIDELITY ADVISOR INTERMEDIATE MUNICIPAL INCOME FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class B shares
took place on June 30, 1994. Class B shares bear a 0.90% 12b-1 fee
(1.00% prior to January 1, 1996) that is reflected in returns after
June 30, 1994. Returns between September 10, 1992 (the date Class T
shares were first offered) and June 30, 1994 are those of Class T
shares and reflect Class T shares' 0.25% 12b-1 fee. Returns prior to
September 10, 1992 are those of Institutional Class, the original
class of the fund, which does not bear a 12b-1 fee. Had Class B
shares' 12b-1 fee been reflected, returns prior to June 30, 1994 would
have been lower. Class B shares' contingent deferred sales charges
included in the past six months, past one year, past five year and
past 10 year total return figures are 3%, 3%, 0% and 0%, respectively.
If Fidelity had not reimbursed certain class expenses, the total
returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.39% -1.34% 22.41% 67.30%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL -1.59% -4.19% 22.41% 67.30%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 2.20% 0.34% 32.12% n/a
Intermediate Municipal Debt 1.65% -1.17% 25.91% 80.42%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class B's returns to those of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class B's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 130 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.34% 4.13% 5.28%
INCOME - CL B
FIDELITY ADV INT MUNICIPAL -4.19% 4.13% 5.28%
INCOME - CL B (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 0.34% 5.73% n/a
Intermediate Municipal Debt -1.17% 4.71% 6.07%
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
1990/04/30 10000.00 10000.00
1990/05/31 10182.32 10218.30
1990/06/30 10266.62 10308.12
1990/07/31 10390.52 10459.65
1990/08/31 10330.11 10307.77
1990/09/30 10357.78 10313.65
1990/10/31 10473.61 10500.74
1990/11/30 10640.71 10711.91
1990/12/31 10669.43 10758.51
1991/01/31 10788.57 10902.88
1991/02/28 10886.79 10997.74
1991/03/31 10894.11 11001.70
1991/04/30 10992.86 11148.02
1991/05/31 11080.93 11247.13
1991/06/30 11087.66 11235.99
1991/07/31 11198.72 11372.85
1991/08/31 11288.20 11522.63
1991/09/30 11357.39 11672.65
1991/10/31 11479.35 11777.71
1991/11/30 11508.28 11810.57
1991/12/31 11698.45 12064.02
1992/01/31 11780.17 12091.53
1992/02/29 11793.68 12095.40
1992/03/31 11748.59 12099.87
1992/04/30 11830.77 12207.56
1992/05/31 11960.53 12351.24
1992/06/30 12117.50 12558.50
1992/07/31 12378.46 12935.00
1992/08/31 12286.94 12808.88
1992/09/30 12403.09 12892.65
1992/10/31 12314.84 12765.92
1992/11/30 12539.86 12994.56
1992/12/31 12555.01 13127.23
1993/01/31 12697.77 13279.90
1993/02/28 13050.31 13760.24
1993/03/31 12920.86 13614.79
1993/04/30 13011.74 13752.16
1993/05/31 13066.50 13829.45
1993/06/30 13204.22 14060.26
1993/07/31 13219.22 14078.68
1993/08/31 13462.44 14371.80
1993/09/30 13601.71 14535.50
1993/10/31 13614.48 14563.55
1993/11/30 13508.35 14435.24
1993/12/31 13739.16 14739.97
1994/01/31 13866.63 14908.30
1994/02/28 13520.39 14522.18
1994/03/31 12992.14 13930.83
1994/04/30 13107.13 14048.97
1994/05/31 13224.45 14170.77
1994/06/30 13129.41 14084.19
1994/07/31 13299.24 14342.35
1994/08/31 13337.80 14391.98
1994/09/30 13165.83 14180.70
1994/10/31 12970.11 13928.85
1994/11/30 12677.85 13677.02
1994/12/31 12898.99 13978.05
1995/01/31 13213.85 14377.54
1995/02/28 13541.14 14795.64
1995/03/31 13680.46 14965.64
1995/04/30 13667.73 14983.30
1995/05/31 13970.79 15461.42
1995/06/30 13886.81 15326.91
1995/07/31 13981.85 15472.21
1995/08/31 14148.02 15668.39
1995/09/30 14230.06 15767.57
1995/10/31 14372.82 15996.84
1995/11/30 14528.74 16262.22
1995/12/31 14603.72 16418.50
1996/01/31 14707.98 16542.46
1996/02/29 14652.13 16430.80
1996/03/31 14486.02 16220.82
1996/04/30 14446.47 16174.91
1996/05/31 14422.86 16168.44
1996/06/30 14540.85 16344.51
1996/07/31 14646.09 16493.25
1996/08/31 14636.60 16489.29
1996/09/30 14756.26 16720.14
1996/10/31 14891.26 16909.25
1996/11/30 15140.30 17218.69
1996/12/31 15074.91 17146.37
1997/01/31 15109.55 17178.77
1997/02/28 15226.03 17336.47
1997/03/31 15037.64 17105.38
1997/04/30 15142.69 17248.55
1997/05/31 15293.87 17507.97
1997/06/30 15444.16 17694.43
1997/07/31 15804.02 18184.57
1997/08/31 15672.73 18014.18
1997/09/30 15839.07 18228.00
1997/10/31 15902.55 18345.21
1997/11/30 15978.51 18453.08
1997/12/31 16162.97 18722.31
1998/01/31 16286.79 18915.52
1998/02/28 16268.20 18921.20
1998/03/31 16270.25 18937.85
1998/04/30 16195.57 18852.44
1998/05/31 16397.65 19150.87
1998/06/30 16444.46 19226.33
1998/07/31 16447.46 19274.59
1998/08/31 16665.61 19572.38
1998/09/30 16836.08 19816.25
1998/10/31 16804.86 19815.86
1998/11/30 16833.97 19885.41
1998/12/31 16865.49 19935.52
1999/01/31 17055.99 20172.55
1999/02/28 16940.30 20084.40
1999/03/31 16941.76 20112.32
1999/04/30 16957.11 20162.40
1999/05/31 16859.76 20045.66
1999/06/30 16616.95 19757.00
1999/07/31 16663.95 19828.91
1999/08/31 16598.42 19670.28
1999/09/30 16613.12 19678.35
1999/10/31 16500.54 19465.03
1999/11/30 16646.48 19672.14
1999/12/31 16548.28 19525.58
2000/01/31 16501.68 19440.65
2000/02/29 16583.24 19666.16
2000/03/31 16800.22 20096.06
2000/04/28 16730.50 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000518 132203 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class B on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have been $16,730 - a 67.30% 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 $19,977 - a 99.77%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 1.78% 3.24% 3.58% 3.86% 3.90% 4.07%
Capital returns -0.39% -5.05% 2.09% 2.93% -0.29% 6.74%
Total returns 1.39% -1.81% 5.67% 6.79% 3.61% 10.81%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 2.78(cents) 18.03(cents) 35.65(cents)
Annualized dividend rate 3.33% 3.57% 3.48%
30-day annualized yield 3.74% - -
30-day annualized 5.84% - -
tax-equivalent yield
DIVIDENDS per share show the income paid by the class for a set
period. If you annualize this number, based on an average share price
of $10.16 over the past one month, $10.13 over the past six months and
$10.23 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. If Fidelity had not reimbursed
certain class expenses, the yield and tax-equivalent yield would have
been 3.66% and 5.72%, 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 six months, past
one year, past five year and past 10 year total return figures are 1%,
1%, 0% and 0%, respectively. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.34% -1.44% 22.20% 67.02%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL 0.35% -2.39% 22.20% 67.02%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 2.20% 0.34% 32.12% n/a
Intermediate Municipal Debt 1.65% -1.17% 25.91% 80.42%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to those of the
Lehman Brothers 1-17 Year Municipal Bond Index - a market
value-weighted index of investment-grade municipal bonds with
maturities between one and 17 years. To measure how Class C's
performance stacked up against its peers, you can compare it to the
intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 130 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -1.44% 4.09% 5.26%
INCOME - CL C
FIDELITY ADV INT MUNICIPAL -2.39% 4.09% 5.26%
INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-17 Year Municipal Bond 0.34% 5.73% n/a
Intermediate Municipal Debt -1.17% 4.71% 6.07%
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
1990/04/30 10000.00 10000.00
1990/05/31 10182.32 10218.30
1990/06/30 10266.62 10308.12
1990/07/31 10390.52 10459.65
1990/08/31 10330.11 10307.77
1990/09/30 10357.78 10313.65
1990/10/31 10473.61 10500.74
1990/11/30 10640.71 10711.91
1990/12/31 10669.43 10758.51
1991/01/31 10788.57 10902.88
1991/02/28 10886.79 10997.74
1991/03/31 10894.11 11001.70
1991/04/30 10992.86 11148.02
1991/05/31 11080.93 11247.13
1991/06/30 11087.66 11235.99
1991/07/31 11198.72 11372.85
1991/08/31 11288.20 11522.63
1991/09/30 11357.39 11672.65
1991/10/31 11479.35 11777.71
1991/11/30 11508.28 11810.57
1991/12/31 11698.45 12064.02
1992/01/31 11780.17 12091.53
1992/02/29 11793.68 12095.40
1992/03/31 11748.59 12099.87
1992/04/30 11830.77 12207.56
1992/05/31 11960.53 12351.24
1992/06/30 12117.50 12558.50
1992/07/31 12378.46 12935.00
1992/08/31 12286.94 12808.88
1992/09/30 12403.09 12892.65
1992/10/31 12314.84 12765.92
1992/11/30 12539.86 12994.56
1992/12/31 12555.01 13127.23
1993/01/31 12697.77 13279.90
1993/02/28 13050.31 13760.24
1993/03/31 12920.86 13614.79
1993/04/30 13011.74 13752.16
1993/05/31 13066.50 13829.45
1993/06/30 13204.22 14060.26
1993/07/31 13219.22 14078.68
1993/08/31 13462.44 14371.80
1993/09/30 13601.71 14535.50
1993/10/31 13614.48 14563.55
1993/11/30 13508.35 14435.24
1993/12/31 13739.16 14739.97
1994/01/31 13866.63 14908.30
1994/02/28 13520.39 14522.18
1994/03/31 12992.14 13930.83
1994/04/30 13107.13 14048.97
1994/05/31 13224.45 14170.77
1994/06/30 13129.41 14084.19
1994/07/31 13299.24 14342.35
1994/08/31 13337.80 14391.98
1994/09/30 13165.83 14180.70
1994/10/31 12970.11 13928.85
1994/11/30 12677.85 13677.02
1994/12/31 12898.99 13978.05
1995/01/31 13213.85 14377.54
1995/02/28 13541.14 14795.64
1995/03/31 13680.46 14965.64
1995/04/30 13667.73 14983.30
1995/05/31 13970.79 15461.42
1995/06/30 13886.81 15326.91
1995/07/31 13981.85 15472.21
1995/08/31 14148.02 15668.39
1995/09/30 14230.06 15767.57
1995/10/31 14372.82 15996.84
1995/11/30 14528.74 16262.22
1995/12/31 14603.72 16418.50
1996/01/31 14707.98 16542.46
1996/02/29 14652.13 16430.80
1996/03/31 14486.02 16220.82
1996/04/30 14446.47 16174.91
1996/05/31 14422.86 16168.44
1996/06/30 14540.85 16344.51
1996/07/31 14646.09 16493.25
1996/08/31 14636.60 16489.29
1996/09/30 14756.26 16720.14
1996/10/31 14891.26 16909.25
1996/11/30 15140.30 17218.69
1996/12/31 15074.91 17146.37
1997/01/31 15109.55 17178.77
1997/02/28 15226.03 17336.47
1997/03/31 15037.64 17105.38
1997/04/30 15142.69 17248.55
1997/05/31 15293.87 17507.97
1997/06/30 15444.16 17694.43
1997/07/31 15804.02 18184.57
1997/08/31 15672.73 18014.18
1997/09/30 15839.07 18228.00
1997/10/31 15902.55 18345.21
1997/11/30 15977.39 18453.08
1997/12/31 16160.74 18722.31
1998/01/31 16282.60 18915.52
1998/02/28 16263.20 18921.20
1998/03/31 16277.92 18937.85
1998/04/30 16201.83 18852.44
1998/05/31 16402.25 19150.87
1998/06/30 16431.55 19226.33
1998/07/31 16448.74 19274.59
1998/08/31 16649.77 19572.38
1998/09/30 16818.78 19816.25
1998/10/31 16801.66 19815.86
1998/11/30 16829.53 19885.41
1998/12/31 16859.64 19935.52
1999/01/31 17032.50 20172.55
1999/02/28 16931.54 20084.40
1999/03/31 16915.65 20112.32
1999/04/30 16945.38 20162.40
1999/05/31 16846.68 20045.66
1999/06/30 16602.81 19757.00
1999/07/31 16648.10 19828.91
1999/08/31 16581.16 19670.28
1999/09/30 16594.39 19678.35
1999/10/31 16480.49 19465.03
1999/11/30 16624.70 19672.14
1999/12/31 16525.86 19525.58
2000/01/31 16477.84 19440.65
2000/02/29 16557.86 19666.16
2000/03/31 16772.90 20096.06
2000/04/28 16701.99 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000518 132941 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Class C on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have been $16,702 - a 67.02% 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 $19,977 - a 99.77%
increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER
31,
2000 1999 1998
Dividend returns 1.73% 3.14% 3.44%
Capital returns -0.39% -5.05% 2.38%
Total returns 1.34% -1.91% 5.82%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effect of sales
charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 2.70(cents) 17.54(cents) 34.57(cents)
Annualized dividend rate 3.23% 3.47% 3.38%
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, $10.14 over the past six
months and $10.24 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.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Given the investment environment
for municipal bonds during the
six-month period ending April 30,
2000, it seemed almost unrealistic
to expect strong performance
from the sector. After all, there were
three interest-rate hikes by the
Federal Reserve Board in that time
frame. That's typically bad news for
munis, which are generally longer
in duration and, therefore, more
interest-rate sensitive than other
fixed-income sectors. Municipal
bonds also had to compete with
record-setting equity performance
and a strong rally in Treasuries
during the past six months. Yet
remarkably, the municipal bond
sector outperformed nearly every
segment of the fixed-income
market for the overall period. In fact,
through the first four months of 2000,
the Lehman Brothers Municipal Index
also outperformed most major U.S.
equity indexes, including the S&P
500(Registered trademark), the NASDAQ, and the Dow
Jones Industrial Average. For the
six months ending April 30, the
Lehman Brothers Municipal Bond
Index - an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - gained 2.63%.
That outpaced the overall
taxable-bond market return of
1.42%, as measured by the Lehman
Brothers Aggregate Bond Index.
Much of the municipal segment's
gains occurred in February and
March when muni yields rose above
6%, a fairly rare phenomenon. The
attractive yields that munis offered
prompted a powerful rush of retail
buying, which sparked a strong rally
in the sector.
(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. Rising interest rates and persistent inflation worries put pressure
on municipal bonds. For the six-month period that ended April 30,
2000, the fund's Class A, Class T, Class B and Class C shares had
total returns of 1.87%, 1.85%, 1.39% and 1.34%, respectively. To get a
sense of how the fund did relative to its competitors, the
intermediate municipal debt funds average returned 1.65% for the same
six-month period, according to Lipper Inc. Additionally, the Lehman
Brothers 1-17 Year Municipal Bond Index, which tracks the types of
securities in which the fund invests, returned 2.20% for the same
six-month period. For the 12-month period that ended April 30, 2000,
the fund's Class A, Class T, Class B and Class C shares returned
-0.50%, -0.54%, -1.34% and -1.44%, respectively. For the same one-year
period, the intermediate municipal debt funds average returned -1.17%
and the Lehman Brothers index returned 0.34%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST
SIX MONTHS?
A. The fund continued to benefit from its relatively large position in
premium coupon bonds, which pay interest rates above prevailing market
rates and trade at prices that are above the face - or par - value.
The primary reason why I've favored them over the past several years
is because their premium gives them DE MINIMIS protection. This
protects certain premium bond gains from unfavorable tax treatment
that can occur during particular market environments. As interest
rates rose and bond prices fell, more and more bonds fell outside of
DE MINIMIS and investors punished them accordingly by pushing their
prices lower. As a result, the fund's focus on premium bonds meant
that it avoided many of the poor-performing bonds that fell outside of
DE MINIMIS. 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.
Q. WHAT ELSE CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund benefited by owning few poor-performing zero coupon bonds,
which don't pay interest but are sold below their face value. "Zeros"
are especially sensitive to interest-rate changes and, as a result,
fell out of favor and suffered more than interest-paying bonds when
interest rates rose.
Q. WHICH BONDS WERE THE MOST DISAPPOINTING DURING THE PERIOD?
A. Health care bonds, which continued to be hurt by reduced Medicare
and managed care payments, concerns about proposed federal health care
legislation and uncertainty surrounding this year's U.S. presidential
election, were probably the biggest disappointments. The fund's
holdings in Texas ranked second among detractors from performance.
When the state legislature broadened Texas-based insurance companies'
ability to buy municipal bonds issued in other states, the demand for
Texas munis weakened.
Q. WHERE DID YOU FIND ATTRACTIVE VALUES IN TERMS OF SECTORS OVER THE
PAST SIX MONTHS?
A. I found compelling values among issuers that are less sensitive to
the state of the economy - including those that provide essential
services such as water, sewer and transportation. Given that more
economically sensitive bonds - such as general obligation bonds -
offered only a small amount of additional yield, there really wasn't
any penalty for getting some measure of protection against a potential
economic slowdown.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. As always, the direction of interest rates will be the main
determinant of municipal bond performance. But supply and demand also
will figure prominently. From that standpoint, the municipal market
has improved over the past six months. Higher interest rates curtailed
the supply of new issuance, and refundings - or refinancings - of
existing debt have slowed. Also, rising interest rates temporarily
pushed municipal bond yields above 6.00% in February and March, which
attracted the attention of a lot of individual investors. With
municipal bonds priced somewhat attractively relative to U.S. Treasury
securities, demand could firm again and provide a relatively good
technical backdrop for municipals.
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, consistent with
the preservation of capital, by
investing normally in
investment-grade municipal
securities
START DATE: September 19,
1985
SIZE: as of April 30, 2000,
more than $58 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON MUNICIPAL
BOND BUYING STRATEGIES:
"At Fidelity, one of the key
strategies we use in managing
municipal bond funds is to
opportunistically purchase and
sell bonds of various maturities,
and the past six months provide a
useful example of our approach.
With the help of Fidelity's
research team, I initially found
value in bonds with maturities on
the shorter and longer end of the
intermediate-bond maturity
spectrum. Toward the end of 1999, I
sold some of the shorter and longer
maturities in favor of bonds in the
middle range between five and 10
years. Despite these shifts between
bonds of various maturities, I kept
the fund's duration - which
measures interest-rate sensitivity
- in line with the intermediate
municipal market as a whole, as
measured by the Lehman Brothers
1-17 Year Municipal Bond Index."
NOTE TO SHAREHOLDERS: At a
meeting on April 19, 2000,
shareholders voted to merge
Fidelity Advisor Intermediate
Municipal Income Fund into
Fidelity Advisor Municipal Income
Fund. The merger took place on
May 25, 2000.
INVESTMENT CHANGES
TOP FIVE STATES AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
California 12.2 10.0
Texas 11.3 15.4
Washington 10.2 10.4
North Carolina 7.1 4.9
New York 7.0 8.4
TOP FIVE SECTORS AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Electric Utilities 25.7 19.9
Education 20.7 22.6
General Obligations 17.6 27.1
Health Care 16.4 13.5
Transportation 4.0 4.4
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 6.6 7.2
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 APRIL 30, 2000
6 MONTHS AGO
Years 4.9 5.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 2000
Aaa 52.2%
Aa, A 32.4%
Baa 11.9%
Ba and Below 1.5%
Short-term
Investments 2.0%
Row: 1, Col: 1, Value: 52.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 32.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 11.9
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.5
Row: 1, Col: 8, Value: 2.0
AS OF OCTOBER 31, 1999
Aaa 53.5%
Aa, A 34.2%
Baa 10.8%
Ba and Below 0.0%
Short-term
Investments 1.5%
Row: 1, Col: 1, Value: 53.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 34.2
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.8
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.5
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.5%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 298,338
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARKANSAS - 1.5%
Arkansas Gen. Oblig. (Cap. Aa2 1,000,000 901,560
Appreciation) (College
Savings Prog.) Series A, 0%
6/1/02
CALIFORNIA - 12.2%
California Edl. Facilities AAA 225,000 218,849
Auth. Rev. Rfdg. (Chapman
Univ. Proj.) 5.375% 10/1/16
(AMBAC Insured)
California Health Facilities A+ 2,275,000 2,277,207
Fing. Auth. Rev. (Casa de
Las Campanas Proj.) Series
A, 5.375% 8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,003,380
Rev. (Home Mtg. Prog.)
Series R, 5.35% 8/1/07 (MBIA
Insured) (e)
California Poll. Cont. Fing. Ba1 500,000 502,845
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc. Proj.)
Series A, 7.15% 2/1/11 (e)
Los Angeles County Ctfs. of A3 970,000 769,026
Prtn. (Disney Parking Proj.)
0% 9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,025,110
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,018,320
6.5% 7/1/08 BBB- 300,000 319,314
7,134,051
COLORADO - 1.6%
Arapaho County Cap. Impt. Aaa 3,620,000 568,883
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities Ba1 400,000 387,916
Auth. Rev. Rfdg. (Rocky
Mountain Adventist Proj.)
6.25% 2/1/04
956,799
DISTRICT OF COLUMBIA - 0.9%
District of Columbia Redev. Baa 500,000 501,080
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 - 1.6%
Broward County Resource A3 $ 435,000 $ 448,920
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Jacksonville Port Auth. Rev. Aaa 500,000 514,260
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
963,180
ILLINOIS - 2.8%
Chicago Midway Arpt. Rev. Aaa 300,000 311,322
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 435,000 264,480
0% 6/15/09 (FGIC Insured) Aaa 65,000 39,636
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 994,430
1,609,868
IOWA - 2.6%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,521,570
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 5.2%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):
5.25% 12/1/09 (MBIA Insured) Aaa 1,385,000 1,361,732
5.25% 12/1/11 (MBIA Insured) Aaa 1,750,000 1,704,780
3,066,512
LOUISIANA - 3.2%
Louisiana Pub. Facilities Aaa 1,825,000 1,849,054
Auth. Rev. Rfdg. (Student
Ln. Prog.) Sr. Series A1,
6.2% 3/1/01
MASSACHUSETTS - 5.0%
Boston Gen. Oblig. Rev. Aaa 250,000 256,160
(Boston City Hosp. Proj.)
Series A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
101.666) (f)
Massachusetts Health & Edl. Aaa 700,000 689,178
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care
Proj.) Series B, 4.55%
1/1/21 (MBIA Insured)
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,427,440
Rev. (Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.) Series
A1, 0% 8/1/02
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Tpk. Auth. Aaa $ 550,000 $ 545,820
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)
Massachusetts Wtr. Poll. Aa1 10,000 9,704
Abatement Trust Wtr. Poll.
Abatement Rev. (MWRA Ln.
Prog.) Series A, 5.25%
8/1/14
2,928,302
MICHIGAN - 3.1%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp. A1 2,000,000 1,634,900
Proj.) Series A, 5% 6/1/19
(Mercy Health Svcs. Proj.) Aa3 200,000 202,820
Series S, 5.75% 8/15/05
1,837,720
MINNESOTA - 0.6%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 176,314
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 201,248
Facilities Auth. Rev.
(MacAlester College Proj.)
Series 4C, 5.5% 3/1/12
377,562
NEVADA - 0.9%
Clark County School District Aaa 500,000 527,280
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW MEXICO - 5.2%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa 250,000 250,683
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 493,529
(e)
New Mexico Edl. Assistance Aaa 1,700,000 1,735,955
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 553,155
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,033,322
NEW YORK - 7.0%
New York City Gen. Oblig. A3 1,000,000 991,630
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Revs.:
(City Univ. Sys. Baa1 500,000 505,785
Consolidation Proj.) Series
A, 5.75% 7/1/13
(City Univ. Sys. Proj.) Baa1 500,000 561,830
Series C, 7.5% 7/1/10
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth.
Revs.: - continued
Rfdg. (State Univ. Edl. A3 $ 500,000 $ 523,110
Facilities Proj.) Series A,
6.5% 5/15/04
New York State Envir. Aa1 500,000 438,880
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev.
(Revolving Funds Prog.)
Series F, 4.875% 6/15/18
New York State Local Govt. A3 1,000,000 646,760
Assistance Corp. (Cap.
Appreciation) Series A, 0%
4/1/08
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge Proj.):
5.4% 4/1/03 Baa1 250,000 251,658
6% 4/1/03 Baa1 200,000 204,260
4,123,913
NORTH CAROLINA - 7.1%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B:
5.875% 1/1/21 (MBIA Insured) Aaa 650,000 644,137
6% 1/1/06 Baa3 1,315,000 1,327,032
Series C, 5.5% 1/1/07 Baa1 700,000 685,328
Series A, 5.625% 1/1/03 Baa3 500,000 500,020
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 Baa1 750,000 752,048
5.9% 1/1/03 Baa1 250,000 251,135
4,159,700
PENNSYLVANIA - 4.0%
Pennsylvania Higher Edl. AA- 1,270,000 1,314,831
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 1,021,860
Rfdg. (Residential Dev.
Section 8 Proj.) Series A,
7% 7/1/01
2,336,691
RHODE ISLAND - 1.7%
Rhode Island Student Ln. A 1,000,000 1,010,090
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
SOUTH CAROLINA - 3.9%
South Carolina Ed. Assistance
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Prog.):
Sr. Lien Series A2, 5.4% AAA $ 1,250,000 $ 1,254,775
9/1/02
Sub Lien Series B, 5.7% A 1,000,000 1,010,090
9/1/05 (e)
2,264,865
TENNESSEE - 0.5%
Memphis-Shelby County Arpt. Aaa 275,000 276,763
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
TEXAS - 11.3%
Austin Independent School Aaa 500,000 521,150
District 8.125% 8/1/01
(Escrowed to Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 442,486
Student Ln. Rev. Rfdg.
Series A1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 173,466
District Rfdg. 0% 2/15/03
Harris County Gen. Oblig. Aaa 3,000,000 2,676,507
(Cap. Appreciation) (Toll
Road Proj.) Sub Lien Series
A, 0% 8/15/02 (MBIA Insured)
Hurst Euless Bedford Aaa 1,000,000 537,340
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 975,080
5.125% 8/15/12 (FGIC Insured)
Texas Pub. Fin. Auth. Bldg. Aaa 1,000,000 1,066,620
Rev. Rfdg. (Texas Technical
College Proj.) 6.25% 8/1/09
(MBIA Insured)
Univ. of Texas Permanent Aaa 250,000 244,798
Univ. Fund 5% 7/1/10
6,637,447
UTAH - 4.4%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
(Cap. Appreciation) Series A, Aaa 2,860,000 2,064,748
0% 7/1/06 (MBIA Insured)
Rfdg. (Cap. Appreciation) Aaa 500,000 496,280
Series B, 0% 7/1/00 (MBIA
Insured)
2,561,028
WASHINGTON - 10.2%
Grant County Pub. Util. Aaa 1,715,000 1,626,540
District No. 2 (Priest
Rapids Hydro-Elec. Proj.)
Second Series B, 5.375%
1/1/16 (MBIA Insured) (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A, 0% 7/1/06 Aaa $ 2,700,000 $ 1,937,547
(MBIA Insured)
5.4% 7/1/12 (b) Aa1 2,000,000 1,952,220
Washington Pub. Pwr. Supply Aa1 500,000 491,400
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
6,007,707
TOTAL MUNICIPAL BONDS 56,884,402
(Cost $57,678,051)
CASH EQUIVALENTS - 2.0%
SHARES
Municipal Central Cash Fund, 1,156,686 1,156,686
4.80% (c)(d) (Cost
$1,156,686)
TOTAL INVESTMENT PORTFOLIO - 58,041,088
99.0%
(Cost $58,834,737)
NET OTHER ASSETS - 1.0% 601,461
NET ASSETS - 100% $ 58,642,549
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
20 Bond Buyer Municipal Bond June 2000 $ 1,864,375 $ (15,745)
Index Contracts
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS - 3.2%
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $292,833.
(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 74.2% AAA, AA, A 68.2%
Baa 9.5% BBB 13.9%
Ba 1.5% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The distribution of municipal securities by revenue source, as a
percentage of total net assets, is as follows:
Electric Utilities 25.7%
Education 20.7
General Obligations 17.6
Health Care 16.4
Others* (individually less 19.6
than 5%)
100.0%
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $58,834,737. Net unrealized depreciation
aggregated $793,649, of which $333,023 related to appreciated
investment securities and $1,126,672 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 58,041,088
value (cost $58,834,737) -
See accompanying schedule
Receivable for fund shares 3,060
sold
Interest receivable 786,113
Receivable for daily 2,500
variation on futures
contracts
Other receivables 911
TOTAL ASSETS 58,833,672
LIABILITIES
Payable for fund shares $ 61,009
redeemed
Distributions payable 86,658
Accrued management fee 9,389
Distribution fees payable 17,102
Other payables and accrued 16,965
expenses
TOTAL LIABILITIES 191,123
NET ASSETS $ 58,642,549
Net Assets consist of:
Paid in capital $ 59,869,408
Distributions in excess of (21,166)
net interest income
Accumulated undistributed net (396,299)
realized gain (loss) on
investments
Net unrealized appreciation (809,394)
(depreciation) on investments
NET ASSETS $ 58,642,549
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,705,097 (divided by)
366,218 shares)
Maximum offering price per $10.51
share (100/96.25 of $10.12)
CLASS T: NET ASSET VALUE and $10.12
redemption price per share
($39,158,835 (divided by)
3,871,341 shares)
Maximum offering price per $10.41
share (100/97.25 of $10.12)
CLASS B: NET ASSET VALUE and $10.10
offering price per share
($9,215,784 (divided by)
912,548 shares) A
CLASS C: NET ASSET VALUE and $10.11
offering price per share
($1,370,083 (divided by)
135,537 shares) A
INSTITUTIONAL CLASS: NET $10.11
ASSET VALUE, offering price
and redemption price per
share ($5,192,750 (divided
by) 513,379 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INTEREST INCOME $ 1,733,156
EXPENSES
Management fee $ 123,723
Transfer agent fees 41,112
Distribution fees 113,127
Accounting fees and expenses 33,015
Non-interested trustees' 99
compensation
Custodian fees and expenses 1,300
Registration fees 38,343
Audit 5,187
Legal 730
Reports to shareholders 4,606
Miscellaneous 75
Total expenses before 361,317
reductions
Expense reductions (30,976) 330,341
NET INTEREST INCOME 1,402,815
REALIZED AND UNREALIZED GAIN (363,403)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 52,767
Futures contracts (15,745) 37,022
NET GAIN (LOSS) (326,381)
NET INCREASE (DECREASE) IN $ 1,076,434
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 1,402,815 $ 3,109,997
Net realized gain (loss) (363,403) (21,187)
Change in net unrealized 37,022 (3,947,556)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,076,434 (858,746)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,338,736) (3,109,997)
From net interest income
From net realized gain - (587,640)
TOTAL DISTRIBUTIONS (1,338,736) (3,697,637)
Share transactions - net (13,045,148) (3,244,402)
increase (decrease)
TOTAL INCREASE (DECREASE) (13,307,450) (7,800,785)
IN NET ASSETS
NET ASSETS
Beginning of period 71,949,999 79,750,784
End of period (including $ 58,642,549 $ 71,949,999
distributions in excess of
net interest income of
$21,166 and $0, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.150 $ 10.770 $ 10.600 $ 10.410 $ 10.160
of period
Income from Investment
Operations
Net interest income .223 D .431 .411 .459 .113
Net realized and unrealized (.035) (.540) .200 .191 .250
gain (loss)
Total from investment .188 (.109) .611 .650 .363
operations
Less Distributions
From net interest income (.218) (.431) (.411) (.459) (.113)
From net realized gain - (.080) (.030) (.001) -
Total distributions (.218) (.511) (.441) (.460) (.113)
Net asset value, end of $ 10.120 $ 10.150 $ 10.770 $ 10.600 $ 10.410
period
TOTAL RETURN B, C 1.87% (1.07)% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,705 $ 2,572 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .85% A, F .85% F .90% A, F .90% F .90% A, F
net assets
Ratio of net interest income 4.45% A 4.17% 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G ELEVEN MONTHS ENDED OCTOBER 31
H YEAR ENDED NOVEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.380
period
Income from Investment
Operations
Net interest income .223 D .427 .407 .449 .461
Net realized and unrealized (.037) (.540) .210 .181 .030
gain (loss)
Total from investment .186 (.113) .617 .630 .491
operations
Less Distributions
From net interest income (.216) (.427) (.407) (.449) (.461)
From net realized gain - (.080) (.030) (.001) -
In excess of net realized gain - - - - -
Total distributions (.216) (.507) (.437) (.450) (.461)
Net asset value, end of period $ 10.120 $ 10.150 $ 10.770 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.85% (1.11)% 5.94% 6.21% 4.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 39,159 $ 50,432 $ 60,070 $ 48,830 $ 56,729
(000 omitted)
Ratio of expenses to average .90% A, E .90% E .95% A, E 1.00% E 1.00% E
net assets
Ratio of net interest income 4.40% A 4.12% 4.15% A 4.32% 4.42%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEAR ENDED OCTOBER 31,
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.400 $ 10.460
period
Income from Investment
Operations
Net interest income .451 .455
Net realized and unrealized .980 (1.040)
gain (loss)
Total from investment 1.431 (.585)
operations
Less Distributions
From net interest income (.451) (.455)
From net realized gain - -
In excess of net realized gain - (.020)
Total distributions (.451) (.475)
Net asset value, end of period $ 10.380 $ 9.400
TOTAL RETURN B, C 15.49% (5.78)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 62,852 $ 57,382
(000 omitted)
Ratio of expenses to average .94% E .90% E
net assets
Ratio of net interest income 4.56% 4.49%
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.140 $ 10.760 $ 10.590 $ 10.410 $ 10.380
period
Income from Investment
Operations
Net interest income .187 D .353 .339 .382 .394
Net realized and unrealized (.047) (.540) .200 .181 .030
gain (loss)
Total from investment .140 (.187) .539 .563 .424
operations
Less Distributions
From net interest income (.180) (.353) (.339) (.382) (.394)
From net realized gain - (.080) (.030) (.001) -
Total distributions (.180) (.433) (.369) (.383) (.394)
Net asset value, end of period $ 10.100 $ 10.140 $ 10.760 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.39% (1.81)% 5.17% 5.54% 4.21%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,216 $ 10,387 $ 11,134 $ 7,917 $ 7,445
(000 omitted)
Ratio of expenses to average 1.60% A, F 1.60% F 1.65% A, F 1.65% F 1.66% F
net assets
Ratio of net interest income 3.70% A 3.43% 3.45% A 3.67% 3.76%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B YEAR ENDED OCTOBER 31,
1995 H 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.400 $ 9.890
period
Income from Investment
Operations
Net interest income .373 .155
Net realized and unrealized .980 (.490)
gain (loss)
Total from investment 1.353 (.335)
operations
Less Distributions
From net interest income (.373) (.155)
From net realized gain - -
Total distributions (.373) (.155)
Net asset value, end of period $ 10.380 $ 9.400
TOTAL RETURN B, C 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.68% F 1.65% A, F
net assets
Ratio of net interest income 3.71% 3.74% A
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.550
period
Income from Investment
Operations
Net interest income .183 D .342 .328 .027
Net realized and unrealized (.048) (.540) .210 .040
gain (loss)
Total from investment .135 (.198) .538 .067
operations
Less Distributions
From net interest income (.175) (.342) (.328) (.027)
From net realized gain - (.080) (.030) -
Total distributions (.175) (.422) (.358) (.027)
Net asset value, end of period $ 10.110 $ 10.150 $ 10.770 $ 10.590
TOTAL RETURN B, C 1.34% (1.91)% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,370 $ 2,562 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.70% A, F 1.70% F 1.75% A, F 1.75% A, F
net assets
Ratio of net interest income 3.60% A 3.34% 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST 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 ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
INSTITUTIONAL CLASS
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.360
period
Income from Investment
Operations
Net interest income .232 D .448 .427 .475 .487
Net realized and unrealized (.046) (.540) .210 .181 .050
gain (loss)
Total from investment .186 (.092) .637 .656 .537
operations
Less Distributions
From net interest income (.226) (.448) (.427) (.475) (.487)
From net realized gain - (.080) (.030) (.001) -
In excess of net realized gain - - - - -
Total distributions (.226) (.528) (.457) (.476) (.487)
Net asset value, end of period $ 10.110 $ 10.150 $ 10.770 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.85% (.92)% 6.14% 6.48% 5.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,193 $ 5,997 $ 6,328 $ 6,098 $ 6,455
(000 omitted)
Ratio of expenses to average .70% A, E .70% E .75% A, E .75% E .75% E
net assets
Ratio of expenses to average .70% A .70% .75% A .75% .74% F
net assets after expense
reductions
Ratio of net interest income 4.60% A 4.32% 4.36% A 4.57% 4.68%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEAR ENDED OCTOBER 31,
INSTITUTIONAL CLASS
1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.410 $ 10.460
period
Income from Investment
Operations
Net interest income .477 .481
Net realized and unrealized .950 (1.030)
gain (loss)
Total from investment 1.427 (.549)
operations
Less Distributions
From net interest income (.477) (.481)
From net realized gain - -
In excess of net realized gain - (.020)
Total distributions (.477) (.501)
Net asset value, end of period $ 10.360 $ 9.410
TOTAL RETURN B, C 15.44% (5.43)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,085 $ 11,702
(000 omitted)
Ratio of expenses to average .70% E .65% E
net assets
Ratio of expenses to average .70% .65%
net assets after expense
reductions
Ratio of net interest income 4.96% 4.75%
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Municipal Income Fund (the fund) is a
fund of Fidelity Advisor Series II (the trust) and is authorized to
issue an unlimited number of shares. Effective the close of business
on December 29, 1999, the fund was closed to new accounts. 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). Distributions in excess of net
interest 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.
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 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
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
commitment. Losses may arise due to changes in the 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.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $631,544 and $14,859,519, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,880,120 and $0, 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 annualized rate of .38% of average net
assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 and
Service 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 $ 2,598 $ 2
CLASS T 55,930 1,492
CLASS B 45,458 32,952
CLASS C 9,141 5,655
$ 113,127 $ 40,101
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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,888 $ 841
CLASS T 811 134
CLASS B 16,582 16,582*
CLASS C 1,124 1,124*
$ 20,405 $ 18,681
* 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 $ 2,338 .14*
CLASS T 27,715 .12*
CLASS B 5,829 .12*
CLASS C 1,398 .15*
INSTITUTIONAL CLASS 3,832 .14*
$ 41,112
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
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, 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 .85% $ 1,199
CLASS T .90% 24,241
CLASS B 1.60% 2,704
CLASS C 1.70% 828
INSTITUTIONAL CLASS .70% 1,957
$ 30,929
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 the fund's expenses. During the period, the fund's
custodian fees were reduced by $47 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INTEREST INCOME
Class A $ 71,929 $ 92,550
Class T 928,930 2,315,888
Class B 183,811 358,623
Class C 32,061 59,144
Institutional Class 122,005 283,792
Total $ 1,338,736 $ 3,109,997
6. DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET REALIZED GAIN
Class A $ - $ 8,027
Class T - 448,244
Class B - 74,885
Class C - 9,946
Institutional Class - 46,538
Total $ - $ 587,640
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 137,314 213,824 $ 1,399,255
Reinvestment of distributions 6,099 7,447 61,728
Shares redeemed (30,631) (68,308) (310,761)
Net increase (decrease) 112,782 152,963 $ 1,150,222
CLASS T Shares sold 102,330 2,607,737 $ 1,041,806
Reinvestment of distributions 67,741 195,749 686,225
Shares redeemed (1,267,108) (3,412,827) (12,831,128)
Net increase (decrease) (1,097,037) (609,341) $ (11,103,097)
CLASS B Shares sold 128,275 436,062 $ 1,303,741
Reinvestment of distributions 11,735 24,808 118,708
Shares redeemed (251,527) (471,198) (2,549,760)
Net increase (decrease) (111,517) (10,328) $ (1,127,311)
CLASS C Shares sold 17,726 258,235 $ 180,457
Reinvestment of distributions 2,120 4,045 21,474
Shares redeemed (136,577) (115,591) (1,381,538)
Net increase (decrease) (116,731) 146,689 $ (1,179,607)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 2,273,361
Reinvestment of distributions 77,827
Shares redeemed (711,636)
Net increase (decrease) $ 1,639,552
CLASS T Shares sold $ 27,740,166
Reinvestment of distributions 2,061,872
Shares redeemed (36,164,059)
Net increase (decrease) $ (6,362,021)
CLASS B Shares sold $ 4,584,924
Reinvestment of distributions 260,754
Shares redeemed (4,962,734)
Net increase (decrease) $ (117,056)
CLASS C Shares sold $ 2,695,857
Reinvestment of distributions 42,439
Shares redeemed (1,199,769)
Net increase (decrease) $ 1,538,527
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
INSTITUTIONAL CLASS Shares 46,836 161,716 $ 474,347
sold
Reinvestment of distributions 2,993 7,244 30,309
Shares redeemed (127,299) (165,729) (1,290,011)
Net increase (decrease) (77,470) 3,231 $ (785,355)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
INSTITUTIONAL CLASS Shares $ 1,718,233
sold
Reinvestment of distributions 76,239
Shares redeemed (1,737,876)
Net increase (decrease) $ 56,596
</TABLE>
8. MERGER INFORMATION.
On May 25, 2000, Class A, Class T, Class B, Class C, and Institutional
Class of Fidelity Advisor Municipal Income Fund acquired all of the
assets and assumed all of the liabilities of the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares, respectively.
Each acquisition was approved by the shareholders of each class of the
fund on April 19, 2000. 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 by Fidelity Advisor Municipal Income Fund Class
A was accomplished by an exchange of 314,140 shares of Fidelity
Advisor Municipal Income Fund Class A for the 360,900 shares then
outstanding of Class A (each valued at $10.01). Class T's acquisition
by Fidelity Advisor Municipal Income Fund Class T was accomplished by
an exchange of 3,316,008 shares of Fidelity Advisor Municipal Income
Fund Class T for the 3,816,726 shares then outstanding of Class T
(each valued at $10.00). Class B's acquisition by Fidelity Advisor
Municipal Income Fund Class B was accomplished by an exchange of
776,254 shares of Fidelity Advisor Municipal Income Fund Class B for
the 892,031 shares then outstanding of Class B (each valued at $9.99).
Class C's acquisition by Fidelity Advisor Municipal Income Fund Class
C was accomplished by an exchange of 114,599 shares of Fidelity
Advisor Municipal Income Fund Class C for the 131,903 shares then
outstanding of Class C (each valued at $10.00). Institutional Class's
acquisition by Fidelity Advisor Municipal Income Institutional Class
was accomplished by an exchange of 420,609 shares of Fidelity Advisor
Municipal Income Fund Institutional Class for the 482,017 shares then
outstanding of Institutional Class (each valued at $10.00).
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 19,
2000. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL
To approve an Agreement and Plan of Reorganization between Fidelity
Advisor Intermediate Municipal Income Fund and Fidelity Advisor
Municipal Income Fund.
# of % of
Votes Cast Votes Cast
Affirmative 32,475,468.60 93.350
Against 1,058,365.60 3.043
Abstain 1,254,957.39 3.607
TOTAL 34,788,791.59 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Stanley N. Griffith, Assistant Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
* INDEPENDENT TRUSTEES
LTTE-SANN-0600 103604
1.704559.102
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
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
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) ADVISOR
INTERMEDIATE MUNICIPAL INCOME FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(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 18 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 27 Notes to the financial
statements.
PROXY VOTING RESULTS 35
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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL 1.85% -0.44% 28.24% 77.73%
INCOME - INST CL
LB 1-17 Year Municipal Bond 2.20% 0.34% 32.12% n/a
Intermediate Municipal Debt 1.65% -1.17% 25.91% 80.42%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to those of the Lehman Brothers 1-17 Year Municipal Bond Index
- a market value-weighted index of investment-grade municipal bonds
with maturities between one and 17 years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the intermediate municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 130 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV INT MUNICIPAL -0.44% 5.10% 5.92%
INCOME - INST CL
LB 1-17 Year Municipal Bond 0.34% 5.73% n/a
Intermediate Municipal Debt -1.17% 4.71% 6.07%
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
1990/04/30 10000.00 10000.00
1990/05/31 10182.32 10218.30
1990/06/30 10266.62 10308.12
1990/07/31 10390.52 10459.65
1990/08/31 10330.11 10307.77
1990/09/30 10357.78 10313.65
1990/10/31 10473.61 10500.74
1990/11/30 10640.71 10711.91
1990/12/31 10669.43 10758.51
1991/01/31 10788.57 10902.88
1991/02/28 10886.79 10997.74
1991/03/31 10894.11 11001.70
1991/04/30 10992.86 11148.02
1991/05/31 11080.93 11247.13
1991/06/30 11087.66 11235.99
1991/07/31 11198.72 11372.85
1991/08/31 11288.20 11522.63
1991/09/30 11357.39 11672.65
1991/10/31 11479.35 11777.71
1991/11/30 11508.28 11810.57
1991/12/31 11698.45 12064.02
1992/01/31 11780.17 12091.53
1992/02/29 11793.68 12095.40
1992/03/31 11748.59 12099.87
1992/04/30 11830.77 12207.56
1992/05/31 11960.53 12351.24
1992/06/30 12117.50 12558.50
1992/07/31 12378.46 12935.00
1992/08/31 12286.94 12808.88
1992/09/30 12401.70 12892.65
1992/10/31 12317.01 12765.92
1992/11/30 12544.64 12994.56
1992/12/31 12550.35 13127.23
1993/01/31 12708.37 13279.90
1993/02/28 13051.23 13760.24
1993/03/31 12924.57 13614.79
1993/04/30 13017.92 13752.16
1993/05/31 13075.27 13829.45
1993/06/30 13216.24 14060.26
1993/07/31 13246.99 14078.68
1993/08/31 13481.50 14371.80
1993/09/30 13624.28 14535.50
1993/10/31 13653.10 14563.55
1993/11/30 13549.87 14435.24
1993/12/31 13797.46 14739.97
1994/01/31 13928.55 14908.30
1994/02/28 13570.92 14522.18
1994/03/31 13043.87 13930.83
1994/04/30 13162.04 14048.97
1994/05/31 13282.65 14170.77
1994/06/30 13190.01 14084.19
1994/07/31 13376.66 14342.35
1994/08/31 13430.03 14391.98
1994/09/30 13269.02 14180.70
1994/10/31 13083.32 13928.85
1994/11/30 12813.64 13677.02
1994/12/31 13048.13 13978.05
1995/01/31 13365.21 14377.54
1995/02/28 13706.95 14795.64
1995/03/31 13859.90 14965.64
1995/04/30 13858.93 14983.30
1995/05/31 14178.53 15461.42
1995/06/30 14105.28 15326.91
1995/07/31 14214.07 15472.21
1995/08/31 14395.16 15668.39
1995/09/30 14490.48 15767.57
1995/10/31 14648.20 15996.84
1995/11/30 14791.76 16262.22
1995/12/31 14923.35 16418.50
1996/01/31 15026.46 16542.46
1996/02/29 14980.79 16430.80
1996/03/31 14836.53 16220.82
1996/04/30 14792.56 16174.91
1996/05/31 14779.42 16168.44
1996/06/30 14911.22 16344.51
1996/07/31 15030.56 16493.25
1996/08/31 15032.41 16489.29
1996/09/30 15181.12 16720.14
1996/10/31 15331.44 16909.25
1996/11/30 15584.02 17218.69
1996/12/31 15542.79 17146.37
1997/01/31 15574.54 17178.77
1997/02/28 15706.19 17336.47
1997/03/31 15523.84 17105.38
1997/04/30 15643.75 17248.55
1997/05/31 15827.18 17507.97
1997/06/30 15979.02 17694.43
1997/07/31 16379.04 18184.57
1997/08/31 16239.99 18014.18
1997/09/30 16424.37 18228.00
1997/10/31 16502.73 18345.21
1997/11/30 16593.77 18453.08
1997/12/31 16797.67 18722.31
1998/01/31 16938.91 18915.52
1998/02/28 16932.03 18921.20
1998/03/31 16947.13 18937.85
1998/04/30 16881.87 18852.44
1998/05/31 17105.50 19150.87
1998/06/30 17167.16 19226.33
1998/07/31 17183.42 19274.59
1998/08/31 17424.48 19572.38
1998/09/30 17615.56 19816.25
1998/10/31 17612.60 19815.86
1998/11/30 17656.26 19885.41
1998/12/31 17686.31 19935.52
1999/01/31 17899.70 20172.55
1999/02/28 17807.31 20084.40
1999/03/31 17805.70 20112.32
1999/04/30 17851.76 20162.40
1999/05/31 17763.02 20045.66
1999/06/30 17503.54 19757.00
1999/07/31 17583.36 19828.91
1999/08/31 17510.61 19670.28
1999/09/30 17556.12 19678.35
1999/10/31 17450.57 19465.03
1999/11/30 17617.57 19672.14
1999/12/31 17527.57 19525.58
2000/01/31 17491.64 19440.65
2000/02/29 17590.45 19666.16
2000/03/31 17851.31 20096.06
2000/04/28 17772.96 19977.29
IMATRL PRASUN SHR__CHT 20000430 20000518 133638 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Intermediate Municipal Income Fund -
Institutional Class on April 30, 1990. As the chart shows, by April
30, 2000, the value of the investment would have grown to $17,773 - a
77.73% 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
$19,977 - a 99.77% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will
do tomorrow. Bond prices,
for example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return and yield
of a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.24% 4.13% 4.55% 4.81% 4.85% 5.22%
Capital returns -0.39% -5.05% 2.18% 2.83% -0.19% 6.74%
Total returns 1.85% -0.92% 6.73% 7.64% 4.66% 11.96%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.53(cents) 22.58(cents) 44.88(cents)
Annualized dividend rate 4.22% 4.47% 4.39%
30-day annualized yield 4.64% - -
30-day annualized 7.25% - -
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, $10.14 over the past six months and
$10.23 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 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 4.57% and 7.14%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Given the investment environment
for municipal bonds during the
six-month period ending April 30,
2000, it seemed almost unrealistic
to expect strong performance
from the sector. After all, there were
three interest-rate hikes by the
Federal Reserve Board in that time
frame. That's typically bad news for
munis, which are generally longer
in duration and, therefore, more
interest-rate sensitive than other
fixed-income sectors. Municipal
bonds also had to compete with
record-setting equity performance
and a strong rally in Treasuries
during the past six months. Yet
remarkably, the municipal bond
sector outperformed nearly every
segment of the fixed-income
market for the overall period. In fact,
through the first four months of 2000,
the Lehman Brothers Municipal Index
also outperformed most major U.S.
equity indexes, including the S&P
500(Registered trademark), the NASDAQ, and the Dow
Jones Industrial Average. For the
six months ending April 30, the
Lehman Brothers Municipal Bond
Index - an index of over 35,000
investment-grade, fixed-rate,
tax-exempt bonds - gained 2.63%.
That outpaced the overall
taxable-bond market return of
1.42%, as measured by the Lehman
Brothers Aggregate Bond Index.
Much of the municipal segment's
gains occurred in February and
March when muni yields rose above
6%, a fairly rare phenomenon. The
attractive yields that munis offered
prompted a powerful rush of retail
buying, which sparked a strong rally
in the sector.
(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. Rising interest rates and persistent inflation worries put pressure
on municipal bonds. For the six-month period that ended April 30,
2000, the fund's Institutional Class shares had a total return of
1.85%. To get a sense of how the fund did relative to its competitors,
the intermediate municipal debt funds average returned 1.65% for the
same six-month period, according to Lipper Inc. Additionally, the
Lehman Brothers 1-17 Year Municipal Bond Index, which tracks the types
of securities in which the fund invests, returned 2.20% for the same
six-month period. For the 12-month period that ended April 30, 2000,
the fund's Institutional Class shares returned -0.44%, while the
intermediate municipal debt funds average returned -1.17% and the
Lehman Brothers index returned 0.34%.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST
SIX MONTHS?
A. The fund continued to benefit from its relatively large position in
premium coupon bonds, which pay interest rates above prevailing market
rates and trade at prices that are above the face - or par - value.
The primary reason why I've favored them over the past several years
is because their premium gives them DE MINIMIS protection. This
protects certain premium bond gains from unfavorable tax treatment
that can occur during particular market environments. As interest
rates rose and bond prices fell, more and more bonds fell outside of
DE MINIMIS and investors punished them accordingly by pushing their
prices lower. As a result, the fund's focus on premium bonds meant
that it avoided many of the poor-performing bonds that fell outside of
DE MINIMIS. 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.
Q. WHAT ELSE CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund benefited by owning few poor-performing zero coupon bonds,
which don't pay interest but are sold below their face value. "Zeros"
are especially sensitive to interest-rate changes and, as a result,
fell out of favor and suffered more than interest-paying bonds when
interest rates rose.
Q. WHICH BONDS WERE THE MOST DISAPPOINTING DURING THE PERIOD?
A. Health care bonds, which continued to be hurt by reduced Medicare
and managed care payments, concerns about proposed federal health care
legislation and uncertainty surrounding this year's U.S. presidential
election, were probably the biggest disappointments. The fund's
holdings in Texas ranked second among detractors from performance.
When the state legislature broadened Texas-based insurance companies'
ability to buy municipal bonds issued in other states, the demand for
Texas munis weakened.
Q. WHERE DID YOU FIND ATTRACTIVE VALUES IN TERMS OF SECTORS OVER THE
PAST SIX MONTHS?
A. I found compelling values among issuers that are less sensitive to
the state of the economy - including those that provide essential
services such as water, sewer and transportation. Given that more
economically sensitive bonds - such as general obligation bonds -
offered only a small amount of additional yield, there really wasn't
any penalty for getting some measure of protection against a potential
economic slowdown.
Q. WHAT'S AHEAD FOR THE MUNICIPAL MARKET?
A. As always, the direction of interest rates will be the main
determinant of municipal bond performance. But supply and demand also
will figure prominently. From that standpoint, the municipal market
has improved over the past six months. Higher interest rates curtailed
the supply of new issuance, and refundings - or refinancings - of
existing debt have slowed. Also, rising interest rates temporarily
pushed municipal bond yields above 6.00% in February and March, which
attracted the attention of a lot of individual investors. With
municipal bonds priced somewhat attractively relative to U.S. Treasury
securities, demand could firm again and provide a relatively good
technical backdrop for municipals.
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, consistent with
the preservation of capital, by
investing normally in
investment-grade municipal
securities
START DATE: September 19,
1985
SIZE: as of April 30, 2000,
more than $58 million
MANAGER: Norm Lind, since
1998; joined Fidelity in
1986
NORM LIND ON MUNICIPAL
BOND BUYING STRATEGIES:
"At Fidelity, one of the key
strategies we use in managing
municipal bond funds is to
opportunistically purchase and
sell bonds of various maturities,
and the past six months provide a
useful example of our approach.
With the help of Fidelity's
research team, I initially found
value in bonds with maturities on
the shorter and longer end of the
intermediate-bond maturity
spectrum. Toward the end of 1999, I
sold some of the shorter and longer
maturities in favor of bonds in the
middle range between five and 10
years. Despite these shifts between
bonds of various maturities, I kept
the fund's duration - which
measures interest-rate sensitivity
- in line with the intermediate
municipal market as a whole, as
measured by the Lehman Brothers
1-17 Year Municipal Bond Index."
NOTE TO SHAREHOLDERS: At a
meeting on April 19, 2000,
shareholders voted to merge
Fidelity Advisor Intermediate
Municipal Income Fund into
Fidelity Advisor Municipal Income
Fund. The merger took place on
May 25, 2000.
INVESTMENT CHANGES
TOP FIVE STATES AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
California 12.2 10.0
Texas 11.3 15.4
Washington 10.2 10.4
North Carolina 7.1 4.9
New York 7.0 8.4
TOP FIVE SECTORS AS OF APRIL
30, 2000
% OF FUND'S NET ASSETS % OF FUND'S NET ASSETS 6
MONTHS AGO
Electric Utilities 25.7 19.9
Education 20.7 22.6
General Obligations 17.6 27.1
Health Care 16.4 13.5
Transportation 4.0 4.4
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 6.6 7.2
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 APRIL 30, 2000
6 MONTHS AGO
Years 4.9 5.0
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION
(MOODY'S RATINGS)
AS OF APRIL 30, 2000
Aaa 52.2%
Aa, A 32.4%
Baa 11.9%
Ba and Below 1.5%
Short-term
Investments 2.0%
Row: 1, Col: 1, Value: 52.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 32.4
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 11.9
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 1.5
Row: 1, Col: 8, Value: 2.0
AS OF OCTOBER 31, 1999
Aaa 53.5%
Aa, A 34.2%
Baa 10.8%
Ba and Below 0.0%
Short-term
Investments 1.5%
Row: 1, Col: 1, Value: 53.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 34.2
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 10.8
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.5
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P (registered
trademark) RATINGS. AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS - 97.0%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
ALASKA - 0.5%
Alaska Student Ln. Corp. Aaa $ 300,000 $ 298,338
Student Ln. Rev. Series A,
5% 7/1/03 (AMBAC Insured) (e)
ARKANSAS - 1.5%
Arkansas Gen. Oblig. (Cap. Aa2 1,000,000 901,560
Appreciation) (College
Savings Prog.) Series A, 0%
6/1/02
CALIFORNIA - 12.2%
California Edl. Facilities AAA 225,000 218,849
Auth. Rev. Rfdg. (Chapman
Univ. Proj.) 5.375% 10/1/16
(AMBAC Insured)
California Health Facilities A+ 2,275,000 2,277,207
Fing. Auth. Rev. (Casa de
Las Campanas Proj.) Series
A, 5.375% 8/1/09
California Hsg. Fin. Agcy. Aaa 1,000,000 1,003,380
Rev. (Home Mtg. Prog.)
Series R, 5.35% 8/1/07 (MBIA
Insured) (e)
California Poll. Cont. Fing. Ba1 500,000 502,845
Auth. Resource Recovery Rev.
(Waste Mgmt., Inc. Proj.)
Series A, 7.15% 2/1/11 (e)
Los Angeles County Ctfs. of A3 970,000 769,026
Prtn. (Disney Parking Proj.)
0% 9/1/04
Sacramento Muni. Util. Aaa 1,000,000 1,025,110
District Elec. Rev. 5.45%
11/15/08 (FGIC Insured)
Sacramento Pwr. Auth.
Cogeneration Proj. Rev.:
6% 7/1/02 BBB- 1,000,000 1,018,320
6.5% 7/1/08 BBB- 300,000 319,314
7,134,051
COLORADO - 1.6%
Arapaho County Cap. Impt. Aaa 3,620,000 568,883
Trust Fund Hwy. Rev. (Cap.
Appreciation) Series C, 0%
8/31/26 (Pre-Refunded to
8/31/05 @ 20.8626) (f)
Colorado Health Facilities Ba1 400,000 387,916
Auth. Rev. Rfdg. (Rocky
Mountain Adventist Proj.)
6.25% 2/1/04
956,799
DISTRICT OF COLUMBIA - 0.9%
District of Columbia Redev. Baa 500,000 501,080
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 - 1.6%
Broward County Resource A3 $ 435,000 $ 448,920
Recovery Rev. (SES Broward
Co. LP South Proj.) 7.95%
12/1/08
Jacksonville Port Auth. Rev. Aaa 500,000 514,260
Rfdg. 5.75% 11/1/09 (MBIA
Insured) (e)
963,180
ILLINOIS - 2.8%
Chicago Midway Arpt. Rev. Aaa 300,000 311,322
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 435,000 264,480
0% 6/15/09 (FGIC Insured) Aaa 65,000 39,636
(Escrowed to Maturity) (f)
0% 6/15/00 (AMBAC Insured) Aaa 1,000,000 994,430
1,609,868
IOWA - 2.6%
Iowa Student Ln. Liquidity Aa1 1,500,000 1,521,570
Corp. Student Ln. Rev.
Series A, 6.35% 3/1/01
KANSAS - 5.2%
Kansas Dev. Fin. Auth. Rev.
(Sisters of Charity
Leavenworth Health Svc. Co.
Proj.):
5.25% 12/1/09 (MBIA Insured) Aaa 1,385,000 1,361,732
5.25% 12/1/11 (MBIA Insured) Aaa 1,750,000 1,704,780
3,066,512
LOUISIANA - 3.2%
Louisiana Pub. Facilities Aaa 1,825,000 1,849,054
Auth. Rev. Rfdg. (Student
Ln. Prog.) Sr. Series A1,
6.2% 3/1/01
MASSACHUSETTS - 5.0%
Boston Gen. Oblig. Rev. Aaa 250,000 256,160
(Boston City Hosp. Proj.)
Series A, 7.625% 2/15/21
(Pre-Refunded to 8/15/00 @
101.666) (f)
Massachusetts Health & Edl. Aaa 700,000 689,178
Facilities Auth. Rev. Rfdg.
(Fairview Extended Care
Proj.) Series B, 4.55%
1/1/21 (MBIA Insured)
Massachusetts Ind. Fin. Agcy. A1 1,600,000 1,427,440
Rev. (Cap. Appreciation)
(Massachusetts Biomedical
Research Corp. Proj.) Series
A1, 0% 8/1/02
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
MASSACHUSETTS - CONTINUED
Massachusetts Tpk. Auth. Aaa $ 550,000 $ 545,820
Western Tpk. Rev. Series A,
5.55% 1/1/17 (MBIA Insured)
Massachusetts Wtr. Poll. Aa1 10,000 9,704
Abatement Trust Wtr. Poll.
Abatement Rev. (MWRA Ln.
Prog.) Series A, 5.25%
8/1/14
2,928,302
MICHIGAN - 3.1%
Michigan Hosp. Fin. Auth.
Rev. Rfdg.:
(McLaren Health Care Corp. A1 2,000,000 1,634,900
Proj.) Series A, 5% 6/1/19
(Mercy Health Svcs. Proj.) Aa3 200,000 202,820
Series S, 5.75% 8/15/05
1,837,720
MINNESOTA - 0.6%
Minneapolis Gen. Oblig. (Cap. Aaa 200,000 176,314
Appreciation) Series B, 0%
12/1/02
Minnesota Higher Ed. Aa3 200,000 201,248
Facilities Auth. Rev.
(MacAlester College Proj.)
Series 4C, 5.5% 3/1/12
377,562
NEVADA - 0.9%
Clark County School District Aaa 500,000 527,280
Series A, 9.75% 6/1/01 (MBIA
Insured)
NEW MEXICO - 5.2%
Albuquerque Arpt. Rev. Rfdg.:
6.25% 7/1/00 (AMBAC Insured) Aaa 250,000 250,683
(e)
6.75% 7/1/09 (AMBAC Insured) Aaa 450,000 493,529
(e)
New Mexico Edl. Assistance Aaa 1,700,000 1,735,955
Foundation Student Ln. Rev.
Series IV A2, 6.65% 3/1/07
Rio Rancho Wtr. & Wastewtr. Aaa 500,000 553,155
Sys. Rev. Series A, 8%
5/15/04 (FSA Insured)
3,033,322
NEW YORK - 7.0%
New York City Gen. Oblig. A3 1,000,000 991,630
Series H, 5.5% 8/1/12
New York State Dorm. Auth.
Revs.:
(City Univ. Sys. Baa1 500,000 505,785
Consolidation Proj.) Series
A, 5.75% 7/1/13
(City Univ. Sys. Proj.) Baa1 500,000 561,830
Series C, 7.5% 7/1/10
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth.
Revs.: - continued
Rfdg. (State Univ. Edl. A3 $ 500,000 $ 523,110
Facilities Proj.) Series A,
6.5% 5/15/04
New York State Envir. Aa1 500,000 438,880
Facilities Corp. Clean Wtr.
& Drinking Wtr. Rev.
(Revolving Funds Prog.)
Series F, 4.875% 6/15/18
New York State Local Govt. A3 1,000,000 646,760
Assistance Corp. (Cap.
Appreciation) Series A, 0%
4/1/08
New York State Thruway Auth.
Svc. Contract Rev. (Local
Hwy. & Bridge Proj.):
5.4% 4/1/03 Baa1 250,000 251,658
6% 4/1/03 Baa1 200,000 204,260
4,123,913
NORTH CAROLINA - 7.1%
North Carolina Eastern Muni.
Pwr. Agcy. Pwr. Sys. Rev.:
Rfdg.:
Series B:
5.875% 1/1/21 (MBIA Insured) Aaa 650,000 644,137
6% 1/1/06 Baa3 1,315,000 1,327,032
Series C, 5.5% 1/1/07 Baa1 700,000 685,328
Series A, 5.625% 1/1/03 Baa3 500,000 500,020
North Carolina Muni. Pwr.
Agcy. #1 Catawba Elec. Rev.
Rfdg.:
5.75% 1/1/02 Baa1 750,000 752,048
5.9% 1/1/03 Baa1 250,000 251,135
4,159,700
PENNSYLVANIA - 4.0%
Pennsylvania Higher Edl. AA- 1,270,000 1,314,831
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 1,021,860
Rfdg. (Residential Dev.
Section 8 Proj.) Series A,
7% 7/1/01
2,336,691
RHODE ISLAND - 1.7%
Rhode Island Student Ln. A 1,000,000 1,010,090
Auth. Student Ln. Rev. Rfdg.
Series A, 6.55% 12/1/00
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
SOUTH CAROLINA - 3.9%
South Carolina Ed. Assistance
Auth. Rev. Rfdg. (Guaranteed
Student Ln. Prog.):
Sr. Lien Series A2, 5.4% AAA $ 1,250,000 $ 1,254,775
9/1/02
Sub Lien Series B, 5.7% A 1,000,000 1,010,090
9/1/05 (e)
2,264,865
TENNESSEE - 0.5%
Memphis-Shelby County Arpt. Aaa 275,000 276,763
Auth. Arpt. Rev. Rfdg.
Series A, 5.25% 2/15/01
(MBIA Insured) (e)
TEXAS - 11.3%
Austin Independent School Aaa 500,000 521,150
District 8.125% 8/1/01
(Escrowed to Maturity) (f)
Brazos Higher Ed. Auth., Inc. Aaa 435,000 442,486
Student Ln. Rev. Rfdg.
Series A1, 6.05% 12/1/01 (e)
Deer Park Independent School Aaa 200,000 173,466
District Rfdg. 0% 2/15/03
Harris County Gen. Oblig. Aaa 3,000,000 2,676,507
(Cap. Appreciation) (Toll
Road Proj.) Sub Lien Series
A, 0% 8/15/02 (MBIA Insured)
Hurst Euless Bedford Aaa 1,000,000 537,340
Independent School District
Rfdg. (Cap. Appreciation) 0%
8/15/11
Laredo Gen. Oblig. Rfdg. Aaa 1,000,000 975,080
5.125% 8/15/12 (FGIC Insured)
Texas Pub. Fin. Auth. Bldg. Aaa 1,000,000 1,066,620
Rev. Rfdg. (Texas Technical
College Proj.) 6.25% 8/1/09
(MBIA Insured)
Univ. of Texas Permanent Aaa 250,000 244,798
Univ. Fund 5% 7/1/10
6,637,447
UTAH - 4.4%
Intermountain Pwr. Agcy. Pwr.
Supply Rev.:
(Cap. Appreciation) Series A, Aaa 2,860,000 2,064,748
0% 7/1/06 (MBIA Insured)
Rfdg. (Cap. Appreciation) Aaa 500,000 496,280
Series B, 0% 7/1/00 (MBIA
Insured)
2,561,028
WASHINGTON - 10.2%
Grant County Pub. Util. Aaa 1,715,000 1,626,540
District No. 2 (Priest
Rapids Hydro-Elec. Proj.)
Second Series B, 5.375%
1/1/16 (MBIA Insured) (e)
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
WASHINGTON - CONTINUED
Washington Pub. Pwr. Supply
Sys. Nuclear Proj. #2 Rev.:
Rfdg. Series A, 0% 7/1/06 Aaa $ 2,700,000 $ 1,937,547
(MBIA Insured)
5.4% 7/1/12 (b) Aa1 2,000,000 1,952,220
Washington Pub. Pwr. Supply Aa1 500,000 491,400
Sys. Nuclear Proj. #3 Rev.
Rfdg. Series C, 5.1% 7/1/07
6,007,707
TOTAL MUNICIPAL BONDS 56,884,402
(Cost $57,678,051)
CASH EQUIVALENTS - 2.0%
SHARES
Municipal Central Cash Fund, 1,156,686 1,156,686
4.80% (c)(d) (Cost
$1,156,686)
TOTAL INVESTMENT PORTFOLIO - 58,041,088
99.0%
(Cost $58,834,737)
NET OTHER ASSETS - 1.0% 601,461
NET ASSETS - 100% $ 58,642,549
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
20 Bond Buyer Municipal Bond June 2000 $ 1,864,375 $ (15,745)
Index Contracts
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS - 3.2%
</TABLE>
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $292,833.
(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 74.2% AAA, AA, A 68.2%
Baa 9.5% BBB 13.9%
Ba 1.5% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The distribution of municipal securities by revenue source, as a
percentage of total net assets, is as follows:
Electric Utilities 25.7%
Education 20.7
General Obligations 17.6
Health Care 16.4
Others* (individually less 19.6
than 5%)
100.0%
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $58,834,737. Net unrealized depreciation
aggregated $793,649, of which $333,023 related to appreciated
investment securities and $1,126,672 related to depreciated investment
securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 58,041,088
value (cost $58,834,737) -
See accompanying schedule
Receivable for fund shares 3,060
sold
Interest receivable 786,113
Receivable for daily 2,500
variation on futures
contracts
Other receivables 911
TOTAL ASSETS 58,833,672
LIABILITIES
Payable for fund shares $ 61,009
redeemed
Distributions payable 86,658
Accrued management fee 9,389
Distribution fees payable 17,102
Other payables and accrued 16,965
expenses
TOTAL LIABILITIES 191,123
NET ASSETS $ 58,642,549
Net Assets consist of:
Paid in capital $ 59,869,408
Distributions in excess of (21,166)
net interest income
Accumulated undistributed net (396,299)
realized gain (loss) on
investments
Net unrealized appreciation (809,394)
(depreciation) on investments
NET ASSETS $ 58,642,549
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.12
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($3,705,097 (divided by)
366,218 shares)
Maximum offering price per $10.51
share (100/96.25 of $10.12)
CLASS T: NET ASSET VALUE and $10.12
redemption price per share
($39,158,835 (divided by)
3,871,341 shares)
Maximum offering price per $10.41
share (100/97.25 of $10.12)
CLASS B: NET ASSET VALUE and $10.10
offering price per share
($9,215,784 (divided by)
912,548 shares) A
CLASS C: NET ASSET VALUE and $10.11
offering price per share
($1,370,083 (divided by)
135,537 shares) A
INSTITUTIONAL CLASS: NET $10.11
ASSET VALUE, offering price
and redemption price per
share ($5,192,750 (divided
by) 513,379 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INTEREST INCOME $ 1,733,156
EXPENSES
Management fee $ 123,723
Transfer agent fees 41,112
Distribution fees 113,127
Accounting fees and expenses 33,015
Non-interested trustees' 99
compensation
Custodian fees and expenses 1,300
Registration fees 38,343
Audit 5,187
Legal 730
Reports to shareholders 4,606
Miscellaneous 75
Total expenses before 361,317
reductions
Expense reductions (30,976) 330,341
NET INTEREST INCOME 1,402,815
REALIZED AND UNREALIZED GAIN (363,403)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 52,767
Futures contracts (15,745) 37,022
NET GAIN (LOSS) (326,381)
NET INCREASE (DECREASE) IN $ 1,076,434
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net interest income $ 1,402,815 $ 3,109,997
Net realized gain (loss) (363,403) (21,187)
Change in net unrealized 37,022 (3,947,556)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,076,434 (858,746)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (1,338,736) (3,109,997)
From net interest income
From net realized gain - (587,640)
TOTAL DISTRIBUTIONS (1,338,736) (3,697,637)
Share transactions - net (13,045,148) (3,244,402)
increase (decrease)
TOTAL INCREASE (DECREASE) (13,307,450) (7,800,785)
IN NET ASSETS
NET ASSETS
Beginning of period 71,949,999 79,750,784
End of period (including $ 58,642,549 $ 71,949,999
distributions in excess of
net interest income of
$21,166 and $0, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.150 $ 10.770 $ 10.600 $ 10.410 $ 10.160
of period
Income from Investment
Operations
Net interest income .223 D .431 .411 .459 .113
Net realized and unrealized (.035) (.540) .200 .191 .250
gain (loss)
Total from investment .188 (.109) .611 .650 .363
operations
Less Distributions
From net interest income (.218) (.431) (.411) (.459) (.113)
From net realized gain - (.080) (.030) (.001) -
Total distributions (.218) (.511) (.441) (.460) (.113)
Net asset value, end of $ 10.120 $ 10.150 $ 10.770 $ 10.600 $ 10.410
period
TOTAL RETURN B, C 1.87% (1.07)% 5.89% 6.42% 3.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 3,705 $ 2,572 $ 1,082 $ 442 $ 103
(000 omitted)
Ratio of expenses to average .85% A, F .85% F .90% A, F .90% F .90% A, F
net assets
Ratio of net interest income 4.45% A 4.17% 4.19% A 4.37% 4.60% A
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO NOVEMBER 30, 1996.
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G ELEVEN MONTHS ENDED OCTOBER 31
H YEAR ENDED NOVEMBER 30
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 F 1997 G 1996 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.380
period
Income from Investment
Operations
Net interest income .223 D .427 .407 .449 .461
Net realized and unrealized (.037) (.540) .210 .181 .030
gain (loss)
Total from investment .186 (.113) .617 .630 .491
operations
Less Distributions
From net interest income (.216) (.427) (.407) (.449) (.461)
From net realized gain - (.080) (.030) (.001) -
In excess of net realized gain - - - - -
Total distributions (.216) (.507) (.437) (.450) (.461)
Net asset value, end of period $ 10.120 $ 10.150 $ 10.770 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.85% (1.11)% 5.94% 6.21% 4.89%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 39,159 $ 50,432 $ 60,070 $ 48,830 $ 56,729
(000 omitted)
Ratio of expenses to average .90% A, E .90% E .95% A, E 1.00% E 1.00% E
net assets
Ratio of net interest income 4.40% A 4.12% 4.15% A 4.32% 4.42%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T YEAR ENDED OCTOBER 31,
1995 G 1994 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.400 $ 10.460
period
Income from Investment
Operations
Net interest income .451 .455
Net realized and unrealized .980 (1.040)
gain (loss)
Total from investment 1.431 (.585)
operations
Less Distributions
From net interest income (.451) (.455)
From net realized gain - -
In excess of net realized gain - (.020)
Total distributions (.451) (.475)
Net asset value, end of period $ 10.380 $ 9.400
TOTAL RETURN B, C 15.49% (5.78)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 62,852 $ 57,382
(000 omitted)
Ratio of expenses to average .94% E .90% E
net assets
Ratio of net interest income 4.56% 4.49%
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.140 $ 10.760 $ 10.590 $ 10.410 $ 10.380
period
Income from Investment
Operations
Net interest income .187 D .353 .339 .382 .394
Net realized and unrealized (.047) (.540) .200 .181 .030
gain (loss)
Total from investment .140 (.187) .539 .563 .424
operations
Less Distributions
From net interest income (.180) (.353) (.339) (.382) (.394)
From net realized gain - (.080) (.030) (.001) -
Total distributions (.180) (.433) (.369) (.383) (.394)
Net asset value, end of period $ 10.100 $ 10.140 $ 10.760 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.39% (1.81)% 5.17% 5.54% 4.21%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,216 $ 10,387 $ 11,134 $ 7,917 $ 7,445
(000 omitted)
Ratio of expenses to average 1.60% A, F 1.60% F 1.65% A, F 1.65% F 1.66% F
net assets
Ratio of net interest income 3.70% A 3.43% 3.45% A 3.67% 3.76%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B YEAR ENDED OCTOBER 31,
1995 H 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.400 $ 9.890
period
Income from Investment
Operations
Net interest income .373 .155
Net realized and unrealized .980 (.490)
gain (loss)
Total from investment 1.353 (.335)
operations
Less Distributions
From net interest income (.373) (.155)
From net realized gain - -
Total distributions (.373) (.155)
Net asset value, end of period $ 10.380 $ 9.400
TOTAL RETURN B, C 14.60% (3.44)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,226 $ 1,682
(000 omitted)
Ratio of expenses to average 1.68% F 1.65% A, F
net assets
Ratio of net interest income 3.71% 3.74% A
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 G 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.550
period
Income from Investment
Operations
Net interest income .183 D .342 .328 .027
Net realized and unrealized (.048) (.540) .210 .040
gain (loss)
Total from investment .135 (.198) .538 .067
operations
Less Distributions
From net interest income (.175) (.342) (.328) (.027)
From net realized gain - (.080) (.030) -
Total distributions (.175) (.422) (.358) (.027)
Net asset value, end of period $ 10.110 $ 10.150 $ 10.770 $ 10.590
TOTAL RETURN B, C 1.34% (1.91)% 5.16% .63%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,370 $ 2,562 $ 1,137 $ 13
(000 omitted)
Ratio of expenses to average 1.70% A, F 1.70% F 1.75% A, F 1.75% A, F
net assets
Ratio of net interest income 3.60% A 3.34% 3.29% A 3.33% A
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INTEREST 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 ELEVEN MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 2000 YEAR ENDED OCTOBER 31,
INSTITUTIONAL CLASS
(UNAUDITED) 1999 1998 G 1997 H 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.150 $ 10.770 $ 10.590 $ 10.410 $ 10.360
period
Income from Investment
Operations
Net interest income .232 D .448 .427 .475 .487
Net realized and unrealized (.046) (.540) .210 .181 .050
gain (loss)
Total from investment .186 (.092) .637 .656 .537
operations
Less Distributions
From net interest income (.226) (.448) (.427) (.475) (.487)
From net realized gain - (.080) (.030) (.001) -
In excess of net realized gain - - - - -
Total distributions (.226) (.528) (.457) (.476) (.487)
Net asset value, end of period $ 10.110 $ 10.150 $ 10.770 $ 10.590 $ 10.410
TOTAL RETURN B, C 1.85% (.92)% 6.14% 6.48% 5.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,193 $ 5,997 $ 6,328 $ 6,098 $ 6,455
(000 omitted)
Ratio of expenses to average .70% A, E .70% E .75% A, E .75% E .75% E
net assets
Ratio of expenses to average .70% A .70% .75% A .75% .74% F
net assets after expense
reductions
Ratio of net interest income 4.60% A 4.32% 4.36% A 4.57% 4.68%
to average net assets
Portfolio turnover rate 2% A 19% 26% A 18% 35%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEAR ENDED OCTOBER 31,
INSTITUTIONAL CLASS
1995 H 1994 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.410 $ 10.460
period
Income from Investment
Operations
Net interest income .477 .481
Net realized and unrealized .950 (1.030)
gain (loss)
Total from investment 1.427 (.549)
operations
Less Distributions
From net interest income (.477) (.481)
From net realized gain - -
In excess of net realized gain - (.020)
Total distributions (.477) (.501)
Net asset value, end of period $ 10.360 $ 9.410
TOTAL RETURN B, C 15.44% (5.43)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,085 $ 11,702
(000 omitted)
Ratio of expenses to average .70% E .65% E
net assets
Ratio of expenses to average .70% .65%
net assets after expense
reductions
Ratio of net interest income 4.96% 4.75%
to average net assets
Portfolio turnover rate 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 NET INTEREST 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
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Intermediate Municipal Income Fund (the fund) is a
fund of Fidelity Advisor Series II (the trust) and is authorized to
issue an unlimited number of shares. Effective the close of business
on December 29, 1999, the fund was closed to new accounts. 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). Distributions in excess of net
interest 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.
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 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
2. OPERATING POLICIES - CONTINUED
WHEN-ISSUED SECURITIES - CONTINUED
commitment. Losses may arise due to changes in the 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.
Futures contracts involve, to varying degrees, risk of loss in excess
of the futures variation margin reflected in the Statement of Assets
and Liabilities. The underlying face amount at value of any open
futures contracts at period end is shown in the schedule of
investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the
underlying instruments or if the counterparties do not perform under
the contracts' terms. Gains (losses) are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at
the settlement price established each day by the board of trade or
exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $631,544 and $14,859,519, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,880,120 and $0, 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 annualized rate of .38% of average net
assets.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 and
Service 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 $ 2,598 $ 2
CLASS T 55,930 1,492
CLASS B 45,458 32,952
CLASS C 9,141 5,655
$ 113,127 $ 40,101
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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 1,888 $ 841
CLASS T 811 134
CLASS B 16,582 16,582*
CLASS C 1,124 1,124*
$ 20,405 $ 18,681
* 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 $ 2,338 .14*
CLASS T 27,715 .12*
CLASS B 5,829 .12*
CLASS C 1,398 .15*
INSTITUTIONAL CLASS 3,832 .14*
$ 41,112
* ANNUALIZED
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
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, 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 .85% $ 1,199
CLASS T .90% 24,241
CLASS B 1.60% 2,704
CLASS C 1.70% 828
INSTITUTIONAL CLASS .70% 1,957
$ 30,929
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 the fund's expenses. During the period, the fund's
custodian fees were reduced by $47 under this arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INTEREST INCOME
Class A $ 71,929 $ 92,550
Class T 928,930 2,315,888
Class B 183,811 358,623
Class C 32,061 59,144
Institutional Class 122,005 283,792
Total $ 1,338,736 $ 3,109,997
6. DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET REALIZED GAIN
Class A $ - $ 8,027
Class T - 448,244
Class B - 74,885
Class C - 9,946
Institutional Class - 46,538
Total $ - $ 587,640
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 137,314 213,824 $ 1,399,255
Reinvestment of distributions 6,099 7,447 61,728
Shares redeemed (30,631) (68,308) (310,761)
Net increase (decrease) 112,782 152,963 $ 1,150,222
CLASS T Shares sold 102,330 2,607,737 $ 1,041,806
Reinvestment of distributions 67,741 195,749 686,225
Shares redeemed (1,267,108) (3,412,827) (12,831,128)
Net increase (decrease) (1,097,037) (609,341) $ (11,103,097)
CLASS B Shares sold 128,275 436,062 $ 1,303,741
Reinvestment of distributions 11,735 24,808 118,708
Shares redeemed (251,527) (471,198) (2,549,760)
Net increase (decrease) (111,517) (10,328) $ (1,127,311)
CLASS C Shares sold 17,726 258,235 $ 180,457
Reinvestment of distributions 2,120 4,045 21,474
Shares redeemed (136,577) (115,591) (1,381,538)
Net increase (decrease) (116,731) 146,689 $ (1,179,607)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 2,273,361
Reinvestment of distributions 77,827
Shares redeemed (711,636)
Net increase (decrease) $ 1,639,552
CLASS T Shares sold $ 27,740,166
Reinvestment of distributions 2,061,872
Shares redeemed (36,164,059)
Net increase (decrease) $ (6,362,021)
CLASS B Shares sold $ 4,584,924
Reinvestment of distributions 260,754
Shares redeemed (4,962,734)
Net increase (decrease) $ (117,056)
CLASS C Shares sold $ 2,695,857
Reinvestment of distributions 42,439
Shares redeemed (1,199,769)
Net increase (decrease) $ 1,538,527
</TABLE>
7. SHARE TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
INSTITUTIONAL CLASS Shares 46,836 161,716 $ 474,347
sold
Reinvestment of distributions 2,993 7,244 30,309
Shares redeemed (127,299) (165,729) (1,290,011)
Net increase (decrease) (77,470) 3,231 $ (785,355)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
INSTITUTIONAL CLASS Shares $ 1,718,233
sold
Reinvestment of distributions 76,239
Shares redeemed (1,737,876)
Net increase (decrease) $ 56,596
</TABLE>
8. MERGER INFORMATION.
On May 25, 2000, Class A, Class T, Class B, Class C, and Institutional
Class of Fidelity Advisor Municipal Income Fund acquired all of the
assets and assumed all of the liabilities of the fund's Class A, Class
T, Class B, Class C, and Institutional Class shares, respectively.
Each acquisition was approved by the shareholders of each class of the
fund on April 19, 2000. 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 by Fidelity Advisor Municipal Income Fund Class
A was accomplished by an exchange of 314,140 shares of Fidelity
Advisor Municipal Income Fund Class A for the 360,900 shares then
outstanding of Class A (each valued at $10.01). Class T's acquisition
by Fidelity Advisor Municipal Income Fund Class T was accomplished by
an exchange of 3,316,008 shares of Fidelity Advisor Municipal Income
Fund Class T for the 3,816,726 shares then outstanding of Class T
(each valued at $10.00). Class B's acquisition by Fidelity Advisor
Municipal Income Fund Class B was accomplished by an exchange of
776,254 shares of Fidelity Advisor Municipal Income Fund Class B for
the 892,031 shares then outstanding of Class B (each valued at $9.99).
Class C's acquisition by Fidelity Advisor Municipal Income Fund Class
C was accomplished by an exchange of 114,599 shares of Fidelity
Advisor Municipal Income Fund Class C for the 131,903 shares then
outstanding of Class C (each valued at $10.00). Institutional Class's
acquisition by Fidelity Advisor Municipal Income Institutional Class
was accomplished by an exchange of 420,609 shares of Fidelity Advisor
Municipal Income Fund Institutional Class for the 482,017 shares then
outstanding of Institutional Class (each valued at $10.00).
PROXY VOTING RESULTS
A special meeting of the fund's shareholders was held on April 19,
2000. The results of votes taken among shareholders on proposals
before them are reported below. Each vote reported represents one
dollar of net asset value held on the record date for the meeting.
PROPOSAL
To approve an Agreement and Plan of Reorganization between Fidelity
Advisor Intermediate Municipal Income Fund and Fidelity Advisor
Municipal Income Fund.
# of % of
Votes Cast Votes Cast
Affirmative 32,475,468.60 93.350
Against 1,058,365.60 3.043
Abstain 1,254,957.39 3.607
TOTAL 34,788,791.59 100.000
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money
Management, Inc.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
Boyce I. Greer, Vice President
Stanley N. Griffith, Assistant Vice President
Norman U. Lind, Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
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
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LTTEI-SANN-0600 103621
1.704563.102
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(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
MORTGAGE SECURITIES FUND
(INITIAL CLASS OF FIDELITY ADVISOR MORTGAGE
SECURITIES FUND)
SEMIANNUAL REPORT
APRIL 30, 2000
(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.
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 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:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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 MORTGAGE SECURITIES FUND - INITIAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 1.67% 2.29% 39.12% 114.89%
- INITIAL CL
LB Mortgage 1.26% 1.85% 39.51% 116.20%
US Mortgage Funds Average 1.15% 1.19% 33.82% 101.21%
</TABLE>
CUMULATIVE TOTAL RETURNS show Initial Class' performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Initial Class' returns to the
performance of the Lehman Brothers Mortgage-Backed Securities Index -
a market value-weighted index of fixed-rate securities that represent
interests in pools of mortgage loans with original terms of 15 and 30
years that are issued by the Government National Mortgage Association
(GNMA), the Federal National Mortgage Association (FNMA), and the
Federal Home Loan Mortgage Corp. (FHLMC), and balloon mortgages with
fixed-rate coupons. To measure how Initial Class' performance stacked
up against its peers, you can compare it to the U.S. mortgage funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 62 mutual funds. These benchmarks reflect
reinvestment of dividends and capital gains, if any, and exclude the
effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY MORTGAGE SECURITIES 2.29% 6.83% 7.95%
- INITIAL CL
LB Mortgage 1.85% 6.89% 8.02%
US Mortgage Funds Average 1.19% 5.99% 7.24%
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
FA Mortgage Sec -CL I LB Mortgage Backed Secs
00240 LB006
1990/04/30 10000.00 10000.00
1990/05/31 10290.72 10310.28
1990/06/30 10439.91 10473.31
1990/07/31 10591.63 10655.05
1990/08/31 10563.61 10541.83
1990/09/30 10620.01 10628.33
1990/10/31 10728.80 10748.84
1990/11/30 10963.56 10974.07
1990/12/31 11152.68 11158.00
1991/01/31 11268.40 11327.60
1991/02/28 11340.55 11423.09
1991/03/31 11416.83 11500.84
1991/04/30 11540.41 11606.77
1991/05/31 11600.41 11708.82
1991/06/30 11629.42 11719.27
1991/07/31 11796.46 11917.54
1991/08/31 12021.89 12134.27
1991/09/30 12209.56 12361.69
1991/10/31 12353.89 12566.51
1991/11/30 12429.41 12657.63
1991/12/31 12670.86 12912.02
1992/01/31 12609.91 12762.83
1992/02/29 12735.38 12883.59
1992/03/31 12647.37 12801.47
1992/04/30 12765.94 12927.33
1992/05/31 12976.65 13160.34
1992/06/30 13114.14 13315.60
1992/07/31 13091.63 13431.98
1992/08/31 13176.31 13606.92
1992/09/30 13259.03 13712.86
1992/10/31 13127.19 13592.58
1992/11/30 13190.64 13635.10
1992/12/31 13361.81 13811.26
1993/01/31 13483.72 13992.76
1993/02/28 13599.20 14134.66
1993/03/31 13688.01 14220.42
1993/04/30 13783.56 14293.80
1993/05/31 13824.38 14375.20
1993/06/30 13993.02 14485.26
1993/07/31 14069.94 14543.09
1993/08/31 14096.14 14611.61
1993/09/30 14126.93 14624.24
1993/10/31 14152.06 14666.52
1993/11/30 14122.48 14637.85
1993/12/31 14258.78 14756.42
1994/01/31 14390.10 14902.69
1994/02/28 14314.21 14798.70
1994/03/31 14151.99 14413.34
1994/04/30 14090.00 14307.17
1994/05/31 14209.94 14363.78
1994/06/30 14282.67 14332.68
1994/07/31 14510.99 14619.63
1994/08/31 14576.01 14665.79
1994/09/30 14418.02 14457.08
1994/10/31 14447.29 14448.82
1994/11/30 14432.88 14403.63
1994/12/31 14535.64 14518.55
1995/01/31 14810.45 14829.31
1995/02/28 15142.01 15207.86
1995/03/31 15206.27 15279.54
1995/04/30 15446.01 15496.76
1995/05/31 15932.00 15985.37
1995/06/30 16053.54 16076.24
1995/07/31 16090.01 16103.94
1995/08/31 16288.55 16270.62
1995/09/30 16456.93 16413.73
1995/10/31 16640.00 16559.76
1995/11/30 16824.23 16749.03
1995/12/31 17009.58 16958.23
1996/01/31 17148.84 17086.04
1996/02/29 17039.58 16944.14
1996/03/31 16977.76 16882.91
1996/04/30 16942.37 16835.29
1996/05/31 16876.77 16786.21
1996/06/30 17109.68 17017.28
1996/07/31 17170.77 17079.72
1996/08/31 17166.99 17079.48
1996/09/30 17438.68 17365.45
1996/10/31 17761.35 17706.10
1996/11/30 18035.75 17959.52
1996/12/31 17934.05 17865.49
1997/01/31 18046.29 17998.15
1997/02/28 18105.12 18058.17
1997/03/31 17934.67 17888.09
1997/04/30 18215.52 18173.34
1997/05/31 18394.71 18351.19
1997/06/30 18609.77 18565.25
1997/07/31 18928.80 18915.13
1997/08/31 18907.44 18870.18
1997/09/30 19112.19 19109.51
1997/10/31 19316.08 19321.38
1997/11/30 19380.20 19384.79
1997/12/31 19550.47 19561.44
1998/01/31 19737.80 19756.06
1998/02/28 19764.20 19797.85
1998/03/31 19847.36 19881.67
1998/04/30 19946.72 19994.17
1998/05/31 20081.13 20127.07
1998/06/30 20179.86 20223.05
1998/07/31 20259.86 20325.58
1998/08/31 20433.28 20510.00
1998/09/30 20644.19 20757.59
1998/10/31 20448.90 20730.86
1998/11/30 20601.47 20834.12
1998/12/31 20670.82 20922.56
1999/01/31 20786.26 21071.51
1999/02/28 20728.30 20988.17
1999/03/31 20882.80 21129.11
1999/04/30 20958.69 21226.61
1999/05/31 20881.74 21107.95
1999/06/30 20806.52 21033.67
1999/07/31 20692.84 20890.98
1999/08/31 20680.96 20890.23
1999/09/30 20988.89 21229.32
1999/10/31 21080.83 21351.41
1999/11/30 21071.64 21363.07
1999/12/31 21050.29 21310.81
2000/01/31 20938.90 21126.11
2000/02/29 21198.28 21371.14
2000/03/31 21439.66 21604.91
2000/04/28 21431.14 21619.76
IMATRL PRASUN SHR__CHT 20000430 20000524 094120 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Mortgage Securities Fund - Initial Class on April
30, 1990. As the chart shows, by April 30, 2000, the value of the
investment would have grown to $21,489 - a 114.89% 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 $21,620 - a 116.20% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in the
opposite direction of interest
rates. In turn, the share price,
return and yield of a fund that
invests in bonds will vary. That
means if you sell your shares
during a market downturn, you
might lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.58% 6.19% 6.17% 6.60% 6.66% 7.86%
Capital returns -1.91% -3.05% -0.18% 2.26% 0.08% 7.32%
Total returns 1.67% 3.14% 5.99% 8.86% 6.74% 15.18%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains paid
by the class are reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 5.62(cents) 37.02(cents) 69.26(cents)
Annualized dividend rate 6.59% 7.17% 6.64%
30-day annualized yield 6.80% - -
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 $10.37 over the past one month, $10.35 over the past six months and
$10.43 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Tom Silvia)
An interview with Tom Silvia, Portfolio Manager of Fidelity Advisor
Mortgage Securities Fund
Q. HOW DID THE FUND PERFORM, TOM?
A. For the six-month period that ended April 30, 2000, the fund's
Initial Class shares provided a total return of 1.67%. To get a sense
of how the fund did relative to its competitors, the U.S. mortgage
funds average returned 1.15% for the same six-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 1.26% for the same six-month period. For the
12-month period that ended April 30, 2000, the fund returned 2.29%,
while the U.S. mortgage funds average returned 1.19% and the Lehman
Brothers index returned 1.85%.
Q. WHAT HELPED THE FUND'S PERFORMANCE RELATIVE TO ITS PEERS?
A. The main contributor to the fund's performance was its
larger-than-average stake in commercial mortgage securities (CMS),
which made up about 17% of the fund's net assets at the end of the
period and outperformed most other mortgage securities during the past
six months. Commercial mortgage securities are bonds that are
collateralized by mortgage loans on commercial real estate - such as
office buildings, shopping malls, hotels and apartment buildings.
Their recent strong performance mainly was due to improvement in the
overall credit quality of the sector in response to the strength of
the U.S. economy and good commercial real estate fundamentals. In
contrast to other fixed-income securities, rising interest rates also
bolstered CMS by limiting issuance of new securities. Finally,
proposed changes to pension-fund regulations were expected to broaden
the demand for these securities.
Q. PREPAYMENT ACTIVITY, WHICH WAS A BIG NEGATIVE FOR THE MORTGAGE
MARKET DURING MUCH OF 1999, HAS ALL BUT DISAPPEARED SO FAR IN 2000.
WHY, THEN, DIDN'T MORTGAGE SECURITIES PERFORM BETTER?
A. Rising interest rates - which pushed mortgage securities' yields
higher and their prices lower - were the main culprit behind their
lackluster performance. But another very critical factor was the
Treasury market rally, which came at the expense of mortgage
securities and most other fixed-income investments as well. As the
Federal Reserve Board raised interest rates, long-term Treasury bond
yields actually fell as the U.S. Treasury scaled back its auctions and
announced plans to re-purchase $30 billion of its outstanding Treasury
bonds to cut financing costs. Three successful re-purchases during the
first four months of 2000 supported the idea that Treasury supply
would become increasingly scarce. Those developments also helped firm
demand for intermediate- and short-term Treasuries, which experienced
rising yields but to a lesser extent than mortgage securities. As one
measure of the scope of the performance disparity between Treasuries
and mortgages, the spread - or difference in yield - between a 10-year
Treasury and 10-year mortgage security was over 155 basis points
(1.55% percentage points) at the end of April, compared to about 125
basis points just six months earlier.
Q. WERE THERE ANY OTHER DISAPPOINTMENTS DURING THE PERIOD?
A. Yes, there were. The fund had a relatively small stake in
securities issued by Ginnie Mae, which outperformed securities issued
by Fannie Mae and Freddie Mac. In a surprising development, a senior
Treasury official shook up the mortgage market when he urged Congress
to cut off longstanding but never-used lines of credit that give
Fannie Mae and Freddie Mac securities implicit government backing. He
also asked Congress to repeal "exceptions that let banks hold so much"
of those securities. Although it remained unclear whether those
recommendations would translate into actual policy, investors reacted
to his comments by selling Fannie Mae and Freddie Mac securities,
allowing Ginnie Maes to outperform.
Q. WHAT DID YOU DO IN RESPONSE TO THAT DEVELOPMENT?
A. To lock in their relatively strong performance, I sold some of the
fund's Ginnie Mae holdings. I replaced them with additional Freddie
Mac and Fannie Mae securities, which I felt had been unduly punished
by those developments and offered attractive yields at relatively
cheap prices as a result. By the end of the period, Fannie Mae and
Freddie Mac securities offered yields as much as 15 basis points
(0.15%) more than their Ginnie Mae counterparts.
Q. WHAT'S YOUR OUTLOOK?
A. While I don't believe that any legislation altering the
debt-issuing ability of Fannie Mae and Freddie Mac will be enacted
before the presidential election in November, I believe that spread
volatility between mortgage securities and Treasuries is likely to
continue. Even so, I think that the mortgage securities market offers
some very attractive values at current levels, offering yields well in
excess of U.S. Treasury securities.
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 gains
START DATE: December 31, 1984
SIZE: as of April 30, 2000,
more than $428 million
MANAGER: Tom Silvia, since
1997; joined Fidelity in
1993
TOM SILVIA ON PROPOSED
MOVES TO ALTER THE BACKING
OF MORTGAGE SECURITIES:
"Fannie Mae and Freddie Mac are
government-sponsored enterprises
(GSE) and, as such, enjoy certain
benefits including a $4.5 billion line
of credit from the U.S. Treasury.
They purchase home loans from
originators such as banks, thrifts
and mortgage banks, which they
hold for their own investment
portfolios. They also pool home
loans into mortgage securities.
Whether they hold mortgages for
their own portfolios or whether
they package them as securities,
the effect is that cash is freed up so
that originators can make new
loans. As a result, Fannie Mae and
Freddie Mac securities make up a
fast-growing share of the
government debt markets at a time
when the Treasury is limiting its
issuance.
"Although its emergency line of credit
from the U.S. Treasury has never been
tapped, it carries symbolic significance
because it traditionally has allowed
Fannie Mae and Freddie Mac to
borrow at interest rates close to the
U.S. government's rate. Renewed
government interest in curbing
these two GSE's line of credit and
limiting how much of their securities
commercial banks can own have
caused these securities to perform
poorly recently. The spread
between agency securities and
Treasuries - which is the key
barometer and the market's view of
the creditworthiness of Fannie Mae
and Freddie Mac - jumped sharply
during the past six months."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF
APRIL 30, 2000
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Less than 6% 0.5 0.5
6 - 6.99% 45.0 47.0
7 - 7.99% 38.4 36.4
8 - 8.99% 9.9 7.8
9% and over 4.2 6.9
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE
FUND'S INVESTMENTS, EXCLUDING SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 8.0 8.0
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 APRIL 30, 2000
6 MONTHS AGO
Years 4.7 4.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 AS OF OCTOBER 31, 1999
Mortgage Securities 77.1% Mortgage Securities 76.9%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 21.8% Related Securities 21.0%
U.S. Government Agency U.S. Government Agency
Obligations 3.9% Obligations 0.0%
Short-Term Investments and Short-Term Investments and
Net Other Assets (2.8)%* Net Other Assets 2.1%
Row: 1, Col: 1, Value: 77.09999999999999 Row: 1, Col: 1, Value: 76.90000000000001
Row: 1, Col: 2, Value: nil Row: 1, Col: 2, Value: nil
Row: 1, Col: 3, Value: 21.8 Row: 1, Col: 3, Value: 21.0
Row: 1, Col: 4, Value: 21.8 Row: 1, Col: 4, Value: 21.0
Row: 1, Col: 5, Value: 3.9 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: 0.0 Row: 1, Col: 8, Value: 2.1
</TABLE>
* SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE
PIE CHART.
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.9%
Fannie Mae 6.5% 4/29/09 (Cost $ 18,100,000 $ 16,745,396
$16,755,170)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 77.1%
FANNIE MAE - 51.6%
6% 2/1/14 to 1/1/15 746,709 699,344
6.5% 9/1/10 to 5/1/30 114,294,343 106,929,040
6.5% 5/1/30 (b) 3,000,000 2,798,438
7% 3/1/19 to 4/1/30 69,946,624 67,032,036
7% 5/1/30 (b) 11,000,000 10,518,750
7.5% 3/1/22 to 3/1/30 9,859,778 9,663,998
8% 1/1/07 to 5/1/30 13,667,823 13,647,556
8.25% 1/1/13 71,647 72,282
8.5% 6/1/16 to 11/1/23 3,268,454 3,317,929
8.75% 11/1/08 to 7/1/09 130,237 132,117
9% 1/1/08 to 2/1/13 537,030 548,914
9.5% 5/1/03 to 8/1/22 3,584,805 3,707,128
11% 12/1/02 to 8/1/10 1,035,641 1,112,645
12.25% 5/1/13 to 6/1/15 149,609 166,456
12.5% 11/1/14 to 3/1/16 309,193 346,101
12.75% 2/1/14 to 6/1/15 58,776 65,080
13.5% 9/1/13 to 12/1/14 131,651 150,041
14% 11/1/14 41,336 47,523
220,955,378
FREDDIE MAC - 14.9%
5% 7/1/10 2,267,214 2,044,743
6% 2/1/29 to 7/1/29 4,788,503 4,339,232
6.5% 1/1/24 to 9/1/24 21,278,710 20,059,565
7% 7/1/29 to 9/1/29 12,711,685 12,167,370
7.5% 6/1/26 to 8/1/28 2,932,733 2,877,933
8% 10/1/07 to 4/1/21 599,746 597,861
8.5% 11/1/03 to 1/1/20 1,498,214 1,515,124
8.5% 5/1/30 (b) 9,375,000 9,515,625
9% 9/1/08 to 5/1/21 6,195,628 6,337,155
10% 1/1/09 to 5/1/19 1,063,089 1,110,436
10.5% 8/1/10 to 12/1/20 1,104,924 1,173,296
11.5% 4/1/12 59,101 63,930
12.25% 6/1/14 to 7/1/15 141,607 156,758
12.5% 5/1/12 to 12/1/14 572,665 631,273
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
FREDDIE MAC - CONTINUED
12.75% 6/1/05 to 3/1/15 $ 59,744 $ 64,771
13% 1/1/11 to 6/1/15 941,125 1,053,920
63,708,992
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 10.6%
6.5% 5/15/28 to 1/15/29 4,239,404 3,971,578
7% 1/15/26 to 5/1/30 17,357,994 16,696,649
7.5% 7/15/05 to 9/15/27 13,484,005 13,345,988
8% 4/15/02 to 12/15/25 8,743,665 8,785,665
8.5% 7/15/16 to 6/15/18 1,734,302 1,776,514
9% 9/20/16 to 4/20/18 64,471 66,355
9.5% 8/15/09 to 12/15/24 73,596 78,248
10.5% 8/15/00 to 2/20/18 579,901 618,388
13% 10/15/13 57,889 66,084
13.5% 7/15/11 to 10/15/14 58,238 66,731
45,472,200
TOTAL U.S. GOVERNMENT AGENCY 330,136,570
- MORTGAGE SECURITIES
(Cost $340,585,284)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 4.5%
U.S. GOVERNMENT AGENCY - 4.5%
Fannie Mae REMIC planned
amortization class:
Series 1999-1 Class PJ, 6.5% 10,049,260 8,924,999
2/25/29
Series 1999-51 Class LK, 6.5% 10,000,000 9,000,000
8/25/29
Freddie Mac REMIC planned 1,553,188 1,583,273
amortization class Series
70 Class C, 9% 9/15/20
TOTAL COLLATERALIZED MORTGAGE 19,508,272
OBLIGATIONS
(Cost $19,834,372)
COMMERCIAL MORTGAGE
SECURITIES - 17.3%
Bankers Trust II Series 5,000,000 5,003,125
1999-S1A Class D, 8.0675%
2/28/14 (a)(c)
Bankers Trust REMIC Trust 959,113 959,574
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (c)
CBM Funding Corp. sequential 2,300,000 2,246,813
pay Series 1996-1 Class
A-3PI, 7.08% 11/1/07
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage $ 2,000,000 $ 1,846,250
Securities Corp. Series
1997-C2 Class D, 7.27%
1/17/35
Deutsche Mortgage & Asset 10,200,000 9,066,844
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Federal Deposit Insurance 2,877,831 2,845,905
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
GS Mortgage Securities Corp.
II:
Series 1998-GLII Class E, 1,600,000 1,374,875
6.9698% 4/13/31 (a)(c)
Series 1999-GSFL II Class F, 4,500,000 4,440,235
7.6634% 11/13/13 (a)(c)
Nomura Asset Securities Corp. 15,000,000 13,509,375
Series 1998-D6 Class A4,
7.1288% 3/17/28 (c)
Nomura Depositor Trust
floater Series 1998-ST1A:
Class A-4, 6.9038% 2/15/34 7,900,000 7,639,547
(a)(c)
Class A-5, 7.2538% 2/15/34 5,278,196 5,067,068
(a)(c)
Structured Asset Securities 3,192,522 2,976,528
Corp. Series 1992-M1 Class
C, 7.05% 11/25/02
Thirteen Affiliates of 18,200,000 16,960,837
General Growth Properties,
Inc. Series 1 Class D-1,
6.917% 12/15/07 (a)
TOTAL COMMERCIAL MORTGAGE 73,936,976
SECURITIES
(Cost $78,065,657)
CASH EQUIVALENTS - 2.0%
MATURITY AMOUNT
Investments in repurchase $ 8,728,258 8,724,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $8,724,000)
TOTAL INVESTMENT PORTFOLIO - 449,051,214
104.8%
(Cost $463,964,483)
NET OTHER ASSETS - (4.8)% (20,617,199)
NET ASSETS - 100% $ 428,434,015
</TABLE>
LEGEND
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $40,485,687 or 9.4% of net assets.
(b) Security purchased on a delayed delivery or when-issued basis.
(c) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $464,042,874. Net unrealized depreciation
aggregated $14,991,660, of which $1,347,147 related to appreciated
investment securities and $16,338,807 related to depreciated
investment securities.
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
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 449,051,214
value (including repurchase
agreements of $8,724,000)
(cost $463,964,483) - See
accompanying schedule
Commitment to sell securities $ (15,380,000)
on a delayed delivery basis
Receivable for securities 15,560,000 180,000
sold on a delayed delivery
basis
Receivable for investments 216,711
sold, regular delivery
Cash 35,249
Receivable for fund shares 355,108
sold
Interest receivable 2,900,904
TOTAL ASSETS 452,739,186
LIABILITIES
Payable for investments 23,049,492
purchased on a delayed
delivery basis
Payable for fund shares 580,408
redeemed
Distributions payable 394,203
Accrued management fee 154,072
Distribution fees payable 20,022
Other payables and accrued 106,974
expenses
TOTAL LIABILITIES 24,305,171
NET ASSETS $ 428,434,015
Net Assets consist of:
Paid in capital $ 450,641,604
Undistributed net investment 636,970
income
Accumulated undistributed net (8,111,290)
realized gain (loss) on
investments
Net unrealized appreciation (14,733,269)
(depreciation) on investments
NET ASSETS $ 428,434,015
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $10.27
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($4,150,788 (divided by)
403,999 shares)
Maximum offering price per $10.78
share (100/95.25 of $10.27)
CLASS T: NET ASSET VALUE and $10.28
redemption price per share
($25,695,229 (divided by)
2,499,316 shares)
Maximum offering price per $10.65
share (100/96.50 of $10.28)
CLASS B: NET ASSET VALUE and $10.27
offering price per share
($18,878,803 (divided by)
1,837,824 shares) A
INITIAL CLASS: NET ASSET $10.29
VALUE, offering price and
redemption price per share
($369,689,756 (divided by)
35,943,993 shares)
INSTITUTIONAL CLASS: NET $10.27
ASSET VALUE, offering price
and redemption price per
share ($10,019,439 (divided
by) 975,903 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 16,480,715
Interest
EXPENSES
Management fee $ 963,261
Transfer agent fees 393,883
Distribution fees 122,685
Accounting fees and expenses 74,577
Non-interested trustees' 691
compensation
Custodian fees and expenses 34,263
Registration fees 69,434
Audit 25,540
Legal 4,127
Miscellaneous 1,806
Total expenses before 1,690,267
reductions
Expense reductions (9,106) 1,681,161
NET INVESTMENT INCOME 14,799,554
REALIZED AND UNREALIZED GAIN (2,941,058)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (4,884,058)
Delayed delivery commitments 180,000 (4,704,058)
NET GAIN (LOSS) (7,645,116)
NET INCREASE (DECREASE) IN $ 7,154,438
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 14,799,554 $ 30,638,885
income
Net realized gain (loss) (2,941,058) (5,620,586)
Change in net unrealized (4,704,058) (10,190,965)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 7,154,438 14,827,334
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (16,064,557) (30,183,549)
From net investment income
From net realized gain - (6,924,572)
TOTAL DISTRIBUTIONS (16,064,557) (37,108,121)
Share transactions - net (36,159,462) (14,273,306)
increase (decrease)
TOTAL INCREASE (DECREASE) (45,069,581) (36,554,093)
IN NET ASSETS
NET ASSETS
Beginning of period 473,503,596 510,057,689
End of period (including $ 428,434,015 $ 473,503,596
undistributed net investment
income of $636,970 and
$1,901,973, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .328 .646 .669 .170 .268
Net realized and unrealized (.177) (.336) (.061) .048 .224
gain (loss)
Total from investment .151 .310 .608 .218 .492
operations
Less Distributions
From net investment income (.361) (.640) (.638) (.168) (.272)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.361) (.790) (.668) (.248) (.272)
Net asset value, end of $ 10.270 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.48% 2.93% 5.65% 2.00% 4.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,151 $ 3,090 $ 1,865 $ 1,648 $ 1,586
(000 omitted)
Ratio of expenses to average .90% A, E .90% E .90% E .90% A, E .90% A, E
net assets
Ratio of net investment 6.43% A 6.09% 6.01% 6.18% A 6.09% A
income to average net assets
Portfolio turnover rate 88% A 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 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> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.960 $ 11.020 $ 11.050 $ 10.830
of period
Income from Investment
Operations
Net investment income D .326 .637 .665 .167 .255
Net realized and unrealized (.171) (.338) (.063) .048 .233
gain (loss)
Total from investment .155 .299 .602 .215 .488
operations
Less Distributions
From net investment income (.355) (.629) (.632) (.165) (.268)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.355) (.779) (.662) (.245) (.268)
Net asset value, end of $ 10.280 $ 10.480 $ 10.960 $ 11.020 $ 11.050
period
TOTAL RETURN B, C 1.51% 2.82% 5.60% 1.98% 4.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 25,695 $ 29,052 $ 19,103 $ 14,649 $ 12,193
(000 omitted)
Ratio of expenses to average 1.00% A, E 1.00% E 1.00% E 1.00% A, E 1.00% A, E
net assets
Ratio of net investment 6.33% A 5.99% 6.05% 6.10% A 5.99% A
income to average net assets
Portfolio turnover rate 88% A 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 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 T
SHARES) TO JULY 31, 1997
G THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 G 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.480 $ 10.950 $ 11.020 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .294 .567 .584 .142 .234
Net realized and unrealized (.180) (.324) (.064) .065 .214
gain (loss)
Total from investment .114 .243 .520 .207 .448
operations
Less Distributions
From net investment income (.324) (.563) (.560) (.147) (.238)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.324) (.713) (.590) (.227) (.238)
Net asset value, end of $ 10.270 $ 10.480 $ 10.950 $ 11.020 $ 11.040
period
TOTAL RETURN B, C 1.11% 2.29% 4.82% 1.90% 4.20%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 18,879 $ 19,101 $ 7,840 $ 1,587 $ 823
(000 omitted)
Ratio of expenses to average 1.61% A 1.62% 1.65% E 1.65% A, E 1.65% A, E
net assets
Ratio of net investment 5.72% A 5.37% 5.37% 5.32% A 5.34% A
income to average net assets
Portfolio turnover rate 88% A 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>
FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
INITIAL CLASS
(UNAUDITED) 1999 1998 1997 F 1997 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.490 $ 10.970 $ 11.020 $ 11.050 $ 10.780
period
Income from Investment
Operations
Net investment income .342 D .674 D .700 D .176 D .678 D
Net realized and unrealized (.172) (.342) (.056) .047 .391
gain (loss)
Total from investment .170 .332 .644 .223 1.069
operations
Less Distributions
From net investment income (.370) (.662) (.664) (.173) (.689)
From net realized gain - (.150) (.030) (.080) (.110)
In excess of net realized gain - - - - -
Total distributions (.370) (.812) (.694) (.253) (.799)
Net asset value, end of period $ 10.290 $ 10.490 $ 10.970 $ 11.020 $ 11.050
TOTAL RETURN B, C 1.67% 3.14% 5.99% 2.05% 10.34%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 369,690 $ 406,839 $ 459,212 $ 494,304 $ 506,113
(000 omitted)
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets
Ratio of expenses to average .69% A .70% .71% .72% A .73%
net assets after expense
reductions
Ratio of net investment 6.64% A 6.29% 6.34% 6.36% A 6.26%
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS - YEARS ENDED OCTOBER 31,
INITIAL CLASS
1996 G 1995 G
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.890 $ 10.580
period
Income from Investment
Operations
Net investment income .729 .772
Net realized and unrealized (.015) .325
gain (loss)
Total from investment .714 1.097
operations
Less Distributions
From net investment income (.724) (.737)
From net realized gain (.100) -
In excess of net realized gain - (.050)
Total distributions (.824) (.787)
Net asset value, end of period $ 10.780 $ 10.890
TOTAL RETURN B, C 6.72% 10.88%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 488,162 $ 416,241
(000 omitted)
Ratio of expenses to average .74% .77%
net assets
Ratio of expenses to average .73% E .77%
net assets after expense
reductions
Ratio of net investment 6.75% 7.37%
income to average net assets
Portfolio turnover rate 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 FOR THE THREE MONTHS ENDED OCTOBER 31
G FOR THE YEAR ENDED JULY 31
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 H 1997G
SELECTED PER-SHARE DATA
Net asset value, beginning $ 10.470 $ 10.950 $ 11.010 $ 11.040 $ 10.830
of period
Income from Investment
Operations
Net investment income D .340 .669 .693 .172 .263
Net realized and unrealized (.170) (.343) (.063) .050 .226
gain (loss)
Total from investment .170 .326 .630 .222 .489
operations
Less Distributions
From net investment income (.370) (.656) (.660) (.172) (.279)
From net realized gain - (.150) (.030) (.080) -
Total distributions (.370) (.806) (.690) (.252) (.279)
Net asset value, end of $ 10.270 $ 10.470 $ 10.950 $ 11.010 $ 11.040
period
TOTAL RETURN B, C 1.66% 3.09% 5.86% 2.05% 4.59%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,019 $ 15,422 $ 22,038 $ 19,718 $ 13,177
(000 omitted)
Ratio of expenses to average .74% A .75% E .75% E .75% A, E .75% A, E
net assets
Ratio of expenses to average .73% A, F .75% .75% .75% A .70% A, F
net assets after expense
reductions
Ratio of net investment 6.60% A 6.24% 6.30% 6.35% A 6.29% A
income to average net assets
Portfolio turnover rate 88% A 183% 262% 125% A 149%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E 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 April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Mortgage Securities 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, 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. 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, 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, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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 $200,462,044 and $231,485,190, respectively, of which U.S.
government and government agency obligations aggregated $188,439,822
and $213,483,079, 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 annualized 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 and
Service Plans with respect to each class of shares (collectively
referred to as "the Plans"). Under certain of the Plans, the class
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. A portion of this fee may be reallowed
to securities dealers, banks and other
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
financial institutions for the distribution of each class of shares
and providing shareholder support services. For the period, this fee
was based on the following annual rates of the average net assets of
each applicable class:
CLASS A .15%
CLASS T .25%
CLASS B .90%*
* .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 $ 2,547 $ 0
CLASS T 34,244 1,580
CLASS B 85,894 62,156
$ 122,685 $ 63,736
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.
For the period, sales charge amounts paid to and retained by FDC were
as follows:
PAID TO FDC RETAINED BY FDC
CLASS A $ 11,799 $ 2,734
CLASS T 19,343 6,877
CLASS B 41,401 41,401*
$ 72,543 $ 51,012
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 Shares. Fidelity Service Company, Inc. (FSC), an
affiliate of FMR, is the transfer agent for the Initial Class Shares.
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 $ 4,116 .24
CLASS T 34,562 .25
CLASS B 17,846 .19
INITIAL CLASS 319,867 .17
INSTITUTIONAL CLASS 17,492 .21
$ 393,883
* ANNUALIZED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee
is based on the level of average net assets for the month plus
out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, 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% $ 296
CLASS T 1.00% 3,641
$ 3,937
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 $5,169 under the custodian arrangement.
6. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 118,171 $ 153,223
Class T 942,284 1,450,107
Class B 599,674 724,614
Initial Class 13,820,612 26,727,640
Institutional Class 583,816 1,127,965
Total $ 16,064,557 $ 30,183,549
FROM NET REALIZED GAIN
Class A $ - $ 26,293
Class T - 278,709
Class B - 132,050
Initial Class - 6,182,269
Institutional Class - 305,251
Total $ - $ 6,924,572
7. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 233,326 $ 1,556,559
150,089
Reinvestment of distributions 8,606 11,952 88,693
Shares redeemed (49,692) (120,472) (512,298)
Net increase (decrease) 109,003 124,806 $ 1,132,954
CLASS T Shares sold 497,899 2,003,369 $ 5,147,178
Reinvestment of distributions 81,508 148,336 840,877
Shares redeemed (851,733) (1,122,570) (8,780,957)
Net increase (decrease) (272,326) 1,029,135 $ (2,792,902)
CLASS B Shares sold 348,517 1,505,268 $ 3,610,689
Reinvestment of distributions 44,121 63,855 454,806
Shares redeemed (378,214) (461,420) (3,896,947)
Net increase (decrease) 14,424 1,107,703 $ 168,548
INITIAL CLASS Shares sold 1,600,812 3,914,002 $ 16,541,648
Reinvestment of distributions 1,079,535 2,515,203 11,140,746
Shares redeemed (5,534,245) (9,502,966) (57,155,406)
Net increase (decrease) (2,853,898) (3,073,761) $ (29,473,012)
INSTITUTIONAL CLASS Shares 735,644 667,600 $ 7,541,803
sold
Reinvestment of distributions 27,649 70,535 284,726
Shares redeemed (1,260,679) (1,277,677) (13,021,579)
Net increase (decrease) (497,386) (539,542) $ (5,195,050)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 2,488,784
Reinvestment of distributions 127,329
Shares redeemed (1,280,382)
Net increase (decrease) $ 1,335,731
CLASS T Shares sold $ 21,386,352
Reinvestment of distributions 1,582,559
Shares redeemed (11,947,707)
Net increase (decrease) $ 11,021,204
CLASS B Shares sold $ 16,049,817
Reinvestment of distributions 679,689
Shares redeemed (4,891,488)
Net increase (decrease) $ 11,838,018
INITIAL CLASS Shares sold $ 41,964,545
Reinvestment of distributions 26,913,754
Shares redeemed (101,601,425)
Net increase (decrease) $ (32,723,126)
INSTITUTIONAL CLASS Shares $ 7,141,162
sold
Reinvestment of distributions 754,625
Shares redeemed (13,640,920)
Net increase (decrease) $ (5,745,133)
</TABLE>
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 (FAST(registered trademark))
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.
*0 To 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.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investment Money
Management Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investment Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Thomas J. Silvia, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
* INDEPENDENT TRUSTEES
MOR-SANN-0600 103941
1.703537.102
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
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
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST(registered trademark)) 1-800-544-5555
AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
FIDELITY(REGISTERED TRADEMARK) ADVISOR
SHORT FIXED-INCOME
FUND - CLASS A, CLASS T AND CLASS C
SEMIANNUAL REPORT
APRIL 30, 2000
(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 31 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 39 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY(REGISTERED 1.77% 3.01% 30.21% 82.46%
TRADEMARK) ADV SHORT
FIXED-INCOME - CL A
FIDELITY ADV SHORT 0.24% 1.46% 28.26% 79.72%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 1.79% 3.56% 33.58% 90.60%
Short Investment Grade Debt 1.73% 2.93% 30.51% 86.07%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class A's returns to the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class A's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 115 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.01% 5.42% 6.20%
FIXED-INCOME - CL A
FIDELITY ADV SHORT 1.46% 5.10% 6.04%
FIXED-INCOME - CL A (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.56% 5.96% 6.66%
Short Investment Grade Debt 2.93% 5.46% 6.39%
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
1990/04/30 9850.00 10000.00
1990/05/31 10004.80 10154.53
1990/06/30 10082.21 10261.88
1990/07/31 10201.61 10386.20
1990/08/31 10185.28 10423.04
1990/09/30 10210.68 10501.23
1990/10/31 10184.62 10609.64
1990/11/30 10248.76 10713.28
1990/12/31 10345.45 10838.66
1991/01/31 10314.35 10936.73
1991/02/28 10421.36 11015.72
1991/03/31 10607.46 11095.77
1991/04/30 10761.86 11204.44
1991/05/31 10871.70 11274.42
1991/06/30 10924.84 11316.30
1991/07/31 10999.90 11415.70
1991/08/31 11184.55 11570.49
1991/09/30 11300.25 11695.07
1991/10/31 11426.39 11820.98
1991/11/30 11541.97 11940.52
1991/12/31 11728.77 12121.03
1992/01/31 11776.87 12108.57
1992/02/29 11856.26 12147.00
1992/03/31 11911.61 12144.35
1992/04/30 11988.87 12255.41
1992/05/31 12113.16 12370.19
1992/06/30 12224.49 12496.62
1992/07/31 12376.51 12643.20
1992/08/31 12481.61 12745.25
1992/09/30 12584.84 12865.85
1992/10/31 12504.97 12788.45
1992/11/30 12510.80 12770.43
1992/12/31 12620.85 12891.03
1993/01/31 12812.11 13028.60
1993/02/28 12967.99 13134.89
1993/03/31 13051.25 13177.57
1993/04/30 13117.30 13260.26
1993/05/31 13172.98 13230.05
1993/06/30 13305.25 13330.24
1993/07/31 13383.95 13360.72
1993/08/31 13515.26 13472.58
1993/09/30 13561.94 13516.05
1993/10/31 13646.38 13547.59
1993/11/30 13702.53 13551.57
1993/12/31 13819.08 13606.44
1994/01/31 13905.30 13693.11
1994/02/28 13791.82 13610.15
1994/03/31 13475.93 13540.17
1994/04/30 13404.88 13488.75
1994/05/31 13485.59 13507.04
1994/06/30 13379.46 13542.56
1994/07/31 13501.49 13665.81
1994/08/31 13611.10 13711.93
1994/09/30 13605.87 13681.45
1994/10/31 13616.25 13712.73
1994/11/30 13639.63 13655.21
1994/12/31 13353.49 13681.18
1995/01/31 13452.84 13869.11
1995/02/28 13619.53 14061.02
1995/03/31 13691.13 14140.80
1995/04/30 13802.59 14268.83
1995/05/31 14050.93 14515.86
1995/06/30 14117.09 14594.85
1995/07/31 14169.09 14653.17
1995/08/31 14253.25 14741.96
1995/09/30 14321.65 14814.85
1995/10/31 14439.91 14937.84
1995/11/30 14557.06 15066.40
1995/12/31 14664.13 15180.64
1996/01/31 14772.06 15310.52
1996/02/29 14720.95 15252.21
1996/03/31 14693.48 15241.07
1996/04/30 14695.27 15256.45
1996/05/31 14727.36 15291.70
1996/06/30 14835.08 15403.56
1996/07/31 14880.91 15463.46
1996/08/31 14927.35 15520.45
1996/09/30 15050.83 15662.52
1996/10/31 15211.27 15839.32
1996/11/30 15321.07 15958.07
1996/12/31 15269.31 15960.72
1997/01/31 15332.97 16037.85
1997/02/28 15374.25 16077.61
1997/03/31 15356.34 16065.15
1997/04/30 15484.53 16196.89
1997/05/31 15581.76 16310.07
1997/06/30 15677.65 16423.52
1997/07/31 15860.26 16605.88
1997/08/31 15873.45 16621.52
1997/09/30 15986.31 16749.54
1997/10/31 16068.98 16870.15
1997/11/30 16117.45 16912.56
1997/12/31 16219.28 17024.15
1998/01/31 16422.98 17188.49
1998/02/28 16441.46 17205.71
1998/03/31 16500.26 17272.78
1998/04/30 16557.37 17358.39
1998/05/31 16652.80 17452.75
1998/06/30 16725.49 17542.87
1998/07/31 16803.81 17624.51
1998/08/31 16917.86 17827.29
1998/09/30 17120.45 18067.17
1998/10/31 17125.67 18145.36
1998/11/30 17129.26 18141.91
1998/12/31 17207.57 18212.16
1999/01/31 17304.47 18290.08
1999/02/28 17250.05 18212.95
1999/03/31 17370.38 18341.96
1999/04/30 17447.40 18404.83
1999/05/31 17418.21 18386.04
1999/06/30 17441.10 18444.27
1999/07/31 17467.24 18497.10
1999/08/31 17492.78 18545.69
1999/09/30 17612.93 18670.48
1999/10/31 17660.11 18725.72
1999/11/30 17686.53 18767.20
1999/12/31 17735.02 18786.55
2000/01/31 17745.30 18786.43
2000/02/29 17870.08 18916.81
2000/03/31 17942.27 19023.77
2000/04/28 17972.36 19060.38
IMATRL PRASUN SHR__CHT 20000430 20000522 132035 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class A on
April 30, 1990, and the current 1.50% sales charge was paid. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $17,972 - a 79.72% 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 $19,060 - a 90.60% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF
CLASS A SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996
Dividend returns 2.97% 5.57% 5.83% 6.28% 0.99%
Capital returns -1.20% -2.45% 0.75% -0.64% 0.86%
Total returns 1.77% 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 APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.52(cents) 26.96(cents) 53.08(cents)
Annualized dividend rate 6.06% 5.95% 5.81%
30-day annualized yield 6.52% - -
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 $9.08 over the past one month, $9.09 over the past six months, and
$9.14 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.87% 3.08% 30.57% 82.96%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 0.34% 1.53% 28.61% 80.22%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 1.79% 3.56% 33.58% 90.60%
Short Investment Grade Debt 1.73% 2.93% 30.51% 86.07%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class T's returns to the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class T's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 115 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.08% 5.48% 6.23%
FIXED-INCOME - CL T
FIDELITY ADV SHORT 1.53% 5.16% 6.07%
FIXED-INCOME - CL T (INCL.
1.50% SALES CHARGE)
LB 1-3 Year Govt/Corp 3.56% 5.96% 6.66%
Short Investment Grade Debt 2.93% 5.46% 6.39%
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
1990/04/30 9850.00 10000.00
1990/05/31 10004.80 10154.53
1990/06/30 10082.21 10261.88
1990/07/31 10201.61 10386.20
1990/08/31 10185.28 10423.04
1990/09/30 10210.68 10501.23
1990/10/31 10184.62 10609.64
1990/11/30 10248.76 10713.28
1990/12/31 10345.45 10838.66
1991/01/31 10314.35 10936.73
1991/02/28 10421.36 11015.72
1991/03/31 10607.46 11095.77
1991/04/30 10761.86 11204.44
1991/05/31 10871.70 11274.42
1991/06/30 10924.84 11316.30
1991/07/31 10999.90 11415.70
1991/08/31 11184.55 11570.49
1991/09/30 11300.25 11695.07
1991/10/31 11426.39 11820.98
1991/11/30 11541.97 11940.52
1991/12/31 11728.77 12121.03
1992/01/31 11776.87 12108.57
1992/02/29 11856.26 12147.00
1992/03/31 11911.61 12144.35
1992/04/30 11988.87 12255.41
1992/05/31 12113.16 12370.19
1992/06/30 12224.49 12496.62
1992/07/31 12376.51 12643.20
1992/08/31 12481.61 12745.25
1992/09/30 12584.84 12865.85
1992/10/31 12504.97 12788.45
1992/11/30 12510.80 12770.43
1992/12/31 12620.85 12891.03
1993/01/31 12812.11 13028.60
1993/02/28 12967.99 13134.89
1993/03/31 13051.25 13177.57
1993/04/30 13117.30 13260.26
1993/05/31 13172.98 13230.05
1993/06/30 13305.25 13330.24
1993/07/31 13383.95 13360.72
1993/08/31 13515.26 13472.58
1993/09/30 13561.94 13516.05
1993/10/31 13646.38 13547.59
1993/11/30 13702.53 13551.57
1993/12/31 13819.08 13606.44
1994/01/31 13905.30 13693.11
1994/02/28 13791.82 13610.15
1994/03/31 13475.93 13540.17
1994/04/30 13404.88 13488.75
1994/05/31 13485.59 13507.04
1994/06/30 13379.46 13542.56
1994/07/31 13501.49 13665.81
1994/08/31 13611.10 13711.93
1994/09/30 13605.87 13681.45
1994/10/31 13616.25 13712.73
1994/11/30 13639.63 13655.21
1994/12/31 13353.49 13681.18
1995/01/31 13452.84 13869.11
1995/02/28 13619.53 14061.02
1995/03/31 13691.13 14140.80
1995/04/30 13802.59 14268.83
1995/05/31 14050.93 14515.86
1995/06/30 14117.09 14594.85
1995/07/31 14169.09 14653.17
1995/08/31 14253.25 14741.96
1995/09/30 14321.65 14814.85
1995/10/31 14439.91 14937.84
1995/11/30 14557.06 15066.40
1995/12/31 14664.13 15180.64
1996/01/31 14772.06 15310.52
1996/02/29 14720.95 15252.21
1996/03/31 14693.48 15241.07
1996/04/30 14695.27 15256.45
1996/05/31 14727.36 15291.70
1996/06/30 14835.08 15403.56
1996/07/31 14880.91 15463.46
1996/08/31 14927.35 15520.45
1996/09/30 15067.08 15662.52
1996/10/31 15227.59 15839.32
1996/11/30 15337.34 15958.07
1996/12/31 15334.97 15960.72
1997/01/31 15398.71 16037.85
1997/02/28 15439.95 16077.61
1997/03/31 15422.19 16065.15
1997/04/30 15550.49 16196.89
1997/05/31 15648.03 16310.07
1997/06/30 15743.95 16423.52
1997/07/31 15927.35 16605.88
1997/08/31 15941.49 16621.52
1997/09/30 16037.47 16749.54
1997/10/31 16136.66 16870.15
1997/11/30 16182.19 16912.56
1997/12/31 16282.10 17024.15
1998/01/31 16434.38 17188.49
1998/02/28 16456.04 17205.71
1998/03/31 16504.50 17272.78
1998/04/30 16585.04 17358.39
1998/05/31 16686.77 17452.75
1998/06/30 16748.83 17542.87
1998/07/31 16830.17 17624.51
1998/08/31 16945.77 17827.29
1998/09/30 17149.86 18067.17
1998/10/31 17156.31 18145.36
1998/11/30 17159.81 18141.91
1998/12/31 17238.84 18212.16
1999/01/31 17336.94 18290.08
1999/02/28 17281.83 18212.95
1999/03/31 17422.44 18341.96
1999/04/30 17483.09 18404.83
1999/05/31 17450.89 18386.04
1999/06/30 17492.31 18444.27
1999/07/31 17518.05 18497.10
1999/08/31 17543.12 18545.69
1999/09/30 17663.37 18670.48
1999/10/31 17691.17 18725.72
1999/11/30 17736.21 18767.20
1999/12/31 17784.26 18786.55
2000/01/31 17774.98 18786.43
2000/02/29 17899.84 18916.81
2000/03/31 17991.91 19023.77
2000/04/28 18021.75 19060.38
IMATRL PRASUN SHR__CHT 20000430 20000522 133248 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class T on
April 30, 1990, and the current 1.50% sales charge was paid. As the
chart shows, by April 30, 2000, the value of the investment would have
grown to $18,022 - an 80.22% 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 $19,060 - a 90.60% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 2.96% 5.57% 6.00% 6.29% 6.40% 6.16%
Capital returns -1.09% -2.45% 0.32% -0.32% -0.95% -0.11%
Total returns 1.87% 3.12% 6.32% 5.97% 5.45% 6.05%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.51(cents) 26.87(cents) 52.74(cents)
Annualized dividend rate 6.04% 5.92% 5.76%
30-day annualized yield 6.47% - -
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 $9.09 over the past one month, $9.10 over the past six months, and
$9.15 over the past one year, you can compare the class' income over
these three periods. The 30-day annualized YIELD is a standard formula
for all bond funds based on the yields of the bonds in the fund,
averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It
also helps you compare funds from different companies on an equal
basis. The offering share price used in the calculation of the yield
includes the effect of Class T's current 1.50% sales charge.
FIDELITY ADVISOR SHORT FIXED-INCOME FUND - CLASS C
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. The initial offering of Class C shares
took place on November 3, 1997. Class C shares bear a 1.00% 12b-1 fee.
Returns prior to November 3, 1997 are those of Class T, the original
class of the fund, and reflect Class T shares' 0.15% 12b-1 fee. Had
Class C shares' 12b-1 fee been reflected, returns prior to November 3,
1997 would have been lower. Class C shares' contingent deferred sales
charge included in the past six month, past one year, past five year
and past 10 year total return figures are 1%, 1%, 0% and 0%,
respectively. If Fidelity had not reimbursed certain class expenses,
the past five year and past 10 year total returns would have been
lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 1.33% 2.08% 27.77% 79.03%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 0.35% 1.11% 27.77% 79.03%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 1.79% 3.56% 33.58% 90.60%
Short Investment Grade Debt 1.73% 2.93% 30.51% 86.07%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Class C's performance in percentage
terms over a set period - in this case, six months, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Class C's returns to the performance
of the Lehman Brothers 1-3 Year Government/Corporate Bond Index - a
market value-weighted index of government and investment-grade
corporate fixed-rate debt issues with maturities between one and three
years. To measure how Class C's performance stacked up against its
peers, you can compare it to the short investment grade debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Inc. The past six months average
represents a peer group of 115 mutual funds. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect
of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 2.08% 5.02% 6.00%
FIXED-INCOME - CL C
FIDELITY ADV SHORT 1.11% 5.02% 6.00%
FIXED-INCOME - CL C (INCL.
CONTINGENT DEFERRED SALES
CHARGE)
LB 1-3 Year Govt/Corp 3.56% 5.96% 6.66%
Short Investment Grade Debt 2.93% 5.46% 6.39%
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
1990/04/30 10000.00 10000.00
1990/05/31 10157.16 10154.53
1990/06/30 10235.74 10261.88
1990/07/31 10356.96 10386.20
1990/08/31 10340.39 10423.04
1990/09/30 10366.17 10501.23
1990/10/31 10339.71 10609.64
1990/11/30 10404.84 10713.28
1990/12/31 10503.00 10838.66
1991/01/31 10471.42 10936.73
1991/02/28 10580.06 11015.72
1991/03/31 10768.99 11095.77
1991/04/30 10925.75 11204.44
1991/05/31 11037.26 11274.42
1991/06/30 11091.21 11316.30
1991/07/31 11167.41 11415.70
1991/08/31 11354.87 11570.49
1991/09/30 11472.34 11695.07
1991/10/31 11600.39 11820.98
1991/11/30 11717.74 11940.52
1991/12/31 11907.38 12121.03
1992/01/31 11956.21 12108.57
1992/02/29 12036.82 12147.00
1992/03/31 12093.01 12144.35
1992/04/30 12171.44 12255.41
1992/05/31 12297.62 12370.19
1992/06/30 12410.65 12496.62
1992/07/31 12564.98 12643.20
1992/08/31 12671.68 12745.25
1992/09/30 12776.49 12865.85
1992/10/31 12695.40 12788.45
1992/11/30 12701.32 12770.43
1992/12/31 12813.05 12891.03
1993/01/31 13007.22 13028.60
1993/02/28 13165.47 13134.89
1993/03/31 13250.01 13177.57
1993/04/30 13317.06 13260.26
1993/05/31 13373.58 13230.05
1993/06/30 13507.87 13330.24
1993/07/31 13587.77 13360.72
1993/08/31 13721.07 13472.58
1993/09/30 13768.47 13516.05
1993/10/31 13854.19 13547.59
1993/11/30 13911.20 13551.57
1993/12/31 14029.52 13606.44
1994/01/31 14117.05 13693.11
1994/02/28 14001.85 13610.15
1994/03/31 13681.14 13540.17
1994/04/30 13609.01 13488.75
1994/05/31 13690.95 13507.04
1994/06/30 13583.20 13542.56
1994/07/31 13707.10 13665.81
1994/08/31 13818.38 13711.93
1994/09/30 13813.06 13681.45
1994/10/31 13823.60 13712.73
1994/11/30 13847.34 13655.21
1994/12/31 13556.84 13681.18
1995/01/31 13657.71 13869.11
1995/02/28 13826.94 14061.02
1995/03/31 13899.62 14140.80
1995/04/30 14012.78 14268.83
1995/05/31 14264.90 14515.86
1995/06/30 14332.07 14594.85
1995/07/31 14384.87 14653.17
1995/08/31 14470.30 14741.96
1995/09/30 14539.75 14814.85
1995/10/31 14659.81 14937.84
1995/11/30 14778.74 15066.40
1995/12/31 14887.44 15180.64
1996/01/31 14997.02 15310.52
1996/02/29 14945.13 15252.21
1996/03/31 14917.24 15241.07
1996/04/30 14919.05 15256.45
1996/05/31 14951.63 15291.70
1996/06/30 15060.99 15403.56
1996/07/31 15107.52 15463.46
1996/08/31 15154.67 15520.45
1996/09/30 15296.53 15662.52
1996/10/31 15459.48 15839.32
1996/11/30 15570.90 15958.07
1996/12/31 15568.49 15960.72
1997/01/31 15633.20 16037.85
1997/02/28 15675.07 16077.61
1997/03/31 15657.04 16065.15
1997/04/30 15787.30 16196.89
1997/05/31 15886.33 16310.07
1997/06/30 15983.71 16423.52
1997/07/31 16169.90 16605.88
1997/08/31 16184.25 16621.52
1997/09/30 16281.69 16749.54
1997/10/31 16382.40 16870.15
1997/11/30 16397.78 16912.56
1997/12/31 16504.63 17024.15
1998/01/31 16646.94 17188.49
1998/02/28 16659.72 17205.71
1998/03/31 16713.05 17272.78
1998/04/30 16782.46 17358.39
1998/05/31 16855.31 17452.75
1998/06/30 16924.85 17542.87
1998/07/31 16976.61 17624.51
1998/08/31 17099.68 17827.29
1998/09/30 17275.39 18067.17
1998/10/31 17268.98 18145.36
1998/11/30 17279.44 18141.91
1998/12/31 17347.34 18212.16
1999/01/31 17415.30 18290.08
1999/02/28 17367.27 18212.95
1999/03/31 17473.17 18341.96
1999/04/30 17538.97 18404.83
1999/05/31 17493.05 18386.04
1999/06/30 17502.77 18444.27
1999/07/31 17514.95 18497.10
1999/08/31 17527.10 18545.69
1999/09/30 17634.68 18670.48
1999/10/31 17667.73 18725.72
1999/11/30 17680.89 18767.20
1999/12/31 17716.12 18786.55
2000/01/31 17714.48 18786.43
2000/02/29 17806.73 18916.81
2000/03/31 17886.11 19023.77
2000/04/28 17903.48 19060.38
IMATRL PRASUN SHR__CHT 20000430 20000522 134000 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Class C on
April 30, 1990. As the chart shows, by April 30, 2000, the value of
the investment would have grown to $17,903 - a 79.03% 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 $19,060 - a 90.60% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, NOVEMBER 3, 1997
(COMMENCEMENT OF SALE OF
CLASS C SHARES) TO OCTOBER 31,
2000 1999 1998
Dividend returns 2.53% 4.66% 5.06%
Capital returns -1.20% -2.35% 0.43%
Total returns 1.33% 2.31% 5.49%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested, and exclude the effects of
sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 3.88(cents) 23.06(cents) 44.77(cents)
Annualized dividend rate 5.19% 5.08% 4.89%
30-day annualized yield 5.73% - -
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 $9.09 over the past one month, $9.10 over the past six months and
$9.15 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity Advisor
Short Fixed-Income Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six months that ended April 30, 2000, the fund's Class A,
Class T and Class C shares returned 1.77%, 1.87% and 1.33%,
respectively. In comparison, the Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 1.79% during the same time
frame, while the short investment grade debt funds average return was
1.73%, as tracked by Lipper Inc. For the 12-month period that ended
April 30, 2000, the fund's Class A, Class T and Class C shares
returned 3.01%, 3.08% and 2.08%, respectively. The Lehman Brothers 1-3
Year Government/Corporate Bond Index returned 3.56%, while the short
investment grade debt funds average was 2.93% for the 12-month period.
Q. WHAT FACTORS AFFECTED PERFORMANCE?
A. The fund's performance reflected the changing environment in the
fixed-income market. As interest rates climbed in anticipation of the
Federal Reserve Board's actions to tighten monetary policy by raising
short-term rates, prices tended to decline, resulting in total returns
that were less than the yields of short-term securities. The fund
consistently emphasized spread sectors - such as government agencies,
and corporate, asset-backed and mortgage-backed securities - that
offered spread or yield advantages over Treasury securities. This
emphasis contributed to competitive performance relative to the Lehman
Brothers index. At the same time, our discipline of not trying to
anticipate the direction of interest-rate changes helped the fund
perform in line with the Lipper debt funds average.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE SIX-MONTH
PERIOD?
A. The fixed-income markets were in transition. In late 1999, the
spread sectors rebounded from a summer slump in which they
underperformed Treasuries. This slump was caused by the heavy issuance
of new corporate debt, concerns about potential Y2K problems and the
reaction of mortgage spreads to market volatility. Sentiment reversed
during the final two months of 1999 and in early January, as the
spread sectors rebounded in relation to Treasuries. Since mid-January,
however, spread sectors have underperformed Treasuries. The
fixed-income markets became unsettled by questions about the pricing
relationships between Treasury securities and the spread sectors. As
the yield spreads between Treasuries and non-Treasuries widened,
non-Treasuries suffered greater price losses. The negative impact
caused by this transition, however, was not as large among
shorter-maturity securities relative to longer-maturity securities.
Q. WHAT WERE YOUR PRINCIPAL STRATEGIES, ESPECIALLY WITH RESPECT TO
ALLOCATIONS TO THE SPREAD SECTORS?
A. I continued to emphasize non-Treasury securities because their
yield advantages could still deliver higher total returns by acting as
a cushion to the Fed-related negative price action. At the end of the
fiscal period, 49.7% of the fund's net assets were invested in
corporate securities, with another 23.9% in asset-backed and
mortgage-backed securities. Treasuries accounted for just 10.2% of net
assets. I believed that because of the attractive values, particularly
in high quality securities, investors would eventually return to them.
Consistent with our style, we did not try to anticipate the direction
of interest-rate changes, and we kept the fund's interest-rate
sensitivity, or duration, close to that of the Lehman Brothers 1-3
Year Government/Corporate Index.
Q. DID ANY OTHER AREAS HURT PERFORMANCE?
A. Our security selection in the consumer retail sector detracted from
performance. The market had become extremely sensitive to negative
credit surprises, and we were hurt by securities that suffered
dramatically in that environment.
Q. WHAT IS YOUR OUTLOOK?
A. I think the market is in for a rocky ride in spread sectors. We
have entered a period of heightened volatility as the market tries to
find a new equilibrium in the relationship between the prices of
Treasuries and of non-Treasuries. While spread products have recently
underperformed Treasuries, I don't think this trend will be prolonged.
Spread widening creates valuations that eventually attract investors
back to those securities. Short-term volatility can bring
opportunities to invest in securities that are mispriced in relation
to their underlying value. In this changing environment, I believe we
can find attractive opportunities among non-Treasury securities that
have investment value not reflected in the current market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income,
consistent with preservation of
capital, by investing primarily
in a broad range of
investment-grade, fixed-income
securities
START DATE: September 16,
1987
SIZE: as of April 30, 2000,
more than $290 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON CHANGING
ASSUMPTIONS IN THE
FIXED-INCOME MARKET:
"During recent years, the market has
operated on relatively stable
assumptions about the long-term
relationships between Treasuries
and spread products. However,
several developments have raised
questions about the validity of the
traditional assumptions. First,
federal budget surpluses have meant
there is less need for government
borrowing. This translates into
reduced supply of Treasuries, which
has altered the perceived
supply/demand relationship and
supported the prices of these
securities. At the same time,
support seems to be growing for a
re-evaluation of the implied
government guarantees behind
agency securities, including those
issued by Fannie Mae and Freddie
Mac. This has created doubts about
pricing for agency securities and
encouraged spread volatility.
Meanwhile, equity market volatility
and relatively weak demand for
so-called old economy stocks has
had an impact on the market's
perception of credit quality. Some
large-cap, old economy companies
have marginally increased their
borrowing in order to buoy equity
performance, often funding stock
buy-back programs with new debt.
While this trend is in the interests
of shareholders, it has
undermined the relative pricing of
corporate bonds.
"Together, all these factors are
changing the dynamics of the
relationships between the prices of
Treasury and non-Treasury
securities and contributing to the
underperformance of the latter. In
the long run, I think the market will
move to a new equilibrium, but it
doesn't appear that we've reached
that place yet."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 35.1 39.4
Aa 4.4 5.1
A 17.8 17.5
Baa 36.5 32.7
Ba and Below 0.7 1.9
Not Rated 0.3 0.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P(registered trademark) RATINGS. SECURITIES
RATED AS BA OR BELOW WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY
RECOGNIZED RATING AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT
THE TIME OF ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 2.5 2.4
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 APRIL 30, 2000
6 MONTHS AGO
Years 1.8 1.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 49.7% Corporate Bonds 46.0%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 21.0% Obligations 23.8%
Asset-Backed Securities 16.2% Asset-Backed Securities 15.8%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 7.7% Related Securities 7.7%
Other Investments 1.7% Other Investments 2.3%
Short-Term Investments and Short-Term Investments and
Net Other Assets 3.7% Net Other Assets 4.4%
* FOREIGN INVESTMENTS 6.7% ** FOREIGN INVESTMENTS 5.2%
Row: 1, Col: 1, Value: 49.7 Row: 1, Col: 1, Value: 46.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 21.0 Row: 1, Col: 3, Value: 23.8
Row: 1, Col: 4, Value: 16.2 Row: 1, Col: 4, Value: 15.8
Row: 1, Col: 5, Value: 7.7 Row: 1, Col: 5, Value: 7.7
Row: 1, Col: 6, Value: 1.7 Row: 1, Col: 6, Value: 2.3
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 3.7 Row: 1, Col: 8, Value: 4.4
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 49.7%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.5%
DEFENSE ELECTRONICS - 0.5%
Raytheon Co. 7.9% 3/1/03 (b) Baa2 $ 1,600,000 $ 1,588,368
CONSTRUCTION & REAL ESTATE -
3.1%
REAL ESTATE - 0.8%
Arden Realty LP 8.875% 3/1/05 Baa3 545,000 545,354
(b)
Cabot Industrial Property LP Baa2 575,000 547,170
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 1,200,000 1,120,668
3/15/05
2,213,192
REAL ESTATE INVESTMENT TRUSTS
- 2.3%
Avalonbay Communities, Inc. Baa1 705,000 667,142
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 438,444
7.125% 3/15/04 Baa2 1,300,000 1,249,378
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,607,892
6.5% 1/15/04 Baa1 750,000 705,038
Merry Land & Investment Co., A3 600,000 567,846
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 1,245,000 1,169,180
Spieker Properties LP 6.8% Baa2 315,000 297,272
5/1/04
6,702,192
TOTAL CONSTRUCTION & REAL 8,915,384
ESTATE
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES -
1.3%
Daimler-Chrysler North A1 1,500,000 1,504,950
America Holding Corp. 6.38%
8/23/02 (d)
TRW, Inc.:
6.45% 6/15/01 Baa1 1,550,000 1,527,665
6.5% 6/1/02 Baa1 800,000 773,072
3,805,687
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - CONTINUED
TEXTILES & APPAREL - 1.0%
Jones Apparel Group, Baa2 $ 2,155,000 $ 2,084,165
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 800,000 749,992
7.5% 6/15/04
2,834,157
TOTAL DURABLES 6,639,844
ENERGY - 1.7%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 575,000 526,988
(Petronas) yankee 7.125%
10/18/06 (b)
OIL & GAS - 1.5%
Canada Occidental Petroleum Baa2 1,400,000 1,347,010
Ltd. 7.125% 2/4/04
Oryx Energy Co. 8% 10/15/03 Baa1 335,000 332,534
The Coastal Corp. 6.2% 5/15/04 Baa2 1,700,000 1,598,544
YPF Sociedad Anonima 7.5% Baa1 1,281,547 1,272,064
10/26/02
4,550,152
TOTAL ENERGY 5,077,140
FINANCE - 18.2%
BANKS - 5.1%
Asian Development Bank 6.5% Aaa 500,000 492,085
10/21/02
Capital One Bank:
6.48% 6/28/02 Baa2 1,500,000 1,450,455
6.65% 3/15/04 Baa3 2,500,000 2,375,000
First USA Bank NA 6.125% Aa2 1,600,000 1,579,520
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa2 745,000 706,245
7.375% 9/17/04 Baa2 810,000 766,463
yankee 6.5% 11/15/02 Baa2 695,000 657,644
Popular, Inc. 6.2% 4/30/01 A3 2,885,000 2,846,687
Providian National Bank:
6.25% 5/7/01 Baa3 1,010,000 993,002
6.75% 3/15/02 Baa3 390,000 379,248
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Wells Fargo & Co.:
6.5% 9/3/02 Aa2 $ 1,500,000 $ 1,468,350
7.2% 5/1/03 Aa2 1,000,000 991,110
14,705,809
CREDIT & OTHER FINANCE - 8.7%
CIT Group Holdings, Inc. 6.5% A1 1,870,000 1,832,694
6/14/02
Daimler-Chrysler NA Holding A1 2,600,000 2,567,266
Corp. 6.84% 10/15/02
Edison Mission Energy Funding Baa1 1,613,985 1,565,388
Corp. 6.77% 9/15/03 (b)
ERP Operating LP:
6.55% 11/15/01 A3 360,000 352,336
7.1% 6/23/04 A3 450,000 429,471
Finova Capital Corp.:
6.11% 2/18/03 Baa1 300,000 272,412
7.25% 11/8/04 Baa1 1,800,000 1,649,610
Ford Motor Credit Co.:
6.3% 7/16/02 (d) A2 3,200,000 3,157,312
6.5% 2/28/02 A2 1,300,000 1,273,662
General Electric Capital Aaa 1,300,000 1,283,308
Corp. 6.65% 9/3/02
Heller Financial, Inc. 6.5% A3 1,900,000 1,854,875
7/22/02
PNC Funding Corp. 6.95% 9/1/02 A2 1,400,000 1,379,910
Popular North America, Inc. A3 2,380,000 2,366,434
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 45,729 45,729
7.02% 5/30/00
Sears Roebuck Acceptance A3 550,000 522,132
Corp. 6% 3/20/03
Sprint Capital Corp. 5.7% Baa1 1,880,000 1,771,242
11/15/03
The Money Store, Inc. 7.3% A2 800,000 794,216
12/1/02
Trizec Finance Ltd. yankee Baa3 575,000 586,500
10.875% 10/15/05
TXU Eastern Funding 6.15% Baa1 1,800,000 1,751,040
5/15/02
25,455,537
INSURANCE - 0.4%
New York Life Insurance Co. Aa3 1,200,000 1,145,040
6.4% 12/15/03 (b)
SAVINGS & LOANS - 1.2%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 1,350,000 1,334,367
7% 6/13/02 Baa3 1,250,000 1,231,325
Sovereign Bancorp, Inc. Ba3 1,000,000 966,150
6.625% 3/15/01
3,531,842
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 2.8%
Amvescap PLC yankee:
6.375% 5/15/03 A3 $ 2,450,000 $ 2,323,311
6.6% 5/15/05 A3 600,000 557,604
Donaldson Lufkin & Jenrette, A3 2,600,000 2,556,320
Inc. 6.25% 8/1/01
Goldman Sachs Group LP:
6.2% 2/15/01 A1 1,000,000 990,680
6.6% 7/15/02 (b) A1 500,000 487,845
Lehman Brothers Holdings 7% A3 1,200,000 1,177,620
5/15/03
8,093,380
TOTAL FINANCE 52,931,608
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.5%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 2,240,000 2,191,840
yankee 6.125% 6/15/01 Baa1 2,250,000 2,209,185
4,401,025
MEDIA & LEISURE - 3.6%
BROADCASTING - 2.1%
British Sky Broadcasting Baa3 1,400,000 1,299,984
Group PLC 7.3% 10/15/06
Continental Cablevision, Inc. Baa2 3,015,000 3,045,391
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 400,000 396,784
8/15/01
TCI Communications, Inc.:
8.25% 1/15/03 A2 300,000 306,858
9% 1/2/02 Ba1 970,000 997,160
6,046,177
PUBLISHING - 1.5%
News America Holdings, Inc.:
8.5% 2/15/05 Baa3 800,000 808,920
8.625% 2/1/03 Baa3 1,450,000 1,466,777
Time Warner Entertainment Co. Baa2 1,985,000 2,047,666
LP 9.625% 5/1/02
4,323,363
TOTAL MEDIA & LEISURE 10,369,540
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - 3.7%
BEVERAGES - 1.2%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 $ 1,005,000 $ 985,915
6.25% 12/15/01 Baa3 1,000,000 981,000
6.4% 12/15/03 Baa3 1,600,000 1,521,600
3,488,515
FOODS - 0.9%
Dole Food Co., Inc. 6.75% Baa3 2,590,000 2,587,514
7/15/00
TOBACCO - 1.6%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 1,125,000 1,111,770
7.625% 5/15/02 A2 1,750,000 1,730,890
8.75% 6/1/01 A2 1,000,000 1,006,390
RJ Reynolds Tobacco Holdings, Baa2 800,000 702,448
Inc. 7.375% 5/15/03
4,551,498
TOTAL NONDURABLES 10,627,527
RETAIL & WHOLESALE - 1.2%
GENERAL MERCHANDISE STORES -
0.6%
Federated Department Stores, Baa1 1,860,000 1,870,360
Inc. 8.125% 10/15/02
GROCERY STORES - 0.6%
Safeway, Inc. 7% 9/15/02 Baa2 1,700,000 1,676,693
TOTAL RETAIL & WHOLESALE 3,547,053
TECHNOLOGY - 1.3%
COMPUTERS & OFFICE EQUIPMENT
- 1.3%
Comdisco, Inc.:
6.65% 11/13/01 Baa1 2,010,000 1,983,106
7.25% 9/1/02 Baa1 1,500,000 1,473,885
Sun Microsystems, Inc. 7% Baa1 330,000 325,875
8/15/02
3,782,866
TRANSPORTATION - 3.8%
AIR TRANSPORTATION - 1.6%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 2,124,915 1,997,207
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Continental Airlines, Inc.
pass thru trust
certificates: - continued
7.08% 11/1/04 Baa1 $ 1,249,831 $ 1,197,713
Delta Air Lines 6.65% 3/15/04 Baa3 660,000 616,466
Qantas Airways Ltd. 7.5% Baa1 1,000,000 978,080
6/30/03 (b)
4,789,466
RAILROADS - 1.5%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,572,000
9.5% 8/1/00 Baa2 1,800,000 1,810,008
Norfolk Southern Corp. 6.95% Baa1 900,000 882,612
5/1/02
4,264,620
TRUCKING & FREIGHT - 0.7%
Federal Express Corp. 7.53% A3 1,929,112 1,899,693
9/23/06
TOTAL TRANSPORTATION 10,953,779
UTILITIES - 8.8%
CELLULAR - 0.1%
Cable & Wireless A2 425,000 418,153
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 4.2%
Avon Energy Partners Holdings Baa2 2,300,000 2,250,596
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
7.375% 8/1/03 Baa2 780,000 763,183
9.25% 10/1/01 Baa2 2,300,000 2,350,255
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,910,000 1,873,213
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,513,340
6.5% 5/1/03 Baa1 720,000 692,654
7.125% 9/1/02 Baa1 400,000 393,224
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 721,000 720,120
8% 6/1/02 A3 1,750,000 1,755,005
12,311,590
GAS - 2.4%
CMS Panhandle Holding Co. Baa3 1,100,000 1,022,120
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa2 1,150,000 1,135,510
7/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
GAS - CONTINUED
Enron Corp.:
6.45% 11/15/01 Baa1 $ 1,050,000 $ 1,030,890
6.5% 8/1/02 Baa1 1,350,000 1,312,403
9.875% 6/15/03 Baa1 1,160,000 1,223,754
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 623,773
Sonat, Inc. 6.875% 6/1/05 Baa2 520,000 488,649
6,837,099
TELEPHONE SERVICES - 2.1%
MCI WorldCom, Inc. 8.875% A3 811,000 843,229
1/15/06
Telecomunicaciones de Puerto Baa2 2,430,000 2,341,232
Rico, Inc. 6.15% 5/15/02
Teleglobe Canada, Inc. 7.2% Baa1 1,550,000 1,471,787
7/20/09
US West Communications 7.2% A2 1,500,000 1,469,385
11/1/04 (b)
6,125,633
TOTAL UTILITIES 25,692,475
TOTAL NONCONVERTIBLE BONDS 144,526,609
(Cost $148,573,362)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 12.7%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.5%
Federal Home Loan Bank 6.75% Aaa 4,500,000 4,470,480
5/1/02
Government Trust Certificates Aaa 189,801 191,699
(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 1,588,235 1,550,821
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 423,529 422,216
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 763,200 754,617
secured 6.86% 4/30/04
7,389,833
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
10.2%
U.S. Treasury Notes:
5.25% 5/31/01 Aaa $ 17,850,000 $ 17,615,620
6.625% 4/30/02 Aaa 1,600,000 1,597,504
7.875% 8/15/01 Aaa 10,300,000 10,449,659
29,662,783
TOTAL U.S. GOVERNMENT AND 37,052,616
GOVERNMENT AGENCY OBLIGATIONS
(Cost $37,426,853)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 8.3%
FANNIE MAE - 4.2%
6.5% 10/1/11 Aaa 189,993 182,986
7.5% 6/1/29 to 4/1/30 Aaa 9,081,550 8,885,685
8% 5/1/30 (c) Aaa 3,000,000 2,994,375
11.5% 11/1/15 Aaa 327,283 357,684
12,420,730
FREDDIE MAC - 2.4%
8.5% 5/1/26 to 7/1/28 Aaa 2,679,100 2,719,484
8.5% 5/1/30 (c) Aaa 4,098,000 4,159,470
12% 11/1/19 Aaa 81,294 88,700
6,967,654
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.7%
8% 11/15/17 Aaa 4,826,393 4,871,616
TOTAL U.S. GOVERNMENT AGENCY 24,260,000
- MORTGAGE SECURITIES
(Cost $24,497,986)
ASSET-BACKED SECURITIES - 16.2%
Americredit Automobile
Receivables Trust:
7.02% 12/15/05 Aaa 2,000,000 1,976,875
7.15% 8/15/04 Aaa 1,300,000 1,295,125
Arcadia Automobile
Receivables Trust:
Series 1999-C Class A3, 7.2% Aaa 1,232,570 1,222,941
6/15/07
5.67% 1/15/04 Aaa 1,300,000 1,276,641
ARG Funding Corp. 5.88% Aaa 2,650,000 2,581,473
5/20/03 (b)
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Capita Equipment Receivables Aa3 $ 2,200,000 $ 2,166,313
Trust 6.45% 8/15/02
Capital One Master Trust 7.1% Aaa 2,000,000 1,987,813
4/17/06
Caterpillar Financial Asset Aaa 2,100,000 2,073,094
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 1,278,480 1,277,681
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 848,630 840,143
6.2% 3/20/04 Aaa 333,743 331,501
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 329,552 328,316
6.3% 7/15/12 Aaa 1,600,000 1,584,496
CPS Auto Grantor Trust 6.7% Aaa 110,475 110,199
2/15/02
CS First Boston Mortgage Aaa 634,703 634,504
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,250,821
6.3638% 7/18/05 (d)
Fidelity Funding Auto Trust Aaa 131,905 131,988
6.99% 11/15/02 (b)
First Security Auto Owner A3 1,206,086 1,183,660
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 1,800,000 1,771,200
7.03% 11/15/03 Aaa 933,000 928,772
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,136,063
6.65% 10/15/03 Baa3 118,931 118,559
Olympic Automobile Aaa 304,448 301,023
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust Aaa 1,013,817 1,001,773
5.95% 7/15/04
Orix Credit Alliance Aaa 1,200,000 1,192,875
Receivables Trust 7.12%
5/15/04
Petroleum Enhanced Trust Baa2 1,127,183 1,123,308
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(d)
Premier Auto Trust 5.7% Aaa 4,000,000 3,945,000
10/6/02
Prime Credit Card Master Aaa 1,000,000 986,250
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 86,737 86,737
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 7/16/07 Aaa 2,700,000 2,628,261
7% 7/15/08 Aaa 650,000 641,264
Tranex Auto Receivables Owner Aaa 468,836 465,686
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 1,249,168 1,229,650
Trust 5.98% 9/17/05
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Western Financial Grantor Aaa $ 196,283 $ 195,179
Trust 5.875% 3/1/02
WFS Financial Owner Trust Aaa 2,000,000 1,991,563
7.22% 9/20/04
TOTAL ASSET-BACKED SECURITIES 46,996,747
(Cost $47,499,333)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.5%
PRIVATE SPONSOR - 0.5%
GE Capital Mortgage Services, Aaa 328,320 324,935
Inc. planned amortization
class Series 1994-2 Class
A4, 6% 1/25/09
Residential Funding Mortgage Aaa 1,020,040 1,004,102
Securities I, Inc. planned
amortization class Series
1994-S12 Class A2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 1,329,037
OBLIGATIONS
(Cost $1,345,709)
COMMERCIAL MORTGAGE
SECURITIES - 7.2%
Allied Capital Commercial Aaa 562,101 551,299
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,201,375
1999-S1A Class D, 8.0675%
2/28/14 (b)(d)
Bankers Trust REMIC Trust A1 578,601 578,873
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (d)
CBM Funding Corp. sequential AA 1,022,202 1,014,815
pay Series 1996-1 Class A-2,
6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 749,664 747,790
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 1,000,000 990,938
(b)(d)
Class E, 6.7625% 1/10/13 Baa2 2,700,000 2,673,844
(b)(d)
DLJ Commercial Mortgage Corp. Aa2 1,170,000 1,170,000
floater Series 1998-STFA
Class A-3, 6.5075% 12/8/00
(b)(d)
Equitable Life Assurance Baa2 1,183,784 1,149,935
Society of the United States
floater Series 174 Class
D-2, 6.7063% 5/15/03 (b)(d)
Federal Deposit Insurance Aaa 843,767 834,407
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FMAC Loan Receivables Trust Aaa $ 624,526 $ 592,323
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 1,127,424 1,091,488
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, 7.977% 11/13/13 Baa2 1,100,000 1,095,359
(b)(d)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,085,391
(b)(d)
Host Marriot Pool Trust Aaa 953,970 923,413
sequential pay Series
1999-HMTA Class A, 6.98%
8/1/15
Nomura Depositor Trust Baa2 2,290,000 2,214,502
floater Series 1998-ST1A
Class A-4, 6.9038% 2/15/34
(b)(d)
Structured Asset Securities A3 2,019,007 2,008,281
Corp. floater Series
1998-C2A Class C, 6.555%
1/25/13 (b)(d)
TOTAL COMMERCIAL MORTGAGE 20,924,033
SECURITIES
(Cost $21,212,729)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 0.9%
Ontario Province yankee Aa3 1,200,000 1,208,868
global 7.75% 6/4/02
United Mexican States 9.875% Baa3 1,400,000 1,438,500
1/15/07
TOTAL FOREIGN GOVERNMENT AND 2,647,368
GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,689,184)
SUPRANATIONAL OBLIGATIONS -
0.8%
African Development Bank Aa1 2,240,000 2,255,523
7.75% 12/15/01 (Cost
$2,365,530)
CASH EQUIVALENTS - 5.4%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 15,711,665 $ 15,704,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $15,704,000)
TOTAL INVESTMENT PORTFOLIO - 295,695,933
101.7%
(Cost $301,314,686)
NET OTHER ASSETS - (1.7)% (4,819,286)
NET ASSETS - 100% $ 290,876,647
</TABLE>
LEGEND
(a) S&P 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 $34,710,601 or 11.9% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(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:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 56.9% AAA, AA, A 52.3%
Baa 36.5% BBB 34.0%
Ba 0.7% 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 0.3%.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $301,343,029. Net unrealized depreciation
aggregated $5,647,096, of which $22,888 related to appreciated
investment securities and $5,669,984 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $45,396,000 of which $38,000, $336,000, $17,692,000,
$19,457,000, $2,265,000, $3,149,000 and $2,459,000 will expire on
October 31, 2000, 2001, 2002, 2003, 2004, 2005 and 2007, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 295,695,933
value (including repurchase
agreements of $15,704,000)
(cost $301,314,686) - See
accompanying schedule
Cash 8,116
Receivable for investments 1,062,934
sold
Receivable for fund shares 384,520
sold
Interest receivable 3,801,013
TOTAL ASSETS 300,952,516
LIABILITIES
Payable for investments $ 1,267,658
purchased Regular delivery
Delayed delivery 7,211,780
Payable for fund shares 1,180,563
redeemed
Distributions payable 187,707
Accrued management fee 104,609
Distribution fees payable 48,965
Other payables and accrued 74,587
expenses
TOTAL LIABILITIES 10,075,869
NET ASSETS $ 290,876,647
Net Assets consist of:
Paid in capital $ 344,637,845
Undistributed net investment 140,880
income
Accumulated undistributed net (48,283,325)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (5,618,753)
(depreciation) on investments
NET ASSETS $ 290,876,647
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $9.04
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($14,093,404 (divided by)
1,558,162 shares)
Maximum offering price per $9.18
share (100/98.50 of $9.04)
CLASS T: NET ASSET VALUE and $9.05
redemption price per share
($252,188,575 (divided by)
27,866,437 shares)
Maximum offering price per $9.19
share (100/98.50 of $9.05)
CLASS C: NET ASSET VALUE and $9.05
offering price per share
($17,648,056 (divided by)
1,949,352 shares) A
INSTITUTIONAL CLASS: NET $9.05
ASSET VALUE, offering price
and redemption price per
share ($6,946,612 (divided
by) 767,488 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 10,673,927
Interest
Security lending 8,845
Total Income 10,682,772
EXPENSES
Management fee $ 674,719
Transfer agent fees 298,198
Distribution fees 313,631
Accounting and security 47,300
lending fees
Non-interested trustees' 505
compensation
Custodian fees and expenses 11,341
Registration fees 37,229
Audit 23,820
Legal 2,951
Miscellaneous 1,198
Total expenses before 1,410,892
reductions
Expense reductions (3,128) 1,407,764
NET INVESTMENT INCOME 9,275,008
REALIZED AND UNREALIZED GAIN (2,833,631)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (738,153)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (3,571,784)
NET INCREASE (DECREASE) IN $ 5,703,224
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,275,008 $ 19,052,975
income
Net realized gain (loss) (2,833,631) (2,605,978)
Change in net unrealized (738,153) (6,062,922)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,703,224 10,384,075
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,262,817) (18,762,496)
from net investment income
Share transactions - net (70,301,734) 15,720,432
increase (decrease)
TOTAL INCREASE (DECREASE) (73,861,327) 7,342,011
IN NET ASSETS
NET ASSETS
Beginning of period 364,737,974 357,395,963
End of period (including $ 290,876,647 $ 364,737,974
undistributed net investment
income of $140,880 and
$128,689, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.150 $ 9.380 $ 9.310 $ 9.370 $ 9.290
of period
Income from Investment
Operations
Net investment income D .269 .518 .572 .532 .090
Net realized and unrealized (.109) (.233) .024 (.021) .081
gain (loss)
Total from investment .160 .285 .596 .511 .171
operations
Less Distributions
From net investment income (.270) (.515) (.526) (.571) (.091)
Net asset value, end of $ 9.040 $ 9.150 $ 9.380 $ 9.310 $ 9.370
period
TOTAL RETURN B, C 1.77% 3.12% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,093 $ 17,835 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .84% A .82% .90% F .90% F .90% A, F
net assets
Ratio of expenses to average .84% A .80% G .90% .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.95% A 5.68% 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 110% A 139% 124% 105% 124%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.150 $ 9.380 $ 9.350 $ 9.380 $ 9.470
period
Income from Investment
Operations
Net investment income .268 D .523 D .555 D .578 D .594 D
Net realized and unrealized (.099) (.238) .019 (.036) (.094)
gain (loss)
Total from investment .169 .285 .574 .542 .500
operations
Less Distributions
From net investment income (.269) (.515) (.544) (.572) (.590)
Return of capital - - - - -
Total distributions (.269) (.515) (.544) (.572) (.590)
Net asset value, end of $ 9.050 $ 9.150 $ 9.380 $ 9.350 $ 9.380
period
TOTAL RETURN B, C 1.87% 3.12% 6.32% 5.97% 5.45%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 252,189 $ 309,670 $ 333,050 $ 351,614 $ 416,700
(000 omitted)
Ratio of expenses to average .85% A .84% .89% .89% .88%
net assets
Ratio of expenses to average .85% A .83% E .89% .89% .88%
net assets after expense
reductions
Ratio of net investment 5.94% A 5.64% 5.93% 6.19% 6.29%
income to average net assets
Portfolio turnover rate 110% A 139% 124% 105% 124%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.480
period
Income from Investment
Operations
Net investment income .403
Net realized and unrealized .148
gain (loss)
Total from investment .551
operations
Less Distributions
From net investment income (.407)
Return of capital (.154)
Total distributions (.561)
Net asset value, end of $ 9.470
period
TOTAL RETURN B, C 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 546,546
(000 omitted)
Ratio of expenses to average .89%
net assets
Ratio of expenses to average .89%
net assets after expense
reductions
Ratio of net investment 6.05%
income to average net assets
Portfolio turnover rate 179%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.160 $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .231 .434 .437
Net realized and unrealized (.110) (.222) .064
gain (loss)
Total from investment .121 .212 .501
operations
Less Distributions
From net investment income (.231) (.432) (.461)
Net asset value, end of period $ 9.050 $ 9.160 $ 9.380
TOTAL RETURN B, C 1.33% 2.31% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,648 $ 30,428 $ 11,795
(000 omitted)
Ratio of expenses to average 1.70% A 1.73% 1.75% A, F
net assets
Ratio of expenses to average 1.69% A, G 1.72% G 1.75% A
net assets after expense
reductions
Ratio of net investment 5.09% A 4.75% 4.92% A
income to average net assets
Portfolio turnover rate 110% A 139% 124%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470 $ 9.450
period
Income from Investment
Operations
Net investment income .274 D .534 D .566 D .589 D .598 D .137
Net realized and unrealized (.097) (.236) .021 (.023) (.098) .067
gain (loss)
Total from investment .177 .298 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.277) (.528) (.557) (.586) (.600) (.136)
Return of capital - - - - - (.048)
Total distributions (.277) (.528) (.557) (.586) (.600) (.184)
Net asset value, end of $ 9.050 $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470
period
TOTAL RETURN B, C 1.97% 3.27% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,947 $ 6,805 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .69% A .71% .75% F .75% F .80% F .85% A, F
net assets
Ratio of expenses to average .69% A .70% G .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 6.09% A 5.77% 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 110% A 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 FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class C, and Institutional Class
shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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.
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 $169,417,212 and $234,598,726, respectively, of which U.S.
government and government agency obligations aggregated $116,256,899
and $140,888,231, 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 annualized 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 and
Service 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .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 $ 12,140 $ 102
CLASS T 205,832 3,461
CLASS C 95,659 65,858
$ 313,631 $ 69,421
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 $ 21,229 $ 7,191
CLASS T 95,530 26,518
CLASS C 22,834 22,834 *
$ 139,593 $ 56,543
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 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 $ 14,435 .18 *
CLASS T 260,081 .19 *
CLASS C 17,408 .18 *
INSTITUTIONAL CLASS 6,274 .18 *
$ 298,198
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
maintains the fund's accounting records and administers the security
lending program. The security lending fee is based on the number and
duration of lending transactions. The accounting fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
6. 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
expenses. During the period, the fund's custodian fees were reduced by
$3,128 under the custodian arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 477,646 $ 728,649
Class T 8,096,416 17,079,838
Class C 482,330 560,143
Institutional Class 206,425 393,866
Total $ 9,262,817 $ 18,762,496
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 554,408 4,473,072 $ 5,035,763
Reinvestment of distributions 46,931 71,481 426,146
Shares redeemed (992,843) (3,183,911) (9,013,054)
Net increase (decrease) (391,504) 1,360,642 $ (3,551,145)
CLASS T Shares sold 8,036,203 21,974,295 $ 73,121,088
Reinvestment of distributions 720,229 1,462,245 6,543,672
Shares redeemed (14,725,286) (25,110,949) (134,056,913)
Net increase (decrease) (5,968,854) (1,674,409) $ (54,392,153)
CLASS C Shares sold 1,327,511 4,501,972 $ 11,996,859
Reinvestment of distributions 38,998 46,606 354,364
Shares redeemed (2,740,823) (2,481,867) (24,925,095)
Net increase (decrease) (1,374,314) 2,066,711 $ (12,573,872)
INSTITUTIONAL CLASS Shares 129,988 527,018 $ 1,180,953
sold
Reinvestment of distributions 19,635 36,799 178,348
Shares redeemed (125,757) (569,453) (1,143,865)
Net increase (decrease) 23,866 (5,636) $ 215,436
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 41,324,913
Reinvestment of distributions 658,379
Shares redeemed (29,310,347)
Net increase (decrease) $ 12,672,945
CLASS T Shares sold $ 203,715,730
Reinvestment of distributions 13,533,243
Shares redeemed (233,084,712)
Net increase (decrease) $ (15,835,739)
CLASS C Shares sold $ 41,508,375
Reinvestment of distributions 430,046
Shares redeemed (23,005,901)
Net increase (decrease) $ 18,932,520
INSTITUTIONAL CLASS Shares $ 4,875,430
sold
Reinvestment of distributions 340,500
Shares redeemed (5,265,224)
Net increase (decrease) $ (49,294)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money Management, Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Andrew J. Dudley, Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Ned C. Lautenbach *
Marvin L. Mann *
William O.McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications & 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
SFI-SANN-0600 104096
1.703632.102
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
SHORT FIXED-INCOME
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
APRIL 30, 2000
(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 23 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 31 Notes to the financial
statements.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS
IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES
AND EXPENSES, CONTACT YOUR
INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)
DEAR SHAREHOLDER:
New indicators of accelerating inflation led to a sharp downturn in
equity markets, as the Dow Jones Industrial Average, NASDAQ and S&P
500(Registered trademark) each suffered its worst single-session point
decline in history on April 14. Volatility ruled the remainder of the
month, with equity markets experiencing both strong rallies and broad
sell-offs. Inflation-sensitive Treasuries experienced similar
volatility, as prices for the bellwether 10-year note edged lower
throughout 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY(REGISTERED 1.97% 3.25% 31.45% 84.20%
TRADEMARK) ADV SHORT
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 1.79% 3.56% 33.58% 90.60%
Short Investment Grade Debt 1.73% 2.93% 30.51% 86.07%
Funds Average
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one
year, five years or 10 years. For example, if you had invested $1,000
in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Institutional Class'
returns to the performance of the Lehman Brothers 1-3 Year
Government/Corporate Bond Index - a market value-weighted index of
government and investment-grade corporate fixed-rate debt issues with
maturities between one and three years. To measure how Institutional
Class' performance stacked up against its peers, you can compare it to
the short investment grade debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Inc. The past six months average represents a peer group of 115 mutual
funds. These benchmarks include reinvested dividends and capital
gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY ADV SHORT 3.25% 5.62% 6.30%
FIXED-INCOME - INST CL
LB 1-3 Year Govt/Corp 3.56% 5.96% 6.66%
Short Investment Grade Debt 2.93% 5.46% 6.39%
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
1990/04/30 10000.00 10000.00
1990/05/31 10157.16 10154.53
1990/06/30 10235.74 10261.88
1990/07/31 10356.96 10386.20
1990/08/31 10340.39 10423.04
1990/09/30 10366.17 10501.23
1990/10/31 10339.71 10609.64
1990/11/30 10404.84 10713.28
1990/12/31 10503.00 10838.66
1991/01/31 10471.42 10936.73
1991/02/28 10580.06 11015.72
1991/03/31 10768.99 11095.77
1991/04/30 10925.75 11204.44
1991/05/31 11037.26 11274.42
1991/06/30 11091.21 11316.30
1991/07/31 11167.41 11415.70
1991/08/31 11354.87 11570.49
1991/09/30 11472.34 11695.07
1991/10/31 11600.39 11820.98
1991/11/30 11717.74 11940.52
1991/12/31 11907.38 12121.03
1992/01/31 11956.21 12108.57
1992/02/29 12036.82 12147.00
1992/03/31 12093.01 12144.35
1992/04/30 12171.44 12255.41
1992/05/31 12297.62 12370.19
1992/06/30 12410.65 12496.62
1992/07/31 12564.98 12643.20
1992/08/31 12671.68 12745.25
1992/09/30 12776.49 12865.85
1992/10/31 12695.40 12788.45
1992/11/30 12701.32 12770.43
1992/12/31 12813.05 12891.03
1993/01/31 13007.22 13028.60
1993/02/28 13165.47 13134.89
1993/03/31 13250.01 13177.57
1993/04/30 13317.06 13260.26
1993/05/31 13373.58 13230.05
1993/06/30 13507.87 13330.24
1993/07/31 13587.77 13360.72
1993/08/31 13721.07 13472.58
1993/09/30 13768.47 13516.05
1993/10/31 13854.19 13547.59
1993/11/30 13911.20 13551.57
1993/12/31 14029.52 13606.44
1994/01/31 14117.05 13693.11
1994/02/28 14001.85 13610.15
1994/03/31 13681.14 13540.17
1994/04/30 13609.01 13488.75
1994/05/31 13690.95 13507.04
1994/06/30 13583.20 13542.56
1994/07/31 13707.10 13665.81
1994/08/31 13818.38 13711.93
1994/09/30 13813.06 13681.45
1994/10/31 13823.60 13712.73
1994/11/30 13847.34 13655.21
1994/12/31 13556.84 13681.18
1995/01/31 13657.71 13869.11
1995/02/28 13826.94 14061.02
1995/03/31 13899.62 14140.80
1995/04/30 14012.78 14268.83
1995/05/31 14264.90 14515.86
1995/06/30 14332.07 14594.85
1995/07/31 14401.32 14653.17
1995/08/31 14489.29 14741.96
1995/09/30 14560.54 14814.85
1995/10/31 14666.68 14937.84
1995/11/30 14788.17 15066.40
1995/12/31 14899.55 15180.64
1996/01/31 15012.13 15310.52
1996/02/29 14962.98 15252.21
1996/03/31 14934.92 15241.07
1996/04/30 14936.52 15256.45
1996/05/31 14968.43 15291.70
1996/06/30 15078.21 15403.56
1996/07/31 15124.86 15463.46
1996/08/31 15171.69 15520.45
1996/09/30 15299.33 15662.52
1996/10/31 15465.90 15839.32
1996/11/30 15597.95 15958.07
1996/12/31 15597.86 15960.72
1997/01/31 15662.51 16037.85
1997/02/28 15706.22 16077.61
1997/03/31 15690.06 16065.15
1997/04/30 15805.60 16196.89
1997/05/31 15906.54 16310.07
1997/06/30 16023.33 16423.52
1997/07/31 16211.16 16605.88
1997/08/31 16209.39 16621.52
1997/09/30 16326.66 16749.54
1997/10/31 16430.97 16870.15
1997/11/30 16481.47 16912.56
1997/12/31 16585.32 17024.15
1998/01/31 16741.12 17188.49
1998/02/28 16764.84 17205.71
1998/03/31 16815.75 17272.78
1998/04/30 16899.55 17358.39
1998/05/31 16987.31 17452.75
1998/06/30 17070.91 17542.87
1998/07/31 17155.91 17624.51
1998/08/31 17275.83 17827.29
1998/09/30 17485.86 18067.17
1998/10/31 17493.51 18145.36
1998/11/30 17500.65 18141.91
1998/12/31 17583.57 18212.16
1999/01/31 17686.34 18290.08
1999/02/28 17632.69 18212.95
1999/03/31 17777.86 18341.96
1999/04/30 17841.22 18404.83
1999/05/31 17810.54 18386.04
1999/06/30 17854.57 18444.27
1999/07/31 17882.54 18497.10
1999/08/31 17907.48 18545.69
1999/09/30 18034.46 18670.48
1999/10/31 18064.99 18725.72
1999/11/30 18113.28 18767.20
1999/12/31 18165.28 18786.55
2000/01/31 18158.72 18786.43
2000/02/29 18289.22 18916.81
2000/03/31 18366.38 19023.77
2000/04/28 18420.22 19060.38
IMATRL PRASUN SHR__CHT 20000430 20000522 134443 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Short Fixed-Income Fund - Institutional
Class on April 30, 1990. As the chart shows, by April 30, 2000, the
value of the investment would have grown to $18,420 - a 84.20%
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 $19,060 - a 90.60% increase.
(checkmark)UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the share
price, return and yield of a
fund that invests in bonds will
vary. That means if you sell
your shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
TOTAL RETURN COMPONENTS
SIX MONTHS ENDED APRIL 30, YEARS ENDED OCTOBER 31, JULY 3, 1995 (COMMENCEMENT OF
SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31,
2000 1999 1998 1997 1996 1995
Dividend returns 3.06% 5.72% 6.15% 6.45% 6.51% 1.97%
Capital returns -1.09% -2.45% 0.32% -0.21% -1.06% 0.21%
Total returns 1.97% 3.27% 6.47% 6.24% 5.45% 2.18%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
returns. A dividend return reflects the actual dividends paid by the
class. A capital return reflects both the amount paid by the class to
shareholders as capital gain distributions and changes in the class'
share price. Both returns assume the dividends or capital gains, if
any, paid by the class are reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 2000 PAST 1 MONTH PAST 6 MONTHS PAST 1 YEAR
Dividends per share 4.66(cents) 27.74(cents) 54.20(cents)
Annualized dividend rate 6.24% 6.11% 5.92%
30-day annualized yield 6.76% - -
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 $9.09 over the past one month, $9.10 over the past six months, and
$9.15 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
The Federal Reserve Board delivered
three preemptive strikes against
inflation in the form of quarter-point
interest-rate hikes during the
six-month period ending April 30,
2000, creating a less than ideal
investment environment for bonds.
The Lehman Brothers Aggregate
Bond Index - a widely accepted
measure of taxable-bond
performance - returned only 1.42%
for the period. Treasuries felt the
heat early on, as investors shifted
their focus to high-flying equities or
higher-yielding spread sector
securities - namely corporate
bonds, mortgage securities and
government agencies - which
benefited from a favorable technical
environment. Strong housing
turnover and a fall-off in refinancing
activity spurred mortgages.
Lighter-than-expected supply
rallied corporates, while a
restructuring in the agency market
fueled those issues. However, these
factors were ignored beginning in
January when the U.S. Treasury
announced its intent to re-purchase
long-term debt and cut future
issuance. Treasury prices soared in
response - with their yields
spiraling lower - and with the help
of rising short-term interest rates,
spawned an inverted yield curve,
which occurs when short-term bonds
offer higher yields than their
longer-dated counterparts. Spread
sectors recoiled on the news, with
their yield spreads widening out
relative to Treasuries. The Lehman
Brothers Treasury Index, reflective of
the change in market leadership,
posted a return of 2.58% for the
six-month period, compared to the
Lehman Brothers Corporate Bond,
Mortgage-Backed Securities and
U.S. Agency indexes, which returned
0.11%, 1.26% and 1.16%,
respectively.
(photograph of Andrew Dudley)
An interview with Andrew Dudley, Portfolio Manager of Fidelity Advisor
Short Fixed-Income Fund
Q. HOW DID THE FUND PERFORM, ANDY?
A. For the six months that ended April 30, 2000, the fund's
Institutional Class shares returned 1.97%. In comparison, the Lehman
Brothers 1-3 Year Government/Corporate Bond Index returned 1.79%
during the same time frame, while the short investment grade debt
funds average return was 1.73%, as tracked by Lipper Inc. For the
12-month period that ended April 30, 2000, the fund's Institutional
Class shares returned 3.25%. The Lehman Brothers 1-3 Year
Government/Corporate Bond Index returned 3.56%, while the short
investment grade debt funds average was 2.93% for the 12-month period.
Q. WHAT FACTORS AFFECTED PERFORMANCE?
A. The fund's performance reflected the changing environment in the
fixed-income market. As interest rates climbed in anticipation of the
Federal Reserve Board's actions to tighten monetary policy by raising
short-term rates, prices tended to decline, resulting in total returns
that were less than the yields of short-term securities. The fund
consistently emphasized spread sectors - such as government agencies,
and corporate, asset-backed and mortgage-backed securities - that
offered spread or yield advantages over Treasury securities. This
emphasis contributed to competitive performance relative to the Lehman
Brothers index. At the same time, our discipline of not trying to
anticipate the direction of interest-rate changes helped the fund
perform in line with the Lipper debt funds average.
Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE SIX-MONTH
PERIOD?
A. The fixed-income markets were in transition. In late 1999, the
spread sectors rebounded from a summer slump in which they
underperformed Treasuries. This slump was caused by the heavy issuance
of new corporate debt, concerns about potential Y2K problems and the
reaction of mortgage spreads to market volatility. Sentiment reversed
during the final two months of 1999 and in early January, as the
spread sectors rebounded in relation to Treasuries. Since mid-January,
however, spread sectors have underperformed Treasuries. The
fixed-income markets became unsettled by questions about the pricing
relationships between Treasury securities and the spread sectors. As
the yield spreads between Treasuries and non-Treasuries widened,
non-Treasuries suffered greater price losses. The negative impact
caused by this transition, however, was not as large among
shorter-maturity securities relative to longer-maturity securities.
Q. WHAT WERE YOUR PRINCIPAL STRATEGIES, ESPECIALLY WITH RESPECT TO
ALLOCATIONS TO THE SPREAD SECTORS?
A. I continued to emphasize non-Treasury securities because their
yield advantages could still deliver higher total returns by acting as
a cushion to the Fed-related negative price action. At the end of the
fiscal period, 49.7% of the fund's net assets were invested in
corporate securities, with another 23.9% in asset-backed and
mortgage-backed securities. Treasuries accounted for just 10.2% of net
assets. I believed that because of the attractive values, particularly
in high quality securities, investors would eventually return to them.
Consistent with our style, we did not try to anticipate the direction
of interest-rate changes, and we kept the fund's interest-rate
sensitivity, or duration, close to that of the Lehman Brothers 1-3
Year Government/Corporate Index.
Q. DID ANY OTHER AREAS HURT PERFORMANCE?
A. Our security selection in the consumer retail sector detracted from
performance. The market had become extremely sensitive to negative
credit surprises, and we were hurt by securities that suffered
dramatically in that environment.
Q. WHAT IS YOUR OUTLOOK?
A. I think the market is in for a rocky ride in spread sectors. We
have entered a period of heightened volatility as the market tries to
find a new equilibrium in the relationship between the prices of
Treasuries and of non-Treasuries. While spread products have recently
underperformed Treasuries, I don't think this trend will be prolonged.
Spread widening creates valuations that eventually attract investors
back to those securities. Short-term volatility can bring
opportunities to invest in securities that are mispriced in relation
to their underlying value. In this changing environment, I believe we
can find attractive opportunities among non-Treasury securities that
have investment value not reflected in the current market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR
ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE
SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS
AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE
VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE
INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
(checkmark)FUND FACTS
GOAL: high current income,
consistent with preservation of
capital, by investing primarily
in a broad range of
investment-grade, fixed-income
securities
START DATE: September 16,
1987
SIZE: as of April 30, 2000,
more than $290 million
MANAGER: Andrew Dudley,
since 1997; joined Fidelity
in 1996
ANDREW DUDLEY ON CHANGING
ASSUMPTIONS IN THE
FIXED-INCOME MARKET:
"During recent years, the market has
operated on relatively stable
assumptions about the long-term
relationships between Treasuries
and spread products. However,
several developments have raised
questions about the validity of the
traditional assumptions. First,
federal budget surpluses have meant
there is less need for government
borrowing. This translates into
reduced supply of Treasuries, which
has altered the perceived
supply/demand relationship and
supported the prices of these
securities. At the same time,
support seems to be growing for a
re-evaluation of the implied
government guarantees behind
agency securities, including those
issued by Fannie Mae and Freddie
Mac. This has created doubts about
pricing for agency securities and
encouraged spread volatility.
Meanwhile, equity market volatility
and relatively weak demand for
so-called old economy stocks has
had an impact on the market's
perception of credit quality. Some
large-cap, old economy companies
have marginally increased their
borrowing in order to buoy equity
performance, often funding stock
buy-back programs with new debt.
While this trend is in the interests
of shareholders, it has
undermined the relative pricing of
corporate bonds.
"Together, all these factors are
changing the dynamics of the
relationships between the prices of
Treasury and non-Treasury
securities and contributing to the
underperformance of the latter. In
the long run, I think the market will
move to a new equilibrium, but it
doesn't appear that we've reached
that place yet."
INVESTMENT CHANGES
<TABLE>
<CAPTION>
<S> <C> <C>
QUALITY DIVERSIFICATION AS OF
APRIL 30, 2000
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS 6
MONTHS AGO
Aaa 35.1 39.4
Aa 4.4 5.1
A 17.8 17.5
Baa 36.5 32.7
Ba and Below 0.7 1.9
Not Rated 0.3 0.4
</TABLE>
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P(registered trademark) RATINGS. SECURITIES
RATED AS BA OR BELOW WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY
RECOGNIZED RATING AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT
THE TIME OF ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS
OF APRIL 30, 2000
6 MONTHS AGO
Years 2.5 2.4
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 APRIL 30, 2000
6 MONTHS AGO
Years 1.8 1.8
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION (% OF FUND'S
NET ASSETS)
AS OF APRIL 30, 2000 * AS OF OCTOBER 31, 1999 **
Corporate Bonds 49.7% Corporate Bonds 46.0%
U.S. Government and U.S. Government and
Government Agency Government Agency
Obligations 21.0% Obligations 23.8%
Asset-Backed Securities 16.2% Asset-Backed Securities 15.8%
CMOs and Other Mortgage CMOs and Other Mortgage
Related Securities 7.7% Related Securities 7.7%
Other Investments 1.7% Other Investments 2.3%
Short-Term Investments and Short-Term Investments and
Net Other Assets 3.7% Net Other Assets 4.4%
* FOREIGN INVESTMENTS 6.7% ** FOREIGN INVESTMENTS 5.2%
Row: 1, Col: 1, Value: 49.7 Row: 1, Col: 1, Value: 46.0
Row: 1, Col: 2, Value: 0.0 Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 21.0 Row: 1, Col: 3, Value: 23.8
Row: 1, Col: 4, Value: 16.2 Row: 1, Col: 4, Value: 15.8
Row: 1, Col: 5, Value: 7.7 Row: 1, Col: 5, Value: 7.7
Row: 1, Col: 6, Value: 1.7 Row: 1, Col: 6, Value: 2.3
Row: 1, Col: 7, Value: 0.0 Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 3.7 Row: 1, Col: 8, Value: 4.4
</TABLE>
INVESTMENTS APRIL 30, 2000 (UNAUDITED)
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 49.7%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.5%
DEFENSE ELECTRONICS - 0.5%
Raytheon Co. 7.9% 3/1/03 (b) Baa2 $ 1,600,000 $ 1,588,368
CONSTRUCTION & REAL ESTATE -
3.1%
REAL ESTATE - 0.8%
Arden Realty LP 8.875% 3/1/05 Baa3 545,000 545,354
(b)
Cabot Industrial Property LP Baa2 575,000 547,170
7.125% 5/1/04
Duke-Weeks Realty LP 6.875% Baa2 1,200,000 1,120,668
3/15/05
2,213,192
REAL ESTATE INVESTMENT TRUSTS
- 2.3%
Avalonbay Communities, Inc. Baa1 705,000 667,142
6.58% 2/15/04
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 470,000 438,444
7.125% 3/15/04 Baa2 1,300,000 1,249,378
Equity Office Properties Trust:
6.375% 1/15/02 Baa1 1,650,000 1,607,892
6.5% 1/15/04 Baa1 750,000 705,038
Merry Land & Investment Co., A3 600,000 567,846
Inc. 7.25% 6/15/05
ProLogis Trust 6.7% 4/15/04 Baa1 1,245,000 1,169,180
Spieker Properties LP 6.8% Baa2 315,000 297,272
5/1/04
6,702,192
TOTAL CONSTRUCTION & REAL 8,915,384
ESTATE
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES -
1.3%
Daimler-Chrysler North A1 1,500,000 1,504,950
America Holding Corp. 6.38%
8/23/02 (d)
TRW, Inc.:
6.45% 6/15/01 Baa1 1,550,000 1,527,665
6.5% 6/1/02 Baa1 800,000 773,072
3,805,687
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - CONTINUED
TEXTILES & APPAREL - 1.0%
Jones Apparel Group, Baa2 $ 2,155,000 $ 2,084,165
Inc./Jones Apparel Group
Hldgs., Inc./Jones Apparel
Group USA, Inc. 6.25% 10/1/01
Jones Apparel Group, Inc. Baa2 800,000 749,992
7.5% 6/15/04
2,834,157
TOTAL DURABLES 6,639,844
ENERGY - 1.7%
ENERGY SERVICES - 0.2%
Petroliam Nasional BHD Baa3 575,000 526,988
(Petronas) yankee 7.125%
10/18/06 (b)
OIL & GAS - 1.5%
Canada Occidental Petroleum Baa2 1,400,000 1,347,010
Ltd. 7.125% 2/4/04
Oryx Energy Co. 8% 10/15/03 Baa1 335,000 332,534
The Coastal Corp. 6.2% 5/15/04 Baa2 1,700,000 1,598,544
YPF Sociedad Anonima 7.5% Baa1 1,281,547 1,272,064
10/26/02
4,550,152
TOTAL ENERGY 5,077,140
FINANCE - 18.2%
BANKS - 5.1%
Asian Development Bank 6.5% Aaa 500,000 492,085
10/21/02
Capital One Bank:
6.48% 6/28/02 Baa2 1,500,000 1,450,455
6.65% 3/15/04 Baa3 2,500,000 2,375,000
First USA Bank NA 6.125% Aa2 1,600,000 1,579,520
6/25/01
Korea Development Bank:
6.625% 11/21/03 Baa2 745,000 706,245
7.375% 9/17/04 Baa2 810,000 766,463
yankee 6.5% 11/15/02 Baa2 695,000 657,644
Popular, Inc. 6.2% 4/30/01 A3 2,885,000 2,846,687
Providian National Bank:
6.25% 5/7/01 Baa3 1,010,000 993,002
6.75% 3/15/02 Baa3 390,000 379,248
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Wells Fargo & Co.:
6.5% 9/3/02 Aa2 $ 1,500,000 $ 1,468,350
7.2% 5/1/03 Aa2 1,000,000 991,110
14,705,809
CREDIT & OTHER FINANCE - 8.7%
CIT Group Holdings, Inc. 6.5% A1 1,870,000 1,832,694
6/14/02
Daimler-Chrysler NA Holding A1 2,600,000 2,567,266
Corp. 6.84% 10/15/02
Edison Mission Energy Funding Baa1 1,613,985 1,565,388
Corp. 6.77% 9/15/03 (b)
ERP Operating LP:
6.55% 11/15/01 A3 360,000 352,336
7.1% 6/23/04 A3 450,000 429,471
Finova Capital Corp.:
6.11% 2/18/03 Baa1 300,000 272,412
7.25% 11/8/04 Baa1 1,800,000 1,649,610
Ford Motor Credit Co.:
6.3% 7/16/02 (d) A2 3,200,000 3,157,312
6.5% 2/28/02 A2 1,300,000 1,273,662
General Electric Capital Aaa 1,300,000 1,283,308
Corp. 6.65% 9/3/02
Heller Financial, Inc. 6.5% A3 1,900,000 1,854,875
7/22/02
PNC Funding Corp. 6.95% 9/1/02 A2 1,400,000 1,379,910
Popular North America, Inc. A3 2,380,000 2,366,434
7.375% 9/15/01
Salton Sea Funding Corp. Baa2 45,729 45,729
7.02% 5/30/00
Sears Roebuck Acceptance A3 550,000 522,132
Corp. 6% 3/20/03
Sprint Capital Corp. 5.7% Baa1 1,880,000 1,771,242
11/15/03
The Money Store, Inc. 7.3% A2 800,000 794,216
12/1/02
Trizec Finance Ltd. yankee Baa3 575,000 586,500
10.875% 10/15/05
TXU Eastern Funding 6.15% Baa1 1,800,000 1,751,040
5/15/02
25,455,537
INSURANCE - 0.4%
New York Life Insurance Co. Aa3 1,200,000 1,145,040
6.4% 12/15/03 (b)
SAVINGS & LOANS - 1.2%
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 1,350,000 1,334,367
7% 6/13/02 Baa3 1,250,000 1,231,325
Sovereign Bancorp, Inc. Ba3 1,000,000 966,150
6.625% 3/15/01
3,531,842
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
SECURITIES INDUSTRY - 2.8%
Amvescap PLC yankee:
6.375% 5/15/03 A3 $ 2,450,000 $ 2,323,311
6.6% 5/15/05 A3 600,000 557,604
Donaldson Lufkin & Jenrette, A3 2,600,000 2,556,320
Inc. 6.25% 8/1/01
Goldman Sachs Group LP:
6.2% 2/15/01 A1 1,000,000 990,680
6.6% 7/15/02 (b) A1 500,000 487,845
Lehman Brothers Holdings 7% A3 1,200,000 1,177,620
5/15/03
8,093,380
TOTAL FINANCE 52,931,608
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.5%
Tyco International Group SA:
6.875% 9/5/02 (b) Baa1 2,240,000 2,191,840
yankee 6.125% 6/15/01 Baa1 2,250,000 2,209,185
4,401,025
MEDIA & LEISURE - 3.6%
BROADCASTING - 2.1%
British Sky Broadcasting Baa3 1,400,000 1,299,984
Group PLC 7.3% 10/15/06
Continental Cablevision, Inc. Baa2 3,015,000 3,045,391
8.5% 9/15/01
Cox Communications, Inc. 7% Baa2 400,000 396,784
8/15/01
TCI Communications, Inc.:
8.25% 1/15/03 A2 300,000 306,858
9% 1/2/02 Ba1 970,000 997,160
6,046,177
PUBLISHING - 1.5%
News America Holdings, Inc.:
8.5% 2/15/05 Baa3 800,000 808,920
8.625% 2/1/03 Baa3 1,450,000 1,466,777
Time Warner Entertainment Co. Baa2 1,985,000 2,047,666
LP 9.625% 5/1/02
4,323,363
TOTAL MEDIA & LEISURE 10,369,540
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - 3.7%
BEVERAGES - 1.2%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 $ 1,005,000 $ 985,915
6.25% 12/15/01 Baa3 1,000,000 981,000
6.4% 12/15/03 Baa3 1,600,000 1,521,600
3,488,515
FOODS - 0.9%
Dole Food Co., Inc. 6.75% Baa3 2,590,000 2,587,514
7/15/00
TOBACCO - 1.6%
Philip Morris Companies, Inc.:
7.25% 9/15/01 A2 1,125,000 1,111,770
7.625% 5/15/02 A2 1,750,000 1,730,890
8.75% 6/1/01 A2 1,000,000 1,006,390
RJ Reynolds Tobacco Holdings, Baa2 800,000 702,448
Inc. 7.375% 5/15/03
4,551,498
TOTAL NONDURABLES 10,627,527
RETAIL & WHOLESALE - 1.2%
GENERAL MERCHANDISE STORES -
0.6%
Federated Department Stores, Baa1 1,860,000 1,870,360
Inc. 8.125% 10/15/02
GROCERY STORES - 0.6%
Safeway, Inc. 7% 9/15/02 Baa2 1,700,000 1,676,693
TOTAL RETAIL & WHOLESALE 3,547,053
TECHNOLOGY - 1.3%
COMPUTERS & OFFICE EQUIPMENT
- 1.3%
Comdisco, Inc.:
6.65% 11/13/01 Baa1 2,010,000 1,983,106
7.25% 9/1/02 Baa1 1,500,000 1,473,885
Sun Microsystems, Inc. 7% Baa1 330,000 325,875
8/15/02
3,782,866
TRANSPORTATION - 3.8%
AIR TRANSPORTATION - 1.6%
Continental Airlines, Inc.
pass thru trust certificates:
6.954% 2/2/11 Baa1 2,124,915 1,997,207
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Continental Airlines, Inc.
pass thru trust
certificates: - continued
7.08% 11/1/04 Baa1 $ 1,249,831 $ 1,197,713
Delta Air Lines 6.65% 3/15/04 Baa3 660,000 616,466
Qantas Airways Ltd. 7.5% Baa1 1,000,000 978,080
6/30/03 (b)
4,789,466
RAILROADS - 1.5%
CSX Corp.:
7.05% 5/1/02 Baa2 1,600,000 1,572,000
9.5% 8/1/00 Baa2 1,800,000 1,810,008
Norfolk Southern Corp. 6.95% Baa1 900,000 882,612
5/1/02
4,264,620
TRUCKING & FREIGHT - 0.7%
Federal Express Corp. 7.53% A3 1,929,112 1,899,693
9/23/06
TOTAL TRANSPORTATION 10,953,779
UTILITIES - 8.8%
CELLULAR - 0.1%
Cable & Wireless A2 425,000 418,153
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 4.2%
Avon Energy Partners Holdings Baa2 2,300,000 2,250,596
6.73% 12/11/02 (b)
Niagara Mohawk Power Corp.:
7.375% 8/1/03 Baa2 780,000 763,183
9.25% 10/1/01 Baa2 2,300,000 2,350,255
Ohio Edison Co. 7.375% 9/15/02 Baa2 1,910,000 1,873,213
Philadelphia Electric Co.:
5.625% 11/1/01 Baa1 1,560,000 1,513,340
6.5% 5/1/03 Baa1 720,000 692,654
7.125% 9/1/02 Baa1 400,000 393,224
Texas Utilities Electric Co.:
7.375% 8/1/01 A3 721,000 720,120
8% 6/1/02 A3 1,750,000 1,755,005
12,311,590
GAS - 2.4%
CMS Panhandle Holding Co. Baa3 1,100,000 1,022,120
6.125% 3/15/04
El Paso Energy Corp. 6.625% Baa2 1,150,000 1,135,510
7/15/01
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
GAS - CONTINUED
Enron Corp.:
6.45% 11/15/01 Baa1 $ 1,050,000 $ 1,030,890
6.5% 8/1/02 Baa1 1,350,000 1,312,403
9.875% 6/15/03 Baa1 1,160,000 1,223,754
Enserch Corp. 6.25% 1/1/03 Baa2 650,000 623,773
Sonat, Inc. 6.875% 6/1/05 Baa2 520,000 488,649
6,837,099
TELEPHONE SERVICES - 2.1%
MCI WorldCom, Inc. 8.875% A3 811,000 843,229
1/15/06
Telecomunicaciones de Puerto Baa2 2,430,000 2,341,232
Rico, Inc. 6.15% 5/15/02
Teleglobe Canada, Inc. 7.2% Baa1 1,550,000 1,471,787
7/20/09
US West Communications 7.2% A2 1,500,000 1,469,385
11/1/04 (b)
6,125,633
TOTAL UTILITIES 25,692,475
TOTAL NONCONVERTIBLE BONDS 144,526,609
(Cost $148,573,362)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 12.7%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.5%
Federal Home Loan Bank 6.75% Aaa 4,500,000 4,470,480
5/1/02
Government Trust Certificates Aaa 189,801 191,699
(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 1,588,235 1,550,821
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 423,529 422,216
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 763,200 754,617
secured 6.86% 4/30/04
7,389,833
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
10.2%
U.S. Treasury Notes:
5.25% 5/31/01 Aaa $ 17,850,000 $ 17,615,620
6.625% 4/30/02 Aaa 1,600,000 1,597,504
7.875% 8/15/01 Aaa 10,300,000 10,449,659
29,662,783
TOTAL U.S. GOVERNMENT AND 37,052,616
GOVERNMENT AGENCY OBLIGATIONS
(Cost $37,426,853)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 8.3%
FANNIE MAE - 4.2%
6.5% 10/1/11 Aaa 189,993 182,986
7.5% 6/1/29 to 4/1/30 Aaa 9,081,550 8,885,685
8% 5/1/30 (c) Aaa 3,000,000 2,994,375
11.5% 11/1/15 Aaa 327,283 357,684
12,420,730
FREDDIE MAC - 2.4%
8.5% 5/1/26 to 7/1/28 Aaa 2,679,100 2,719,484
8.5% 5/1/30 (c) Aaa 4,098,000 4,159,470
12% 11/1/19 Aaa 81,294 88,700
6,967,654
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.7%
8% 11/15/17 Aaa 4,826,393 4,871,616
TOTAL U.S. GOVERNMENT AGENCY 24,260,000
- MORTGAGE SECURITIES
(Cost $24,497,986)
ASSET-BACKED SECURITIES - 16.2%
Americredit Automobile
Receivables Trust:
7.02% 12/15/05 Aaa 2,000,000 1,976,875
7.15% 8/15/04 Aaa 1,300,000 1,295,125
Arcadia Automobile
Receivables Trust:
Series 1999-C Class A3, 7.2% Aaa 1,232,570 1,222,941
6/15/07
5.67% 1/15/04 Aaa 1,300,000 1,276,641
ARG Funding Corp. 5.88% Aaa 2,650,000 2,581,473
5/20/03 (b)
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Capita Equipment Receivables Aa3 $ 2,200,000 $ 2,166,313
Trust 6.45% 8/15/02
Capital One Master Trust 7.1% Aaa 2,000,000 1,987,813
4/17/06
Caterpillar Financial Asset Aaa 2,100,000 2,073,094
Trust 6.2% 4/25/04
Chase Manhattan Marine Owner Aaa 1,278,480 1,277,681
Trust 6.25% 4/16/07
Chevy Chase Auto Receivables
Trust:
5.97% 10/20/04 Aaa 848,630 840,143
6.2% 3/20/04 Aaa 333,743 331,501
Contimortgage Home Equity
Loan Trust:
6.26% 7/15/12 Aaa 329,552 328,316
6.3% 7/15/12 Aaa 1,600,000 1,584,496
CPS Auto Grantor Trust 6.7% Aaa 110,475 110,199
2/15/02
CS First Boston Mortgage Aaa 634,703 634,504
Securities Corp. 7% 3/15/27
Discover Card Master Trust I A2 5,250,000 5,250,821
6.3638% 7/18/05 (d)
Fidelity Funding Auto Trust Aaa 131,905 131,988
6.99% 11/15/02 (b)
First Security Auto Owner A3 1,206,086 1,183,660
Trust 6.2% 10/2/06
Ford Credit Auto Owner Trust:
6.15% 9/15/02 A1 1,800,000 1,771,200
7.03% 11/15/03 Aaa 933,000 928,772
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 2,200,000 2,136,063
6.65% 10/15/03 Baa3 118,931 118,559
Olympic Automobile Aaa 304,448 301,023
Receivables Trust 6.125%
11/15/04
Onyx Acceptance Grantor Trust Aaa 1,013,817 1,001,773
5.95% 7/15/04
Orix Credit Alliance Aaa 1,200,000 1,192,875
Receivables Trust 7.12%
5/15/04
Petroleum Enhanced Trust Baa2 1,127,183 1,123,308
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (b)(d)
Premier Auto Trust 5.7% Aaa 4,000,000 3,945,000
10/6/02
Prime Credit Card Master Aaa 1,000,000 986,250
Trust 6.75% 11/15/05
Reliance Auto Receivables Aaa 86,737 86,737
Corp., Inc. 6.1% 7/15/02 (b)
Sears Credit Account Master
Trust II:
6.2% 7/16/07 Aaa 2,700,000 2,628,261
7% 7/15/08 Aaa 650,000 641,264
Tranex Auto Receivables Owner Aaa 468,836 465,686
Trust 6.334% 8/15/03 (b)
Triad Auto Receivables Owner Aaa 1,249,168 1,229,650
Trust 5.98% 9/17/05
ASSET-BACKED SECURITIES -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Western Financial Grantor Aaa $ 196,283 $ 195,179
Trust 5.875% 3/1/02
WFS Financial Owner Trust Aaa 2,000,000 1,991,563
7.22% 9/20/04
TOTAL ASSET-BACKED SECURITIES 46,996,747
(Cost $47,499,333)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.5%
PRIVATE SPONSOR - 0.5%
GE Capital Mortgage Services, Aaa 328,320 324,935
Inc. planned amortization
class Series 1994-2 Class
A4, 6% 1/25/09
Residential Funding Mortgage Aaa 1,020,040 1,004,102
Securities I, Inc. planned
amortization class Series
1994-S12 Class A2, 6.5%
4/25/09
TOTAL COLLATERALIZED MORTGAGE 1,329,037
OBLIGATIONS
(Cost $1,345,709)
COMMERCIAL MORTGAGE
SECURITIES - 7.2%
Allied Capital Commercial Aaa 562,101 551,299
Mortgage Trust sequential
pay Series 1998-1 Class A,
6.31% 1/25/28 (b)
Bankers Trust II Series Baa2 2,200,000 2,201,375
1999-S1A Class D, 8.0675%
2/28/14 (b)(d)
Bankers Trust REMIC Trust A1 578,601 578,873
1988-1 Series 1998-S1A Class
F, 7.58% 11/28/02 (d)
CBM Funding Corp. sequential AA 1,022,202 1,014,815
pay Series 1996-1 Class A-2,
6.88% 7/1/02
CS First Boston Mortgage
Securities Corp.:
sequential pay Series - 749,664 747,790
1997-SPICE Class A, 6.653%
8/20/36 (b)
Series 1998-FL1:
Class D, 6.4125% 12/10/00 A2 1,000,000 990,938
(b)(d)
Class E, 6.7625% 1/10/13 Baa2 2,700,000 2,673,844
(b)(d)
DLJ Commercial Mortgage Corp. Aa2 1,170,000 1,170,000
floater Series 1998-STFA
Class A-3, 6.5075% 12/8/00
(b)(d)
Equitable Life Assurance Baa2 1,183,784 1,149,935
Society of the United States
floater Series 174 Class
D-2, 6.7063% 5/15/03 (b)(d)
Federal Deposit Insurance Aaa 843,767 834,407
Corp. REMIC Trust sequential
pay Series 1996-C1 Class 1A,
6.75% 7/25/26
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FMAC Loan Receivables Trust Aaa $ 624,526 $ 592,323
sequential pay Series 1998-C
Class A1 Notes, 5.99%
9/15/20 (b)
Franchise Loan Trust Aaa 1,127,424 1,091,488
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, 7.977% 11/13/13 Baa2 1,100,000 1,095,359
(b)(d)
Class F, 7.6634% 11/13/13 Baa3 1,100,000 1,085,391
(b)(d)
Host Marriot Pool Trust Aaa 953,970 923,413
sequential pay Series
1999-HMTA Class A, 6.98%
8/1/15
Nomura Depositor Trust Baa2 2,290,000 2,214,502
floater Series 1998-ST1A
Class A-4, 6.9038% 2/15/34
(b)(d)
Structured Asset Securities A3 2,019,007 2,008,281
Corp. floater Series
1998-C2A Class C, 6.555%
1/25/13 (b)(d)
TOTAL COMMERCIAL MORTGAGE 20,924,033
SECURITIES
(Cost $21,212,729)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 0.9%
Ontario Province yankee Aa3 1,200,000 1,208,868
global 7.75% 6/4/02
United Mexican States 9.875% Baa3 1,400,000 1,438,500
1/15/07
TOTAL FOREIGN GOVERNMENT AND 2,647,368
GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,689,184)
SUPRANATIONAL OBLIGATIONS -
0.8%
African Development Bank Aa1 2,240,000 2,255,523
7.75% 12/15/01 (Cost
$2,365,530)
CASH EQUIVALENTS - 5.4%
MATURITY AMOUNT VALUE (NOTE 1)
Investments in repurchase $ 15,711,665 $ 15,704,000
agreements (U.S. Government
Obligations), in a joint
trading account at 5.86%,
dated 4/28/00 due 5/1/00
(Cost $15,704,000)
TOTAL INVESTMENT PORTFOLIO - 295,695,933
101.7%
(Cost $301,314,686)
NET OTHER ASSETS - (1.7)% (4,819,286)
NET ASSETS - 100% $ 290,876,647
</TABLE>
LEGEND
(a) S&P 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 $34,710,601 or 11.9% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(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:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 56.9% AAA, AA, A 52.3%
Baa 36.5% BBB 34.0%
Ba 0.7% 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 0.3%.
INCOME TAX INFORMATION
At April 30, 2000, the aggregate cost of investment securities for
income tax purposes was $301,343,029. Net unrealized depreciation
aggregated $5,647,096, of which $22,888 related to appreciated
investment securities and $5,669,984 related to depreciated investment
securities.
At October 31, 1999, the fund had a capital loss carryforward of
approximately $45,396,000 of which $38,000, $336,000, $17,692,000,
$19,457,000, $2,265,000, $3,149,000 and $2,459,000 will expire on
October 31, 2000, 2001, 2002, 2003, 2004, 2005 and 2007, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS
Investment in securities, at $ 295,695,933
value (including repurchase
agreements of $15,704,000)
(cost $301,314,686) - See
accompanying schedule
Cash 8,116
Receivable for investments 1,062,934
sold
Receivable for fund shares 384,520
sold
Interest receivable 3,801,013
TOTAL ASSETS 300,952,516
LIABILITIES
Payable for investments $ 1,267,658
purchased Regular delivery
Delayed delivery 7,211,780
Payable for fund shares 1,180,563
redeemed
Distributions payable 187,707
Accrued management fee 104,609
Distribution fees payable 48,965
Other payables and accrued 74,587
expenses
TOTAL LIABILITIES 10,075,869
NET ASSETS $ 290,876,647
Net Assets consist of:
Paid in capital $ 344,637,845
Undistributed net investment 140,880
income
Accumulated undistributed net (48,283,325)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (5,618,753)
(depreciation) on investments
NET ASSETS $ 290,876,647
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
APRIL 30, 2000 (UNAUDITED)
CALCULATION OF MAXIMUM $9.04
OFFERING PRICE CLASS A: NET
ASSET VALUE and redemption
price per share
($14,093,404 (divided by)
1,558,162 shares)
Maximum offering price per $9.18
share (100/98.50 of $9.04)
CLASS T: NET ASSET VALUE and $9.05
redemption price per share
($252,188,575 (divided by)
27,866,437 shares)
Maximum offering price per $9.19
share (100/98.50 of $9.05)
CLASS C: NET ASSET VALUE and $9.05
offering price per share
($17,648,056 (divided by)
1,949,352 shares) A
INSTITUTIONAL CLASS: NET $9.05
ASSET VALUE, offering price
and redemption price per
share ($6,946,612 (divided
by) 767,488 shares)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30,
2000 (UNAUDITED)
INVESTMENT INCOME $ 10,673,927
Interest
Security lending 8,845
Total Income 10,682,772
EXPENSES
Management fee $ 674,719
Transfer agent fees 298,198
Distribution fees 313,631
Accounting and security 47,300
lending fees
Non-interested trustees' 505
compensation
Custodian fees and expenses 11,341
Registration fees 37,229
Audit 23,820
Legal 2,951
Miscellaneous 1,198
Total expenses before 1,410,892
reductions
Expense reductions (3,128) 1,407,764
NET INVESTMENT INCOME 9,275,008
REALIZED AND UNREALIZED GAIN (2,833,631)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (738,153)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (3,571,784)
NET INCREASE (DECREASE) IN $ 5,703,224
NET ASSETS RESULTING FROM
OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1999
2000 (UNAUDITED)
INCREASE (DECREASE) IN NET
ASSETS
Operations Net investment $ 9,275,008 $ 19,052,975
income
Net realized gain (loss) (2,833,631) (2,605,978)
Change in net unrealized (738,153) (6,062,922)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 5,703,224 10,384,075
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (9,262,817) (18,762,496)
from net investment income
Share transactions - net (70,301,734) 15,720,432
increase (decrease)
TOTAL INCREASE (DECREASE) (73,861,327) 7,342,011
IN NET ASSETS
NET ASSETS
Beginning of period 364,737,974 357,395,963
End of period (including $ 290,876,647 $ 364,737,974
undistributed net investment
income of $140,880 and
$128,689, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 E
SELECTED PER-SHARE DATA
Net asset value, beginning $ 9.150 $ 9.380 $ 9.310 $ 9.370 $ 9.290
of period
Income from Investment
Operations
Net investment income D .269 .518 .572 .532 .090
Net realized and unrealized (.109) (.233) .024 (.021) .081
gain (loss)
Total from investment .160 .285 .596 .511 .171
operations
Less Distributions
From net investment income (.270) (.515) (.526) (.571) (.091)
Net asset value, end of $ 9.040 $ 9.150 $ 9.380 $ 9.310 $ 9.370
period
TOTAL RETURN B, C 1.77% 3.12% 6.58% 5.64% 1.85%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 14,093 $ 17,835 $ 5,524 $ 19,726 $ 204
(000 omitted)
Ratio of expenses to average .84% A .82% .90% F .90% F .90% A, F
net assets
Ratio of expenses to average .84% A .80% G .90% .90% .90% A
net assets after expense
reductions
Ratio of net investment 5.95% A 5.68% 6.03% 6.00% 6.27% A
income to average net assets
Portfolio turnover rate 110% A 139% 124% 105% 124%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS T
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.150 $ 9.380 $ 9.350 $ 9.380 $ 9.470
period
Income from Investment
Operations
Net investment income .268 D .523 D .555 D .578 D .594 D
Net realized and unrealized (.099) (.238) .019 (.036) (.094)
gain (loss)
Total from investment .169 .285 .574 .542 .500
operations
Less Distributions
From net investment income (.269) (.515) (.544) (.572) (.590)
Return of capital - - - - -
Total distributions (.269) (.515) (.544) (.572) (.590)
Net asset value, end of $ 9.050 $ 9.150 $ 9.380 $ 9.350 $ 9.380
period
TOTAL RETURN B, C 1.87% 3.12% 6.32% 5.97% 5.45%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 252,189 $ 309,670 $ 333,050 $ 351,614 $ 416,700
(000 omitted)
Ratio of expenses to average .85% A .84% .89% .89% .88%
net assets
Ratio of expenses to average .85% A .83% E .89% .89% .88%
net assets after expense
reductions
Ratio of net investment 5.94% A 5.64% 5.93% 6.19% 6.29%
income to average net assets
Portfolio turnover rate 110% A 139% 124% 105% 124%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL HIGHLIGHTS - CLASS T
YEARS ENDED OCTOBER 31,
1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.480
period
Income from Investment
Operations
Net investment income .403
Net realized and unrealized .148
gain (loss)
Total from investment .551
operations
Less Distributions
From net investment income (.407)
Return of capital (.154)
Total distributions (.561)
Net asset value, end of $ 9.470
period
TOTAL RETURN B, C 6.05%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 546,546
(000 omitted)
Ratio of expenses to average .89%
net assets
Ratio of expenses to average .89%
net assets after expense
reductions
Ratio of net investment 6.05%
income to average net assets
Portfolio turnover rate 179%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS - CLASS C
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.160 $ 9.380 $ 9.340
period
Income from Investment
Operations
Net investment income D .231 .434 .437
Net realized and unrealized (.110) (.222) .064
gain (loss)
Total from investment .121 .212 .501
operations
Less Distributions
From net investment income (.231) (.432) (.461)
Net asset value, end of period $ 9.050 $ 9.160 $ 9.380
TOTAL RETURN B, C 1.33% 2.31% 5.49%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,648 $ 30,428 $ 11,795
(000 omitted)
Ratio of expenses to average 1.70% A 1.73% 1.75% A, F
net assets
Ratio of expenses to average 1.69% A, G 1.72% G 1.75% A
net assets after expense
reductions
Ratio of net investment 5.09% A 4.75% 4.92% A
income to average net assets
Portfolio turnover rate 110% A 139% 124%
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF SALE OF CLASS C
SHARES) TO OCTOBER 31, 1998
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
SIX MONTHS ENDED APRIL 30, 2000 YEARS ENDED OCTOBER 31,
(UNAUDITED) 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470 $ 9.450
period
Income from Investment
Operations
Net investment income .274 D .534 D .566 D .589 D .598 D .137
Net realized and unrealized (.097) (.236) .021 (.023) (.098) .067
gain (loss)
Total from investment .177 .298 .587 .566 .500 .204
operations
Less Distributions
From net investment income (.277) (.528) (.557) (.586) (.600) (.136)
Return of capital - - - - - (.048)
Total distributions (.277) (.528) (.557) (.586) (.600) (.184)
Net asset value, end of $ 9.050 $ 9.150 $ 9.380 $ 9.350 $ 9.370 $ 9.470
period
TOTAL RETURN B, C 1.97% 3.27% 6.47% 6.24% 5.45% 2.18%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 6,947 $ 6,805 $ 7,027 $ 6,750 $ 9,200 $ 9,827
(000 omitted)
Ratio of expenses to average .69% A .71% .75% F .75% F .80% F .85% A, F
net assets
Ratio of expenses to average .69% A .70% G .75% .75% .80% .85% A
net assets after expense
reductions
Ratio of net investment 6.09% A 5.77% 6.06% 6.30% 6.37% 6.10% A
income to average net assets
Portfolio turnover rate 110% A 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 FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995
F FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust.
The fund offers Class A, Class T, Class C, and Institutional Class
shares, each of which has equal rights as to assets and voting
privileges. Each class has exclusive voting rights with respect to
matters that affect that class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution, transfer agent, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and
paid monthly from net investment income. Distributions from realized
gains, if any, are recorded on the ex-dividend date. Income dividends
and capital gain distributions are declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury, Federal Agency,
or other obligations found to be satisfactory by FMR 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 market values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY TRANSACTIONS - CONTINUED
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.
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 $169,417,212 and $234,598,726, respectively, of which U.S.
government and government agency obligations aggregated $116,256,899
and $140,888,231, 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 annualized 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 and
Service 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
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 .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 $ 12,140 $ 102
CLASS T 205,832 3,461
CLASS C 95,659 65,858
$ 313,631 $ 69,421
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 $ 21,229 $ 7,191
CLASS T 95,530 26,518
CLASS C 22,834 22,834 *
$ 139,593 $ 56,543
* 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 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 $ 14,435 .18 *
CLASS T 260,081 .19 *
CLASS C 17,408 .18 *
INSTITUTIONAL CLASS 6,274 .18 *
$ 298,198
* ANNUALIZED
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
maintains the fund's accounting records and administers the security
lending program. The security lending fee is based on the number and
duration of lending transactions. The accounting fee is based on the
level of average net assets for the month plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. At period end there were no security loans
outstanding.
6. 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
expenses. During the period, the fund's custodian fees were reduced by
$3,128 under the custodian arrangement.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31,
2000 1999
FROM NET INVESTMENT INCOME
Class A $ 477,646 $ 728,649
Class T 8,096,416 17,079,838
Class C 482,330 560,143
Institutional Class 206,425 393,866
Total $ 9,262,817 $ 18,762,496
8. SHARE TRANSACTIONS.
Transactions for each class of shares for the periods are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES DOLLARS
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, SIX MONTHS ENDED APRIL 30,
2000 1999 2000
CLASS A Shares sold 554,408 4,473,072 $ 5,035,763
Reinvestment of distributions 46,931 71,481 426,146
Shares redeemed (992,843) (3,183,911) (9,013,054)
Net increase (decrease) (391,504) 1,360,642 $ (3,551,145)
CLASS T Shares sold 8,036,203 21,974,295 $ 73,121,088
Reinvestment of distributions 720,229 1,462,245 6,543,672
Shares redeemed (14,725,286) (25,110,949) (134,056,913)
Net increase (decrease) (5,968,854) (1,674,409) $ (54,392,153)
CLASS C Shares sold 1,327,511 4,501,972 $ 11,996,859
Reinvestment of distributions 38,998 46,606 354,364
Shares redeemed (2,740,823) (2,481,867) (24,925,095)
Net increase (decrease) (1,374,314) 2,066,711 $ (12,573,872)
INSTITUTIONAL CLASS Shares 129,988 527,018 $ 1,180,953
sold
Reinvestment of distributions 19,635 36,799 178,348
Shares redeemed (125,757) (569,453) (1,143,865)
Net increase (decrease) 23,866 (5,636) $ 215,436
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
YEAR ENDED OCTOBER 31,
1999
CLASS A Shares sold $ 41,324,913
Reinvestment of distributions 658,379
Shares redeemed (29,310,347)
Net increase (decrease) $ 12,672,945
CLASS T Shares sold $ 203,715,730
Reinvestment of distributions 13,533,243
Shares redeemed (233,084,712)
Net increase (decrease) $ (15,835,739)
CLASS C Shares sold $ 41,508,375
Reinvestment of distributions 430,046
Shares redeemed (23,005,901)
Net increase (decrease) $ 18,932,520
INSTITUTIONAL CLASS Shares $ 4,875,430
sold
Reinvestment of distributions 340,500
Shares redeemed (5,265,224)
Net increase (decrease) $ (49,294)
</TABLE>
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money Management, Inc.
Fidelity Investments Japan Ltd.
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Andrew J. Dudley, Vice President
Dwight D. Churchill, Vice President
David L. Murphy, Vice President
Stanley N. Griffith, Assistant Vice President
Eric D. Roiter, Secretary
Robert A. Dwight, Treasurer
Matthew N. Karstetter, Deputy Treasurer
Maria F. Dwyer, 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
Donald J. Kirk *
Ned C. Lautenbach *
Peter S. Lynch
Ned C. Lautenbach *
Marvin L. Mann *
William O.McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Michael Cook
Abigail P. Johnson
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Telecommunications & 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 Dynamic Capital Appreciation Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Large Cap Fund
Fidelity Advisor Dividend Growth Fund
Fidelity Advisor Growth
Opportunities Fund
SFII-SANN-0600 104097
1.703633.102
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)
