(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
CALIFORNIA MUNICIPAL INCOME
FUND - CLASS A, CLASS T AND CLASS B
ANNUAL REPORT
OCTOBER 31, 1997
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 LAST 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 31 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS
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.
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor California Municipal Income
Fund voted to pay to shareholders of record at the opening of business
on record date, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived
from net investment income:
PAY DATE RECORD DATE CAPITAL GAINS
Class A 12/8/97 12/5/97 $0.04
Class T 12/8/97 12/5/97 $0.04
Class B 12/8/97 12/5/97 $0.04
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR CALIFORNIA 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's 0.25% 12b-1 fee.
Effective August 1, 1997, the maximum 4.25% sales charge on Class A
shares was increased to 4.75%. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS A 7.77% 9.93%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS A 2.65% 4.71%
(INCL. MAX 4.75% SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year or since the fund
started on February 20, 1996. 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 California Municipal Bond Index - a
total return performance benchmark for California investment-grade
municipal bonds with maturities of at least one year. To measure how
Class A's performance stacked up against its peers, you can compare it
to the California municipal debt funds average, which reflects the
performance of mutual funds with similar objectives as tracked by
Lipper Analytical Services, Inc. The past one year average represents
a peer group of 105 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS A 7.77% 5.74%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS A 2.65% 2.75%
(INCL. MAX 4.75% SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971126 120429 S00000000000001
FA CA Muni Inc -CL A LB Municipal Bond
00254 LB015
1996/02/29 9525.00 10000.00
1996/03/31 9372.86 9872.20
1996/04/30 9340.04 9844.26
1996/05/31 9322.87 9840.32
1996/06/30 9430.51 9947.49
1996/07/31 9521.97 10038.01
1996/08/31 9543.58 10035.60
1996/09/30 9674.28 10176.10
1996/10/31 9788.01 10291.19
1996/11/30 9999.36 10479.52
1996/12/31 9925.85 10435.50
1997/01/31 9931.68 10455.23
1997/02/28 10014.26 10551.20
1997/03/31 9850.73 10410.56
1997/04/30 9926.26 10497.69
1997/05/31 10093.54 10655.58
1997/06/30 10189.33 10769.06
1997/07/31 10519.27 11067.36
1997/08/31 10373.21 10963.66
1997/09/30 10521.58 11093.80
1997/10/31 10548.39 11165.13
IMATRL PRASUN SHR__CHT 19971031 19971126 120432 R00000000000023
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor California Municipal Income Fund - Class
A on February 29, 1996, shortly after the fund started, and the
current maximum 4.75% sales charge was paid. As the chart shows, by
October 31, 1997, the value of the investment would have grown to
$10,548 - a 5.48% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade bonds with maturities of at
least one year - did over the same period. With dividends reinvested,
the same $10,000 would have grown to $11,165 - a 11.65% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31, (COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31,
1997 1996
DIVIDEND RETURN 4.45% 2.70%
CAPITAL APPRECIATION RETURN 3.32% -0.70%
TOTAL RETURN 7.77% 2.00%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 effects of sales charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.62(CENTS) 21.43(CENTS) 42.49(CENTS)
ANNUALIZED DIVIDEND RATE 4.16% 4.19% 4.23%
30-DAY ANNUALIZED YIELD 3.89% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.70% - -
</TABLE>
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 $10.24 over the past one
month, $10.15 over the past six months and $10.05 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class A's
current maximum 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 41.95% combined effective 1997
federal and state tax bracket, but does not reflect payment of the
federal alternative minimum tax, if applicable. If Fidelity had not
reimbursed certain class expenses, the yield and tax-equivalent yield
would have been 2.42% and 4.17%, respectively.
FIDELITY ADVISOR CALIFORNIA 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 total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS T 7.77% 9.91%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS T 3.99% 6.06%
(INCL. MAX 3.50% SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year or since the fund
started on February 20, 1996. 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 California Municipal Bond Index - a
total return performance benchmark for California investment-grade
municipal bonds with maturities of at least one year. To measure how
Class T's performance stacked up against its peers, you can compare it
to the California municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 105 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS T 7.77% 5.73%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS T 3.99% 3.53%
(INCL. MAX 3.50% SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971110 120803 S00000000000001
FA CA Muni Inc -CL T LB Municipal Bond
00609 LB015
1996/02/29 9650.00 10000.00
1996/03/31 9495.86 9872.20
1996/04/30 9462.61 9844.26
1996/05/31 9445.22 9840.32
1996/06/30 9554.27 9947.49
1996/07/31 9646.93 10038.01
1996/08/31 9668.82 10035.60
1996/09/30 9790.58 10176.10
1996/10/31 9914.90 10291.19
1996/11/30 10128.07 10479.52
1996/12/31 10062.77 10435.50
1997/01/31 10057.86 10455.23
1997/02/28 10140.75 10551.20
1997/03/31 9974.31 10410.56
1997/04/30 10060.14 10497.69
1997/05/31 10218.44 10655.58
1997/06/30 10324.82 10769.06
1997/07/31 10657.97 11067.36
1997/08/31 10509.25 10963.66
1997/09/30 10648.23 11093.80
1997/10/31 10684.82 11165.13
IMATRL PRASUN SHR__CHT 19971031 19971110 120805 R00000000000023
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor California Municipal Income Fund - Class
T on February 29, 1996, shortly after the fund started, and the
current maximum 3.50% sales charge was paid. As the chart shows, by
October 31, 1997, the value of the investment would have growth to
$10,685 - a 6.85% increase on the initial investment. For comparison,
look at how the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade bonds with maturities of at
least one year - did over the same period. With dividends reinvested,
the same $10,000 would have grown to $11,165 - a 11.65% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31, (COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31,
1997 1996
DIVIDEND RETURN 4.35% 2.69%
CAPITAL APPRECIATION RETURN 3.42% -0.70%
TOTAL RETURN 7.77% 1.99%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 effects of sales charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.53(CENTS) 20.93(CENTS) 41.49(CENTS)
ANNUALIZED DIVIDEND RATE 4.05% 4.09% 4.12%
30-DAY ANNUALIZED YIELD 3.86% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.65% - -
</TABLE>
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 $10.25 over the past one
month, $10.16 over the past six months and $10.06 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current maximum 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 41.95% combined effective 1997
federal and state tax bracket, but does not reflect payment of the
federal alternative minimum tax, if applicable. If Fidelity had not
reimbursed certain class expenses, the yield and tax-equivalent yield
would have been 2.43% and 4.19%, respectively.
FIDELITY ADVISOR CALIFORNIA 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. Class B's contingent deferred sales
charges included in the past one year and life of fund total return
figures are 5% and 4%, respectively. If Fidelity had not reimbursed
certain class expenses, the total returns and dividends would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS B 7.09% 8.54%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS B 2.09% 4.54%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year or since the fund
began on February 20, 1996. 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 California Municipal Bond Index - a
total return performance benchmark for California investment-grade
municipal bonds with maturities of at least one year. To measure how
Class B's performance stacked up against its peers, you can compare it
to the California municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 105 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS B 7.09% 4.95%
ADVISOR CALIFORNIA MUNICIPAL INCOME - CLASS B 2.09% 2.65%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971211 101323 S00000000000001
FA CA Muni Inc -CL B LB Municipal Bond
00610 LB015
1996/02/29 10000.00 10000.00
1996/03/31 9828.97 9872.20
1996/04/30 9789.24 9844.26
1996/05/31 9770.87 9840.32
1996/06/30 9878.27 9947.49
1996/07/31 9969.43 10038.01
1996/08/31 9978.51 10035.60
1996/09/30 10099.31 10176.10
1996/10/31 10211.87 10291.19
1996/11/30 10437.24 10479.52
1996/12/31 10364.07 10435.50
1997/01/31 10353.26 10455.23
1997/02/28 10433.49 10551.20
1997/03/31 10256.17 10410.56
1997/04/30 10328.64 10497.69
1997/05/31 10496.33 10655.58
1997/06/30 10600.16 10769.06
1997/07/31 10926.28 11067.36
1997/08/31 10767.44 10963.66
1997/09/30 10915.06 11093.80
1997/10/31 10535.92 11165.13
IMATRL PRASUN SHR__CHT 19971031 19971211 101325 R00000000000023
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor California Municipal Income Fund - Class
B on February 29, 1996, shortly after the fund started. As the chart
shows, by October 31, 1997, the value of the investment, including the
effect of the applicable contingent deferred sales charge, would have
grown to $10,536 - a 5.36% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index - a
total return performance benchmark for investment-grade bonds with
maturities of at least one year - did over the same period. With
dividends reinvested, the same $10,000 would have grown to $11,165 - a
11.65% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL
DO TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31, (COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31,
1997 1996
DIVIDEND RETURN 3.66% 2.35%
CAPITAL APPRECIATION RETURN 3.43% -1.00%
TOTAL RETURN 7.09% 1.35%
</TABLE>
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 effects of sales charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 2.96(CENTS) 17.59(CENTS) 34.96(CENTS)
ANNUALIZED DIVIDEND RATE 3.41% 3.44% 3.49%
30-DAY ANNUALIZED YIELD 3.34% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 5.75% - -
</TABLE>
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, $10.13 over the past six months and $10.03 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield excludes the effect of Class B's
contingent deferred sales charge. 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 41.95% combined effective 1997
federal and state 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 1.94% and 3.34%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index -
a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The second
half, however, saw a large amount
of new issuance come to market,
and while demand remained
strong, it took time for investors to
become acclimated to this new
supply. In the interim, muni bond
prices fell. The cold months of
winter contrasted with what many
felt was an overheating economy
ripe for an inflation appearance. In
late March, the Federal Reserve
Board raised short-term interest
rates by 0.25%, and while this
gesture was anticipated by
investors, the bond markets
nonetheless reacted negatively.
From April through mid-September,
though, market conditions were
friendly. Favorable economic data
soothed concerns, and the Fed's
reluctance to cut rates further was
another positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with Jonathan Short, Portfolio Manager of Fidelity
Advisor California Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the 12 months that ended October 31, 1997, the fund's Class A,
Class T and Class B shares generated returns of 7.77%, 7.77% and
7.09%, respectively. To get a sense of how the fund did relative to
its competitors, the California municipal debt funds average, as
tracked by Lipper Analytical Services, returned 8.30%. To gauge how
the fund did relative to the overall California municipal market, the
Lehman Brothers California Municipal Bond Index returned 8.72% for the
same 12-month period.
Q. THE BOND MARKETS RALLIED THROUGHOUT MOST OF THE PAST SIX MONTHS,
BUT BECAME QUITE VOLATILE IN THE LAST SEVERAL WEEKS IN OCTOBER. DID
YOU ALTER YOUR STRATEGY IN RESPONSE TO THIS INCREASE IN VOLATILITY?
A. The market's volatility presented some opportunities to buy
selected municipal bonds at what I believed were attractive
valuations. But despite the volatility, my main strategy remained the
same: I kept the fund's duration - or sensitivity to changes in
interest rates - neutral. By that I mean that I didn't alter the
fund's holdings to shield it from rising interest rates, and I didn't
change the structure of the fund to take advantage of decreasing
rates. Instead, it was structured to match the interest-rate
sensitivity of the market for California municipal securities. I feel
that it is impossible to consistently predict the direction of
interest rates and the bond markets over a long period of time. I
think that the past several weeks in October served as a useful
reminder of that belief. Few investors correctly anticipated that a
fallout in the U.S. bond market would be caused by currency turmoil in
Southeast Asia. I don't try to "time the market" by structuring the
fund to benefit from rising or falling rates. Rather, my strategy is
to concentrate on finding securities that I think are selling at a
reasonable price relative to what I believe is their value.
Q. WHICH BONDS PERFORMED WELL DURING THE PERIOD?
A. Bonds rated Baa by Moody's Investors Service were some of the
market's and the fund's best performers. During the period, these
lower-investment-grade bonds did better than higher-rated bonds
primarily because they were in demand by investors looking for higher
yields.
Q. WERE THERE OTHER GOOD PERFORMERS?
A. Non-callable bonds - which can't be redeemed by their issuer before
maturity - also aided the fund's performance. Issuers often are
prompted to refinance their older, more expensive debt if current
rates are lower than those they're paying on existing bonds. The
prices of many of the fund's non-callable holdings rose during the
past six months as investors increasingly sought bonds with call
protection.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS AMONG BONDS WITH
VARIOUS MATURITIES?
A. I chose to focus on intermediate bonds with maturities of between
10 and 20 years because the yield curve - which is a graphical
representation of the difference in yields offered by short-,
intermediate- and long-term bonds - was flat at the far end, beyond 20
years. By that I mean that an investor would have been paid an
appropriate amount of additional income for each additional year of
maturity for bonds with maturities of less than 20 years. It is this
additional income that compensates the investor for the additional
risk taken on by investing in the longer-maturity part of the market.
But for bonds with maturities of 20 years or longer, the extra yield
offered for each successive year to maturity was not, in my opinion,
attractive enough to take on the risk inherent in these bonds. So I
focused on intermediate-maturity bonds, where I felt the best yield
was offered for the risk involved.
Q. WHAT'S YOUR OUTLOOK?
A. It's quite likely that the bond markets will remain volatile. As
we've seen over the past year, the markets have been quite reactive to
news about the economy's strength, pushing bond prices up when
economic growth appeared moderate and sending them lower when growth
appeared strong enough to kindle fears of potential inflation. I
expect we'll see similar reactions - perhaps even more volatile
reactions - until economic growth trends become more defined and
sustainable. As far as the municipal market goes, there are some
factors related to supply and demand that I view as positive.
Specifically, I expect the supply of municipals to remain relatively
low going into next year. And, if history is any guide, demand for
municipals will increase in the first part of 1998. If that trend
continues, then municipals - which are presently priced relatively
cheaply compared to U.S. Treasuries - could benefit from price
increases resulting from this supply and demand imbalance.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
JON SHORT ON CALIFORNIA'S
ECONOMY, FISCAL SITUATION AND
CREDIT RATING:
"The continued strength of
California's economy has been
somewhat surprising. Not only has
the state's employment growth
showed remarkable strength -
particularly in the technology,
trade-related and entertainment
industries - but the housing
market also looks much healthier
than it did a couple of years earlier.
Even areas in Southern California,
which lagged the northern part of
the state throughout much of this
decade, finally have shown signs
that they are on the mend. The
state's strong economy has
translated into a better fiscal
environment. State revenues - in
the form of taxes and other fees
- - came in way ahead of last fiscal
year's budget. As a result of the
state's improved financial and
fiscal situation, one municipal
bond credit-rating agency
upgraded the state's credit rating.
This was, and will likely continue
to be, viewed as a positive by
municipal investors."
NOTE TO SHAREHOLDERS:
As of November 1, 1997, the
Fidelity Advisor California
Municipal Income fund was
closed to any purchases of new and
existing accounts. Additionally,
effective January 1, 1998, Fidelity
will raise the voluntary expense
caps on each class of the fund by
1.25%.
FUND FACTS
GOAL: a high level of current
income free from federal
income tax and California
state personal income tax by
investing primarily in
municipal securities
START DATE: February 20, 1996
SIZE: as of October 31, 1997,
more than $5 million
MANAGER: Jonathan Short,
since inception; joined Fidelity
in 1990
(checkmark)
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 23.6 20.4
ELECTRIC REVENUE 16.3 9.8
WATER & SEWER 11.7 20.1
LEASE REVENUE 10.4 9.2
SPECIAL TAX 9.4 10.1
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 13.0 14.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 7.4 7.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
AAA 53.0%
AA, A 32.8%
BAA 10.6%
SHORT-TERM
INVESTMENTS 3.6%
AAA 46.1%
AA, A 38.3%
BAA 9.6%
SHORT-TERM
INVESTMENTS 6.0%
ROW: 1, COL: 1, VALUE: 53.0
ROW: 1, COL: 2, VALUE: 32.8
ROW: 1, COL: 3, VALUE: 10.6
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 6, VALUE: 3.6
ROW: 1, COL: 1, VALUE: 46.1
ROW: 1, COL: 2, VALUE: 38.3
ROW: 1, COL: 3, VALUE: 9.6
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 6, VALUE: 6.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 96.4%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - 96.4%
Cabrillo Unified School Dist. (Cap. Appreciation)
Series A, 0% 8/1/10 (AMBAC Insured) Aaa $ 200,000 $ 105,500
California Dept. Wtr. Resource (Central Valley
Proj.) Series O, 4.75% 12/1/18 Aa2 100,000 93,250
California Edl. Facs. Auth. Rev. Rfdg.
(Southern California Univ.)
Series A, 5.65% 10/1/10 Aa3 100,000 106,625
California Edl. Facs. Auth. Rev. (Student Loan)
(California Loan Prog.) Series A, 6% 3/1/16
(MBIA Insured) (b) Aaa 100,000 103,875
California Gen. Oblig.:
7% 3/1/06 A1 90,000 105,300
6% 10/1/08 A1 100,000 111,000
6.50% 9/1/10 A1 150,000 174,375
5.75% 11/1/12 A1 130,000 140,888
Rfdg. 5.60% 9/1/21 A1 100,000 102,500
California Health Facs. Fin. Auth. Rev. Rfdg.
(Sutter Health Sys.) Series C, 5.50% 8/15/07
(FSA Insured) Aaa 50,000 53,438
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series E, 6.375% 8/1/27 (b)(c) Aa2 200,000 210,750
Series L, 5.70% 8/1/25 (MBIA Insured) (b)(c) Aaa 100,000 103,375
Series R, 5.25% 8/1/16 (MBIA Insured) (b)(c) Aaa 100,000 101,625
California Poll. Cont. Fing. Auth. Poll. Cont. Rev.
Rfdg. (San Diego Gas & Elec.) Series A,
5.90% 6/1/14 A2 100,000 108,000
California Pub. Works Board Lease Rev.:
(Var. Commty. College Projs.) Series A,
6% 3/1/05 (AMBAC Insured) Aaa 80,000 87,800
(Var. Univ. of California Projs.) Series B,
5% 6/1/05 A1 230,000 235,750
California Statewide Commtys. Dev. Auth.
Rev. Ctfs. of Prtn.:
(Children's Hosp.) 6% 6/1/13
(MBIA Insured) Aaa 100,000 109,750
(St. Joseph Health Sys.) 5.50% 7/1/07 Aa3 75,000 79,219
Central Valley Fing. Auth. Cogeneration Proj.
Rev. (Carson Ice Gen. Proj.) 5.70% 7/1/03 BBB 100,000 105,000
Contra Costa Schools Fing. Auth. Rev. (Vista Unified
School Dist. School Sites) (Cap. Appreciation)
Series A, 0% 9/1/17 (AMBAC Insured)
(Pre-Refunded to 9/1/02 @ 36.34) (d) Aaa 400,000 118,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Duarte Ctfs. of Prtn. (City of Hope Med. Ctr.)
6.25% 4/1/23 Baa1 $ 100,000 $ 104,250
East Bay Muni. Util. Dist.:
Wastewtr. Treatment Sys. Rev. Rfdg.
6% 6/1/06 (FGIC Insured) Aaa 100,000 110,875
Wtr. Sys. Rev. :
6.50% 6/1/04 (AMBAC Insured)
(Pre-refunded to 6/1/04 @ 102) (d) Aaa 75,000 85,500
Rfdg. 6% 6/1/01 (FGIC Insured) Aaa 75,000 79,688
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Sr. Lien) Series A, 6% 1/1/34 Baa 100,000 103,125
Fresno Swr. Rev. Series A-1, 5% 9/1/08
(AMBAC Insured) Aaa 100,000 102,875
Los Angeles County Ctfs. of Prtn.
(Cap. Appreciation) (Disney Parking Proj.)
0% 9/1/16 Baa1 100,000 33,000
Los Angeles County Convention & Exhibition Ctr.
Auth. Rev. Rfdg. Series A, 6% 8/15/10
(MBIA Insured) Aaa 100,000 110,750
Los Angeles County Trans. Commission Sales Tax
Rev. Rfdg. Series B, 6.50% 7/1/10 (e) A1 150,000 171,563
Los Angeles Hbr. Dept. Rev.:
7.60% 10/1/18 (Escrowed to Maturity) (d) AAA 100,000 128,000
Series B, 5.25% 11/1/05 (b)(c) Aa 100,000 104,000
Los Angeles Unified School Dist. Series A,
6% 7/1/14 (FGIC Insured) Aaa 240,000 266,100
Metropolitan Wtr. Dist. Southern California
Wtrwks. Rev. Rfdg. Series B, 4.75% 7/1/09
(MBIA Insured) Aaa 100,000 99,375
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Crossover Rfdg. (Geothermal Proj. #3)
Series A, 5.85% 7/1/10 (AMBAC Insured) Aaa 100,000 109,250
Riverside County Asset Leasing Corp. Leasehold
Rev. (Riverside County Hosp. Proj.) Series B,
5.70% 6/1/16 (MBIA Insured) Aaa 50,000 52,563
Riverside County Pub. Fing. Auth. (Tax Allocation
Rev. Redev. Proj.) Series A, 5.25% 10/1/12 Baa2 100,000 98,500
Sacramento Fing. Auth. Lease Rev. Rfdg.
Series A, 5.40% 11/1/20 (AMBAC Insured) Aaa 75,000 76,688
San Bernadino County Ctfs. of Prtn.
(Med. Ctr. Fing. Proj.):
5.25% 8/1/04 Baa1 150,000 153,188
5.50% 8/1/05 (MBIA Insured) Aaa 50,000 52,813
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
San Diego County Reg'l. Trans. Commission
Sales Tax Rev. Second Series A, 5.25% 4/1/02
(AMBAC Insured) Aaa $ 150,000 $ 156,000
San Francisco Bay Area Rapid Transit Dist. Sales
Tax Rev. 5.50% 7/1/20 (FGIC Insured) Aaa 100,000 100,750
San Francisco City & County Swr. Rev. Rfdg.
5.50% 10/1/01 (AMBAC Insured) Aaa 75,000 78,750
San Joaquin County Ctfs. of Prtn. (Gen. Hosp.
Proj.) 5.80% 9/1/02 A3 100,000 104,000
Santa Rosa Wastewtr. Rev. Rfdg. & Sub-Reg'l.
Wastewtr. Proj. Series A, 4.75% 9/1/16
(FGIC Insured) Aaa 100,000 92,750
Southern California Pub. Pwr. Auth. Rev. Rfdg.
(Sub-Paol Verde Proj.) Series A, 5% 7/1/04
(FSA Insured) Aaa 400,000 413,000
Turlock Irrigation Dist. Rev. Rfdg. Series A,
6% 1/1/07 (MBIA Insured) Aaa 75,000 83,245
TOTAL MUNICIPAL BONDS
(Cost $5,231,894) $ 5,426,618
MUNICIPAL NOTES - 3.6%
CALIFORNIA - 3.6%
California Poll. Cont. Fing. Auth. Resource Recovery
Rev. Rfdg. (Ultra Pwr. Rocklin Prog.)
Series 1988 A, 4.15%, LOC Bank of America
Nat'l. Trust & Saving, VRDN (b) P-1 100,000 100,000
Chula Vista Ind. Dev. Rev. Rfdg. (San Diego
Gas. & Elec. Co.) Series B, 3.85%,
VRDN (b) P-1 100,000 100,000
TOTAL MUNICIPAL NOTES
(Cost $200,000) 200,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $5,431,894) $ 5,626,618
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
1 Municipal Bond Index Contract December 1997 $ 119,900 $ (1,944)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.1%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
1. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
2. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
3. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
4. Security collateralized by an amount sufficient to pay interest and
principal.
5. 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 $17,156.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.6% AAA, AA, A 88.6%
Baa 8.8% BBB 6.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 0%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 23.6%
Electric Revenue 16.3
Water and Sewer 11.7
Lease Revenue 10.4
Special Tax 9.4
Housing 7.4
Healthcare 6.2
Escrowed/Prerefunded 5.9
Others (individually less than 5%) 9.1
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1997, the aggregate cost of investment securities for
income tax purposes was $5,431,894. Net unrealized appreciation
aggregated $194,724, of which $196,190 related to appreciated
investment securities and $1,466 related to depreciated investment
securities.
The fund hereby designates approximately $352 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1997, the fund was required to defer approximately
$4,099 of losses on futures contracts and options.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax and 2.01% of the fund's income dividends
was subject to the federal alternative minimum tax.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $5,431,894) - $ 5,626,618
SEE ACCOMPANYING SCHEDULE
INTEREST RECEIVABLE 70,746
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 5,160
TOTAL ASSETS 5,702,524
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 97,861
DISTRIBUTIONS PAYABLE 4,423
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 125
DISTRIBUTION FEES PAYABLE 1,249
OTHER PAYABLES AND ACCRUED EXPENSES 35,588
TOTAL LIABILITIES 139,246
NET ASSETS $ 5,563,278
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 5,358,665
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 11,833
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 192,780
NET ASSETS $ 5,563,278
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $10.26
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($171,591 (DIVIDED BY) 16,724 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.26) $10.77
CLASS T: $10.27
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,381,456 (DIVIDED BY) 231,961 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.27) $10.64
CLASS B: $10.25
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,006,391 (DIVIDED BY) 98,228 SHARES) A
INSTITUTIONAL CLASS: $10.21
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($2,003,840 (DIVIDED BY) 196,330 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 262,947
EXPENSES
MANAGEMENT FEE $ 19,882
TRANSFER AGENT FEES 9,642
DISTRIBUTION FEES 12,738
ACCOUNTING FEES AND EXPENSES 61,326
NON-INTERESTED TRUSTEES' COMPENSATION 21
CUSTODIAN FEES AND EXPENSES 1,963
REGISTRATION FEES 70,476
AUDIT 29,870
LEGAL 90
MISCELLANEOUS 108
TOTAL EXPENSES BEFORE REDUCTIONS 206,116
EXPENSE REDUCTIONS (155,420) 50,696
NET INVESTMENT INCOME 212,251
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 38,165
FUTURES CONTRACTS (24,385) 13,780
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 156,150
FUTURES CONTRACTS 1,471 157,621
NET GAIN (LOSS) 171,401
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 383,652
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
OCTOBER 31,
1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 212,251 $ 98,467
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 13,780 (856)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 157,621 35,159
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 383,652 132,770
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (212,251) (98,467)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 558,898 4,798,676
TOTAL INCREASE (DECREASE) IN NET ASSETS 730,299 4,832,979
NET ASSETS
BEGINNING OF PERIOD 4,832,979 -
END OF PERIOD $ 5,563,278 $ 4,832,979
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.930 $ 9.750
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .425 .066
NET REALIZED AND UNREALIZED GAIN (LOSS) .330 .180
TOTAL FROM INVESTMENT OPERATIONS .755 .246
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.425) (.066)
NET ASSET VALUE, END OF PERIOD $ 10.260 $ 9.930
TOTAL RETURN B, C 7.77% 2.53%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 172 $ 102
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% D .90% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.27% 3.98% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD SEPTEMBER 3,1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.920 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .415 .261
NET REALIZED AND UNREALIZED GAIN (LOSS) .350 (.080) D
TOTAL FROM INVESTMENT OPERATIONS .765 .181
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.415) (.261)
NET ASSET VALUE, END OF PERIOD $ 10.270 $ 9.920
TOTAL RETURN B, C 7.77% 1.99%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,381 $ 2,244
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% E 1.00% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.00% .87% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.17% 3.92% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.900 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .350 .229
NET REALIZED AND UNREALIZED GAIN (LOSS) .350 (.100) D
TOTAL FROM INVESTMENT OPERATIONS .700 .129
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.350) (.229)
NET ASSET VALUE, END OF PERIOD $ 10.250 $ 9.900
TOTAL RETURN B, C 7.09% 1.35%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,006 $ 646
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% E 1.65% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.64% F 1.62% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.52% 3.38% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.910 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .439 .307
NET REALIZED AND UNREALIZED GAIN (LOSS) .300 (.090) D
TOTAL FROM INVESTMENT OPERATIONS .739 .217
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.439) (.307)
NET ASSET VALUE, END OF PERIOD $ 10.210 $ 9.910
TOTAL RETURN B, C 7.64% 2.27%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,004 $ 1,841
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% E .75% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .74% F .72% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.42% 4.51% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor California Municipal Income Fund(the fund) is a fund
of Fidelity Advisor Series V(the trust) and is authorized to issue an
unlimited number of shares. Effective November 1, 1997, the fund was
closed to new and existing 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, 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 its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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
between 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 and options transactions, market discount and
capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. The payables and receivables associated with
the purchases and sales of when-issued securities having the same
settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected
as both payables and receivables in the statement of assets and
liabilities under the caption "Delayed delivery." Losses may arise due
to changes in the market value of the underlying securities, if the
counterparty does not perform under the contract, or if the issuer
does not issue the securities due to political, economic, or other
factors.
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
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS - CONTINUED
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 $1,856,603 and $1,037,546, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,641,238 and $1,658,771, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of the fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is 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.
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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 209 $ 209
CLASS T 5,723 5,723
CLASS B 6,806 1,891
$ 12,738 $ 7,823
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997) and 3.50% for
selling Class T shares of the fund and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1% (4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 983 $ 0
CLASS T 2,736 1,288
CLASS B 3,578 0*
$ 7,297 $ 1,288
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B and Institutional Class shares. UMB
has entered into a sub-arrangement with Fidelity Investments
Institutional Operations Company, Inc. (FIIOC) with respect to all
classes of the fund to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC, an affiliate of FMR,
receives account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
classes of the fund. All fees are paid to FIIOC by UMB, which is
reimbursed by each class for such payments. FIIOC pays for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ 741 .53%
CLASS T UMB 4,172 .18%
CLASS B UMB 1,816 .24%
INSTITUTIONAL CLASS UMB 2,913 .15%
$ 9,642
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 29,158
CLASS T 1.00% 52,950
CLASS B 1.65% 26,954
INSTITUTIONAL CLASS .75% 46,058
$ 155,120
Effective January 1, 1998, FMR has voluntarily agreed to reimburse
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) above the following annual rates or range
of annual rates of average net assets for each class:
CLASS A 2.15%
CLASS T 2.25%
CLASS B 2.90%
INSTITUTIONAL CLASS 2.00%
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $300 under the custodian
arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 42% of
the total outstanding shares of the fund.
7. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED
1997 1996 A, B
CLASS A
FROM NET INTEREST INCOME $ 5,953 $ 635
CLASS T
FROM NET INTEREST INCOME 95,395 32,566
CLASS B
FROM NET INTEREST INCOME 26,601 9,737
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME 84,302 55,529
$ 212,251 $ 98,467
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
2. DISTRIBUTIONS FOR CLASS B, CLASS T AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
8. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 A, B 1997 1996 A, B
CLASS A 5,896 10,225 $ 59,466 $ 99,695
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 555 68 5,590 677
SHARES REDEEMED (20) - (200) -
NET INCREASE (DECREASE) 6,431 10,293 $ 64,856 $ 100,372
CLASS T 75,489 248,275 $ 757,877 $ 2,423,465
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5,229 2,001 52,742 19,573
SHARES REDEEMED (74,924) (24,109) (754,841) (235,454)
NET INCREASE (DECREASE) 5,794 226,167 $ 55,778 $ 2,207,584
CLASS B 46,691 64,662 $ 473,247 $ 629,107
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,519 573 15,287 5,592
SHARES REDEEMED (15,217) - (155,259) -
NET INCREASE (DECREASE) 32,993 65,235 $ 333,275 $ 634,699
INSTITUTIONAL CLASS 3,395 180,001 $ 33,250 $ 1,800,010
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 8,310 5,760 83,239 56,011
SHARES REDEEMED (1,136) - (11,500) -
NET INCREASE (DECREASE) 10,569 185,761 $ 104,989 $ 1,856,021
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
2. SHARE TRANSACTIONS FOR CLASS B, CLASS T AND INSTITUTIONAL CLASS ARE
FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
9. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 26,420
CLASS T 15,359
CLASS B 13,644
INSTITUTIONAL CLASS 15,053
$ 70,476
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor California Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor California Municipal
Income Fund, including the schedule of portfolio investments, as of
October 31, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for the year ended
October 31, 1997 and for the period February 20, 1996 (commencement of
operations) to October 31, 1996, and the financial highlights of Class
A, Class B, Class T and Institutional Class for each of the periods
indicated therein. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor
California Municipal Income Fund as of October 31, 1997, the results
of its operations for the year then ended, the changes in its net
assets for the year ended October 31, 1997 and for the period February
20, 1996 (commencement of operations) to October 31, 1996, and the
financial highlights of Class A, Class B, Class T and Institutional
Class for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Vice President
Dwight D. Churchill, Vice President
Jonathan D. Short, Vice President
Thomas D. Maher, Assistant Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Edward C. Johnson 3d
Robert M. Gates *
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisory International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
NEW YORK MUNICIPAL INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 1997
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 23 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 30 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 31
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:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR NEW YORK MUNICIPAL INCOME FUND - INSTITUTIONAL CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - 8.55% 19.96%
INSTITUTIONAL CLASS
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year or since
the fund started on August 21, 1995. 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 Lehman Brothers New York 4 Plus Year Municipal Bond
Index - a total return performance benchmark for New York
investment-grade municipal bonds with maturities of at least four
years. To measure how Institutional Class' performance stacked up
against its peers, you can compare it to the New York municipal debt
funds average, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Analytical Services, Inc. The
past one year average represents a peer group of 93 mutual funds.
These benchmarks include reinvested dividends and capital gains, if
any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - 8.55% 8.64%
INSTITUTIONAL CLASS
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
AVERAGE ANNUAL RETURNS take Institutional Class shares' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971110 121436 S00000000000001
FA NY Muni Inc -CL I LB Municipal Bond
00661 LB015
1995/08/31 10000.00 10000.00
1995/09/30 10039.75 10063.30
1995/10/31 10216.57 10209.62
1995/11/30 10410.16 10379.00
1995/12/31 10519.28 10478.74
1996/01/31 10608.72 10557.85
1996/02/29 10517.30 10486.59
1996/03/31 10356.76 10352.57
1996/04/30 10312.58 10323.27
1996/05/31 10301.18 10319.14
1996/06/30 10431.54 10431.52
1996/07/31 10523.15 10526.45
1996/08/31 10492.40 10523.92
1996/09/30 10653.75 10671.25
1996/10/31 10756.24 10791.95
1996/11/30 10991.40 10989.44
1996/12/31 10919.96 10943.28
1997/01/31 10921.12 10963.97
1997/02/28 11022.51 11064.62
1997/03/31 10866.37 10917.12
1997/04/30 10961.21 11008.50
1997/05/31 11152.41 11174.07
1997/06/30 11268.77 11293.07
1997/07/31 11610.24 11605.89
1997/08/31 11471.89 11497.14
1997/09/30 11610.51 11633.61
1997/10/31 11676.33 11708.42
IMATRL PRASUN SHR__CHT 19971031 19971110 121437 R00000000000029
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor New York Municipal Income Fund -
Institutional Class on August 31, 1995, shortly after the fund
started. As the chart shows, by October 31, 1997, the value of the
investment would have grown to $11,676 - a 16.76% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade municipal bonds with maturities of at least one year
- - did over the same period. With dividends reinvested, the same
$10,000 would have grown to $11,708 - a 17.08% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31, AUGUST 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
1997 1996 OCTOBER 31, 1995
DIVIDEND RETURN 4.81% 4.61% 0.96%
CAPITAL APPRECIATION RETURN 3.74% 0.67% 4.00%
TOTAL RETURN 8.55% 5.28% 4.96%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 YIELDS
<TABLE>
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<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.11(CENTS) 24.20(CENTS) 48.07(CENTS)
ANNUALIZED DIVIDEND RATE 4.49% 4.50% 4.55%
30-DAY ANNUALIZED YIELD 4.36% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.68% - -
</TABLE>
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 $10.77 over the past one
month, $10.67 over the past six months, and $10.57 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 43.21% combined effective 1997
federal, state and New York City tax bracket but does not reflect the
payment of the federal alternative minimum tax, if applicable. If
Fidelity had not reimbursed certain class expenses, the yield and the
tax-equivalent yield would have been 3.49% and 6.15%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index -
a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The second
half, however, saw a large amount
of new issuance come to market,
and while demand remained
strong, it took time for investors to
become acclimated to this new
supply. In the interim, muni bond
prices fell. The cold months of
winter contrasted with what many
felt was an overheating economy
ripe for an inflation appearance. In
late March, the Federal Reserve
Board raised short-term interest
rates by 0.25%, and while this
gesture was anticipated by
investors, the bond markets
nonetheless reacted negatively.
From April through mid-September,
though, market conditions were
friendly. Favorable economic data
soothed concerns, and the Fed's
reluctance to cut rates further was
another positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with Norm Lind, Portfolio Manager of Fidelity Advisor New
York Municipal Income Fund
Q. NORM, HOW DID THE FUND PERFORM?
A. For the 12 months that ended October 31, 1997, the fund's
Institutional Class shares generated a return of 8.55%. To compare the
fund's performance to that of its peer group, the New York municipal
debt funds average, as tracked by Lipper Analytical Services, had a
return of 8.04%. To gauge how the fund did relative to the overall New
York municipal market, the Lehman Brothers New York 4 Plus Year
Municipal Bond Index returned 9.60%.
Q. WHY DID THE FUND LAG THE LEHMAN BROTHERS INDEX?
A. Because throughout the past six months, the fund had a much lighter
weighting in New York City bonds than the index. Thanks in part to the
strength of its economy, New York City bonds were some of the
best-performing securities in the entire national municipal market.
Since I try to avoid having the fund's performance overly dependent on
the fortunes of one issuer, I kept the fund's exposure to New York
City bonds at about half the size of the index.
Q. YET THE FUND WAS ABLE TO KEEP PACE WITH THE AVERAGE FUND OF ITS
TYPE DURING THE PERIOD. WHICH OF THE FUND'S HOLDINGS HELPED
PERFORMANCE?
A. Non-callable bonds - which can't be redeemed by their issuers
before maturity - were some of the fund's best performers. Falling
interest rates can prompt municipal issuers to refinance their older,
more expensive debt if current rates are lower than the rate they're
paying. Having a fair amount of "call protection" by owning
non-callable bonds was an advantage during the summer and fall when
interest rates were falling. I was able to hold onto these securities
even when bond yields were falling. Furthermore, the prices of many of
the fund's non-callable bonds rose as demand for them increased.
Q. WHAT OTHER FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Some opportunistic trading in and out of state-appropriated bonds
was beneficial for the fund. The state set a dubious record by issuing
its budget more than 100 days later than scheduled. Because the state
was constrained from issuing new state-appropriated debt during the
prolonged budget process, the existing supply of these high-yielding
bonds wasn't adequate to meet the demand for them. As a result, prices
for state-appropriated bonds generally rose. Not only did the fund
benefit from their rising prices in the summer and autumn, but it also
was helped by their high yields. When these bonds started to look rich
- - or expensive relative to their historical value and to other bonds
in the market - I sold some to lock in gains. More recently, the state
began issuing a fair amount of state-appropriated debt, so supply
increased and prices generally fell. I used this as an opportunity to
add more state-appropriated bonds at what I believed were attractive
prices.
Q. WHICH SECTORS DID YOU FAVOR AND WHY? WHICH DID YOU AVOID?
A. General obligation bonds (GOs) made up the largest sector
concentration of the fund at the end of the period, as well as the
largest sector of the New York municipal bond market as a whole. GOs
are municipal bonds backed by the full faith and credit - which
includes the taxing power - of a city, county or state, and are repaid
by general revenues such as taxes. That's in contrast to revenue
generated from a specific facility such as a tunnel. Generally
speaking, GOs tend to do well when the local economy is strong - as it
has been over the past year - because tax revenues rise as a function
of increased personal income, corporate profits and other sources. On
the other hand, I generally avoided electric utility bonds. There are
still plenty of unanswered questions concerning the bailout of Long
Island Lighting Company. That, coupled with the uncertainty
surrounding the possible deregulation of the electric utility industry
in the state, has cast somewhat of a pall over the performance of
electric bonds.
Q. WHAT'S YOUR OUTLOOK?
A. As always, the direction of interest rates will be the primary
factor determining the performance of municipal bonds. At present, it
doesn't appear that the market has any firm conviction about whether
interest rates will rise or fall. Many observers argue that recent
economic and fiscal problems in Southeast Asia ultimately will slow
the U.S. economy enough to ward off future interest rate hikes. Others
argue that the economy is still strong enough to prompt the Federal
Reserve Board to raise interest rates as a guard against runaway
inflation. As for municipal bonds, there are several factors working
in their favor. First, they currently are priced attractively compared
to U.S. Treasuries. And, for a number of reasons, the beginning of a
new year often brings on more demand for municipals. That's positive
because strong demand could help municipal bond prices.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(solid bullet)
(solid bullet)
FUND FACTS
GOAL:
START DATE:
SIZE:
MANAGER:
(checkmark)
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 46.7 49.4
WATER & SEWER 13.7 14.3
SPECIAL TAX 10.3 10.9
TRANSPORTATION 9.6 10.1
EDUCATION 7.0 5.0
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 14.6 13.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 7.5 7.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
ROW: 1, COL: 1, VALUE: 35.5
ROW: 1, COL: 2, VALUE: 33.1
ROW: 1, COL: 3, VALUE: 29.0
ROW: 1, COL: 4, VALUE: 2.4
AAA 35.1%
AA, A 32.5%
BAA 31.1%
SHORT-TERM
INVESTMENTS 1.3%
AAA 35.5%
AA, A 33.1%
BAA 29.0%
SHORT-TERM
INVESTMENTS 2.4%
ROW: 1, COL: 1, VALUE: 35.1
ROW: 1, COL: 2, VALUE: 32.0
ROW: 1, COL: 3, VALUE: 31.1
ROW: 1, COL: 4, VALUE: 1.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - 96.4%
Albany County Gen. Oblig.
5.75% 6/1/09 (FGIC Insured) (e) Aaa $ 200,000 $ 211,750
Brookhaven Gen. Oblig.
5.375% 10/1/05 (FGIC Insured) Aaa 205,000 216,782
Erie County Gen. Oblig.
Series B, 5.60% 6/15/10 (FGIC Insured) Aaa 100,000 105,250
Metropolitan Trans. Auth. (Commuter Facs.)
5.40% 7/1/10 (d) Baa1 100,000 99,108
Metropolitan Trans. Auth. Svc. Contract
(Commuter Facs.) Series O, 5.75% 7/1/13 Baa1 400,000 420,000
Monroe County Pub. Impt.:
6.50% 6/1/04 Aa 100,000 111,625
5.25% 6/1/08 (FGIC Insured) Aaa 100,000 103,625
Monroe Woodbury Central School Dist.
5.625% 5/15/24 (MBIA Insured) Aaa 100,000 101,625
Nassau County Rfdg. (Combined Swr. Dist.)
Series F, 5.10% 7/1/05 (MBIA Insured) Aaa 230,000 237,475
New York City Gen. Oblig.:
Rfdg. Series B, 6.20% 8/15/06 Baa1 90,000 98,213
Series A-1, 6.50% 8/1/16 Baa1 200,000 214,250
Series B, 5.875%, 8/15/13 Baa1 200,000 207,000
Series C, 6.40% 8/1/03 Baa1 150,000 162,375
Series D, 6% 2/15/16 Baa1 275,000 284,969
Series E, 6% 8/1/26 Baa1 150,000 154,500
Series I, 6.125% 4/15/11 Baa1 150,000 159,563
New York City Muni. Assistance Corp.:
Rfdg. Series E, 6% 7/1/05 Aa2 300,000 328,500
Series G, 5.50% 7/1/04 Aa2 50,000 53,063
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr.
Sys. Rev.:
Series A, 6% 6/15/25 A2 275,000 286,688
Series B:
5.875% 6/15/26 A2 200,000 207,000
5.50% 6/15/27 (MBIA Insured) Aaa 50,000 50,250
New York City Trust Cultural Resources Rev.
(American Museum of Natural History)
Series B, 5.65% 4/1/22 (MBIA Insured) Aaa 150,000 153,938
New York State Dorm. Auth. Lease Rev. Rfdg.
(State Univ. Dorm. Facs.) Series A:
6% 7/1/03 (AMBAC Insured) Aaa 150,000 162,188
5.30% 7/1/24 (AMBAC Insured) Aaa 100,000 98,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev.:
(Consolidated City Univ. Sys.)
2nd Series A, 5.75% 7/1/07 Baa1 $ 450,000 $ 477,000
(Strong Memorial Hosp.) 5.10% 7/1/04 A1 100,000 102,625
Rfdg.:
(FIT Student Hsg. Corp.)
5.75% 7/1/05 (AMBAC Insured) Aaa 125,000 134,219
(Ithaca College)
5.25% 7/1/26 (AMBAC Insured) Aaa 100,000 98,875
(State Univ. Edl. Facs.)
Series A:
6.50% 5/15/05 A3 200,000 223,000
6.50% 5/15/06 A3 100,000 112,375
New York State Energy Research & Dev. Auth.
Facs. Rev. Rfdg. (Consolidated Edison Co.)
Series A, 6.10% 8/15/20 A1 100,000 106,000
New York State Envir. Facs. Corp. Poll. Cont. Rev.
(State Wtr. Revolving Fund Pooled Loan):
Series B, 5.90% 11/15/14 Aaa 150,000 156,938
Series D, 6.40% 11/15/06 Aaa 100,000 113,250
New York State Local Gov't. Assistance Corp.:
Series A, 6% 4/1/24 A3 255,000 264,563
Series B, 6% 4/1/18 A3 225,000 232,313
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.)
Series A, 7.25% 11/1/11 (MBIA Insured) Aaa 100,000 109,625
New York State Mtg. Agcy. Rev.
(Homeowner Mtg.):
Rfdg. Series 60, 6.05% 4/1/26 (c) Aaa 100,000 104,125
Series 49, 5.85% 10/1/17 Aa2 100,000 103,125
5.50% 4/1/19 (AMBAC Insured) (c) Aaa 100,000 100,250
New York State Pwr. Auth. Rev. & Gen. Purpose
Rfdg. Series CC, 5.125% 1/1/11 Aa2 200,000 204,500
New York State Thruway Auth. Hwy. &
Bridge Trust Fund Series B:
6% 4/1/03 (AMBAC Insured) Aaa 210,000 227,325
6% 4/1/04 (MBIA Insured) Aaa 100,000 109,125
New York State Urban Dev. Corp. Rev. Rfdg.
(State Facs.) 5.75% 4/1/11 Baa1 185,000 194,713
Shelter Island Unified Free School Dist.
6.20% 12/15/08 (AMBAC Insured) Aaa 160,000 180,400
Suffolk County Wtr. Auth. Wtrwks. Rev. Rfdg.
(Sub-Lien) 6% 6/1/17 (MBIA Insured) Aaa 100,000 111,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
Syracuse Gen. Oblig. Series D, 7.70% 12/1/99
(MBIA Insured) Aaa $ 120,000 $ 128,400
Triborough Bridge & Tunnel Auth. Rev. Rfdg.
(Gen. Purpose) Series Y, 6% 1/1/12 Aa 340,000 375,700
8,197,933
NEW YORK & NEW JERSEY - 1.2%
New York & New Jersey Port Auth. Consolidated
85th Series, 5.375% 3/1/28 A1 100,000 102,250
TOTAL MUNICIPAL BONDS
(Cost $7,924,773) 8,300,183
MUNICIPAL NOTES - 2.4%
NEW YORK - 2.4%
New York State Energy Research & Dev. Auth.
Poll. Cont. Rev. (Niagara Mohawk Pwr. Proj.)
Series 1988-A, 3.95%,
LOC Morgan Guaranty Trust Co.,
VRDN (b)(c) (Cost $200,000) A-1 200,000 200,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $8,124,773) $ 8,500,183
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
1 Municipal Bond Future Contract Dec. 97 $ 121,743 $ (100)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.4%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
3. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
6. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
7. 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 $10,587.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.6% AAA, AA, A 66.1%
Baa 29.0% BBB 29.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.0%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 46.7%
Water and Sewer 13.7
Special Tax 10.3
Transportation 9.6
Education 7.0
Others (individually less than 5%) 12.7
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31,1997, the aggregate cost of investment securities for
income tax purposes was $8,124,773. Net unrealized appreciation
aggregated $375,410, of which $377,565 related to appreciated
investment securities and $2,155 related to depreciated investment
securities.
The fund hereby designates approximately $2,346 as a capital gain
dividend for the purpose of the dividend paid deduction.
During fiscal year ended October 31,1997, 100% of the fund's income
dividends was free from federal income tax, and 3.12% of the fund's
income dividends was subject to the federal alternative minimum tax.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $8,124,773) - SEE $ 8,500,183
ACCOMPANYING SCHEDULE
INTEREST RECEIVABLE 129,536
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 5,844
TOTAL ASSETS 8,635,563
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 25,377
PAYABLE FOR INVESTMENTS PURCHASED 99,108
DELAYED DELIVERY
PAYABLE FOR FUND SHARES REDEEMED 3,000
DISTRIBUTIONS PAYABLE 6,889
DISTRIBUTION FEES PAYABLE 3,372
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 125
OTHER PAYABLES AND ACCRUED EXPENSES 26,643
TOTAL LIABILITIES 164,514
NET ASSETS $ 8,471,049
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 8,073,478
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 22,261
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 375,310
NET ASSETS $ 8,471,049
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $10.79
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($138,035 (DIVIDED BY) 12,792 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.79) $11.33
CLASS T: $10.80
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($4,062,666 (DIVIDED BY) 376,283 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.80) $11.19
CLASS B: $10.79
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($3,490,366 (DIVIDED BY) 323,573 SHARES) A
INSTITUTIONAL CLASS: $10.80
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($779,982 (DIVIDED BY) 72,198 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSETS LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 427,570
EXPENSES
MANAGEMENT FEE $ 31,669
TRANSFER AGENT FEES 15,707
DISTRIBUTION FEES 37,286
ACCOUNTING FEES AND EXPENSES 60,768
NON-INTERESTED TRUSTEES' COMPENSATION 45
CUSTODIAN FEES AND EXPENSES 1,563
REGISTRATION FEES 77,471
AUDIT 35,292
LEGAL 6,172
MISCELLANEOUS 273
TOTAL EXPENSES BEFORE REDUCTIONS 266,246
EXPENSE REDUCTIONS (167,684) 98,562
NET INTEREST INCOME 329,008
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 22,285
FUTURES CONTRACTS 6,382 28,667
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 270,508
FUTURES CONTRACTS (1,363) 269,145
NET GAIN (LOSS) 297,812
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 626,820
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 329,008 $ 252,837
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 28,667 39,120
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 269,145 5,377
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 626,820 297,334
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (329,008) (252,837)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (43,520) -
TOTAL DISTRIBUTIONS (372,528) (252,837)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 826,818 3,469,707
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,081,110 3,514,204
NET ASSETS
BEGINNING OF PERIOD 7,389,939 3,875,735
END OF PERIOD $ 8,471,049 $ 7,389,939
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31,
1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.490 $ 10.290
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .465 .072
NET REALIZED AND UNREALIZED GAIN (LOSS) .360 .200
TOTAL FROM INVESTMENT OPERATIONS .825 .272
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.465) (.072)
FROM NET REALIZED GAIN (.060) -
TOTAL DISTRIBUTIONS (.525) (.072)
NET ASSET VALUE, END OF PERIOD $ 10.790 $ 10.490
TOTAL RETURN B, C 8.09% 2.65%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 138 $ 102
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% D .90% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.37% 4.43% A
PORTFOLIO TURNOVER RATE 16% 17%
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 TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD SEPTEMBER 3,1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS CLASS - T
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.480 $ 10.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .454 .444 .084
NET REALIZED AND UNREALIZED GAIN (LOSS) .380 .080 .400
TOTAL FROM INVESTMENT OPERATIONS .834 .524 .484
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.454) (.444) (.084)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.514) (.444) (.084)
NET ASSET VALUE, END OF PERIOD $ 10.800 $ 10.480 $ 10.400
TOTAL RETURN B, C 8.18% 5.15% 4.85%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 4,063 $ 4,125 $ 2,033
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% D 1.00% D 1.00% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.00% .97% E 1.00% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.27% 4.30% 4.16% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21, 1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
FINANCIAL HIGHLIGHTS CLASS - B
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.470 $ 10.390 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .385 .375 .074
NET REALIZED AND UNREALIZED GAIN (LOSS) .380 .080 .390
TOTAL FROM INVESTMENT OPERATIONS .765 .455 .464
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.385) (.375) (.074)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.445) (.375) (.074)
NET ASSET VALUE, END OF PERIOD $ 10.790 $ 10.470 $ 10.390
TOTAL RETURN B, C 7.49% 4.46% 4.65%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 3,490 $ 2,445 $ 1,161
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% D 1.66% D 1.75% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE 1.65% 1.62% E 1.75% A
REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.60% 3.62% 3.52% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN(SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21,1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.470 $ 10.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .481 .468 .095
NET REALIZED AND UNREALIZED GAIN (LOSS) .390 .070 .400
TOTAL FROM INVESTMENT OPERATIONS .871 .538 .495
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.481) (.468) (.095)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.541) (.468) (.095)
NET ASSET VALUE, END OF PERIOD $ 10.800 $ 10.470 $ 10.400
TOTAL RETURN B, C 8.55% 5.28% 4.96%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 780 $ 718 $ 683
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% D .75% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE .75% .68% E .75% A
REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.53% 4.53% 4.75% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN(SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21, 1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
10. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor New York Municipal Income Fund(the fund) is a fund of
Fidelity Advisor Series V(the trust) and is authorized to issue an
unlimited number of shares. Effective November 1, 1997, the fund was
closed to new and existing 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 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 its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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
between 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 certain futures and options transactions, market
discount and excise tax regulation.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
11. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's Schedule of
Investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the Statement of Assets and Liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
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.
12. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,291,722 and $1,277,172, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,250,132 and $1,368,781 respectively.
13. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Manangement
and Research Company (FMR) receives a monthly fee that is calculated
on the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of the fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
This fee is 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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 249 $ 249
CLASS T 10,671 10,671
CLASS B 26,366 8,086
$ 37,286 $ 19,006
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1% (4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 1,685 $ 375
CLASS T 9,627 6,295
CLASS B 21,032 0 *
$ 32,344 $ 6,670
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH THE
SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, and Institutional Class shares. UMB
has entered into sub-arrangements 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 receives account fees and
asset-based fees that vary according to the account size and type of
account of the shareholders of the respective classes of the fund. All
fees are paid to FIIOC by UMB, which is reimbursed by each class for
such payments. FIIOC pays for typesetting, printing and mailing of all
shareholder reports. For the period, each class paid the following
transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ 745 .45
CLASS T UMB 8,127 .19
CLASS B UMB 5,577 .19
INSTITUTIONAL CLASS UMB 1,258 .17
$ 15,707
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
14. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 36,360
CLASS T 1.00% 61,998
CLASS B 1.65% 46,461
INSTITUTIONAL CLASS .75% 22,851
$ 167,670
5. EXPENSE REDUCTIONS - CONTINUED
Effective January 1, 1998, FMR has voluntarily agreed to reimburse
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) above the following annual rates or range
of annual rates of average net assets for each class:
CLASS A 2.15%
CLASS T 2.25%
CLASS B 2.90%
INSTITUTIONAL CLASS 2.00%
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $14 under this arrangement.
15. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 29% of
the total outstanding shares of the fund.
16. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1997 1996 A
CLASS A
FROM NET INTEREST INCOME $ 7,257 $ 707
FROM NET REALIZED GAIN 588 -
TOTAL $ 7,845 $ 707
CLASS T
FROM NET INTEREST INCOME $ 182,406 $ 150,521
FROM NET REALIZED GAIN 24,294 -
TOTAL $ 206,700 $ 150,521
CLASS B
FROM NET INTEREST INCOME $ 105,678 $ 70,019
FROM NET REALIZED GAIN 14,507 -
TOTAL $ 120,185 $ 70,019
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME $ 33,667 $ 31,590
FROM NET REALIZED GAIN 4,131 -
TOTAL $ 37,798 $ 31,590
TOTAL $ 372,528 $ 252,837
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
17. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 A 1997 1996 A
CLASS A 9,337 9,691 $ 98,503 $ 99,722
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 725 67 7,654 699
SHARES REDEEMED (7,028) - (75,752) -
NET INCREASE (DECREASE) 3,034 9,758 $ 30,405 $ 100,421
CLASS T 78,019 226,391 $ 820,626 $ 2,359,874
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 16,282 11,198 171,954 116,533
SHARES REDEEMED (111,522) (39,533) (1,179,190) (411,400)
NET INCREASE (DECREASE) (17,221) 198,056 $ (186,610) $ 2,065,007
CLASS B 150,679 133,150 $ 1,590,916 $ 1,388,144
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 6,611 4,418 69,774 45,991
SHARES REDEEMED (67,182) (15,772) (715,664) (161,162)
NET INCREASE (DECREASE) 90,108 121,796 $ 945,026 $ 1,272,973
INSTITUTIONAL CLASS 409 - $ 4,300 $ -
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 3,592 3,003 37,977 31,306
SHARES REDEEMED (409) - (4,280) -
NET INCREASE (DECREASE) 3,592 3,003 $ 37,997 $ 31,306
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
18. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 33,973
CLASS T 14,464
CLASS B 14,270
INSTITUTIONAL CLASS 14,764
$ 77,471
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor New York Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor New York Municipal
Income Fund, including the schedule of portfolio investments, as of
October 31, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights of Class
A, Class T, Class B and Institutional Class for each of the periods
indicated therein. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor New
York Municipal Income Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B and Institutional Class for
each of the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor New York Municipal Income
Fund voted to pay to shareholders of record at the opening of business
on record date, the following distributions derived from capital gains
realized from sales of portfolio securities:
PAY DATE RECORD DATE CAPITAL GAINS
Institutional Class 12/8/97 12/5/97 $.04
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Norman Lind, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Thomas D. Maher, Assistant Vice President
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Intitutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
CALIFORNIA MUNICIPAL INCOME
FUND - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 1997
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 LAST 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 23 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 30 THE AUDITORS' OPINION.
ACCOUNTANTS
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.
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor California Municipal Income
Fund voted to pay to shareholders of record at the opening of business
on record date, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived
from net investment income:
PAY DATE RECORD DATE CAPITAL GAINS
Institutional Class 12/8/97 12/5/97 $0.04
PRESIDENT'S MESSAGE
(PHOTO_OF_EDWARD_C_JOHNSON_3D)DEAR SHAREHOLDER:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR CALIFORNIA MUNICIPAL INCOME FUND - INSTITUTIONAL
CLASS
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can
look at the total percentage change in value, the average annual
percentage change or the growth of a hypothetical $10,000 investment.
Total return reflects the change in the value of an investment,
assuming reinvestment of the class' dividend income and capital gains
(the profits earned upon the sale of securities that have grown in
value). You can also look at the class' income, as reflected in its
yield, to measure performance. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - 7.64% 10.08%
INSTITUTIONAL CLASS
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year or since
the fund started on February 20, 1996. For example, if you had
invested $1,000 in a fund that had a 5% return over the past year, the
value of your investment would be $1,050. You can compare the
Institutional Class' returns to the performance of the Lehman Brothers
California Municipal Bond Index - a total return performance benchmark
for California investment-grade municipal bonds with maturities of at
least one year. To measure how Institutional Class' performance
stacked up against its peers, you can compare it to the California
municipal debt funds average, which reflects the performance of mutual
funds with similar objectives as tracked by Lipper Analytical
Services, Inc. The past one year average represents a peer group of
105 mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR CALIFORNIA MUNICIPAL INCOME - 7.64% 5.83%
INSTITUTIONAL CLASS
LEHMAN BROTHERS CALIFORNIA MUNICIPAL BOND INDEX 8.72% N/A
CALIFORNIA MUNICIPAL DEBT FUNDS AVERAGE 8.30% N/A
AVERAGE ANNUAL RETURNS take Institutional Class shares' cumulative
return and show you what would have happened if Institutional Class
had performed at a constant rate each year.
$10,000 OVER LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971126 120537 S00000000000001
FA CA Muni Inc -CL I LB Municipal Bond
00649 LB015
1996/02/29 10000.00 10000.00
1996/03/31 9837.64 9872.20
1996/04/30 9788.27 9844.26
1996/05/31 9788.23 9840.32
1996/06/30 9915.06 9947.49
1996/07/31 10003.95 10038.01
1996/08/31 10021.32 10035.60
1996/09/30 10160.66 10176.10
1996/10/31 10302.56 10291.19
1996/11/30 10495.36 10479.52
1996/12/31 10419.06 10435.50
1997/01/31 10416.07 10455.23
1997/02/28 10514.85 10551.20
1997/03/31 10333.01 10410.56
1997/04/30 10424.52 10497.69
1997/05/31 10591.73 10655.58
1997/06/30 10704.78 10769.06
1997/07/31 11054.52 11067.36
1997/08/31 10901.62 10963.66
1997/09/30 11048.85 11093.80
1997/10/31 11089.35 11165.13
IMATRL PRASUN SHR__CHT 19971031 19971126 120538 R00000000000023
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor California Municipal Income Fund -
Institutional Class on February 29, 1996, shortly after the fund
started. As the chart shows, by October 31, 1997, the value of the
investment would have grown to $11,089 - a 10.89% increase on the
initial investment. For comparison, look at how the Lehman Brothers
Municipal Bond Index - a total return performance benchmark for
investment-grade bonds with maturities of at least one year - did over
the same period. With dividends reinvested, the same $10,000 would
have grown to $11,165 - an 11.65% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31 (COMMENCEMENT
OF OPERATIONS) TO
OCTOBER 31,
1997 1996
DIVIDEND RETURN 4.61% 3.17%
CAPITAL APPRECIATION RETURN 3.03% -0.90%
TOTAL RETURN 7.64% 2.27%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.74(CENTS) 22.17(CENTS) 43.92(CENTS)
ANNUALIZED DIVIDEND RATE 4.32% 4.35% 4.39%
30-DAY ANNUALIZED YIELD 4.26% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.34% - -
</TABLE>
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, $10.10 over the past six months and $10.00 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on
the yields of the bonds in the fund, averaged over the past 30 days.
This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The 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 41.95% combined effective 1997
federal and state tax bracket, but does not reflect payment of the
federal alternative minimum tax, if applicable. If Fidelity had not
reimbursed certain class expenses, the yield and tax-equivalent yield
would have been 2.82% and 4.86%, respectively.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index -
a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The second
half, however, saw a large amount
of new issuance come to market,
and while demand remained
strong, it took time for investors to
become acclimated to this new
supply. In the interim, muni bond
prices fell. The cold months of
winter contrasted with what many
felt was an overheating economy
ripe for an inflation appearance. In
late March, the Federal Reserve
Board raised short-term interest
rates by 0.25%, and while this
gesture was anticipated by
investors, the bond markets
nonetheless reacted negatively.
From April through mid-September,
though, market conditions were
friendly. Favorable economic data
soothed concerns, and the Fed's
reluctance to cut rates further was
another positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with Jonathan Short, Portfolio Manager of Fidelity
Advisor California Municipal Income Fund
Q. HOW DID THE FUND PERFORM, JON?
A. For the 12 months that ended October 31, 1997, the fund's
Institutional Class shares generated a return of 7.64%. To get a sense
of how the fund did relative to its competitors, the California
municipal debt funds average returned 8.30%, as tracked by Lipper
Analytical Services. To gauge how the fund did relative to the overall
California municipal market, the Lehman Brothers California Municipal
Bond Index returned 8.72% for the same 12-month period.
Q. THE BOND MARKETS RALLIED THROUGHOUT MOST OF THE PAST SIX MONTHS,
BUT BECAME QUITE VOLATILE IN THE LAST SEVERAL WEEKS IN OCTOBER. DID
YOU ALTER YOUR STRATEGY IN RESPONSE TO THIS INCREASE IN VOLATILITY?
A. The market's volatility presented some opportunities to buy
selected municipal bonds at what I believed were attractive
valuations. But despite the volatility, my main strategy remained the
same: I kept the fund's duration - or sensitivity to changes in
interest rates - neutral. By that I mean that I didn't alter the
fund's holdings to shield it from rising interest rates, and I didn't
change the structure of the fund to take advantage of decreasing
rates. Instead, it was structured to match the interest-rate
sensitivity of the market for California municipal securities. I feel
that it is impossible to consistently predict the direction of
interest rates and the bond markets over a long period of time. I
think that the past several weeks in October served as a useful
reminder of that belief. Few investors correctly anticipated that a
fallout in the U.S. bond market would be caused by currency turmoil in
Southeast Asia. I don't try to "time the market" by structuring the
fund to benefit from rising or falling rates. Rather, my strategy is
to concentrate on finding securities that I think are selling at a
reasonable price relative to what I believe is their value.
Q. WHICH BONDS PERFORMED WELL DURING THE PERIOD?
A. Bonds rated Baa by Moody's Investors Service were some of the
market's and the fund's best performers. During the period, these
lower-investment-grade bonds did better than higher-rated bonds
primarily because they were in demand by investors looking for higher
yields.
Q. WERE THERE OTHER GOOD PERFORMERS?
A. Non-callable bonds - which can't be redeemed by their issuer before
maturity - also aided the fund's performance. Issuers often are
prompted to refinance their older, more expensive debt if current
rates are lower than those they're paying on existing bonds. The
prices of many of the fund's non-callable holdings rose during the
past six months as investors increasingly sought bonds with call
protection.
Q. HOW DID YOU ALLOCATE THE FUND'S INVESTMENTS AMONG BONDS WITH
VARIOUS MATURITIES?
A. I chose to focus on intermediate bonds with maturities of between
10 and 20 years because the yield curve - which is a graphical
representation of the difference in yields offered by short-,
intermediate- and long-term bonds - was flat at the far end, beyond 20
years. By that I mean that an investor would have been paid an
appropriate amount of additional income for each additional year of
maturity for bonds with maturities of less than 20 years. It is this
additional income that compensates the investor for the additional
risk taken on by investing in the longer-maturity part of the market.
But for bonds with maturities of 20 years or longer, the extra yield
offered for each successive year to maturity was not, in my opinion,
attractive enough to take on the risk inherent in these bonds. So I
focused on intermediate-maturity bonds, where I felt the best yield
was offered for the risk involved.
Q. WHAT'S YOUR OUTLOOK?
A. It's quite likely that the bond markets will remain volatile. As
we've seen over the past year, the markets have been quite reactive to
news about the economy's strength, pushing bond prices up when
economic growth appeared moderate and sending them lower when growth
appeared strong enough to kindle fears of potential inflation. I
expect we'll see similar reactions - perhaps even more volatile
reactions - until economic growth trends become more defined and
sustainable. As far as the municipal market goes, there are some
factors related to supply and demand that I view as positive.
Specifically, I expect the supply of municipals to remain relatively
low going into next year. And, if history is any guide, demand for
municipals will increase in the first part of 1998. If that trend
continues, then municipals - which are presently priced relatively
cheaply compared to U.S. Treasuries - could benefit from price
increases resulting from this supply and demand imbalance.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
JON SHORT ON CALIFORNIA'S
ECONOMY, FISCAL SITUATION AND
CREDIT RATING:
"The continued strength of
California's economy has been
somewhat surprising. Not only has
the state's employment growth
showed remarkable strength -
particularly in the technology,
trade-related and entertainment
industries - but the housing
market also looks much healthier
than it did a couple of years earlier.
Even areas in Southern California,
which lagged the northern part of
the state throughout much of this
decade, finally have shown signs
that they are on the mend. The
state's strong economy has
translated into a better fiscal
environment. State revenues - in
the form of taxes and other fees
- - came in way ahead of last fiscal
year's budget. As a result of the
state's improved financial and
fiscal situation, one municipal
bond credit-rating agency
upgraded the state's credit rating.
This was, and will likely continue
to be, viewed as a positive by
municipal investors."
NOTE TO SHAREHOLDERS:
As of November 1, 1997, the
Fidelity Advisor California
Municipal Income fund was
closed to any purchases of new and
existing accounts. Additionally,
effective January 1, 1998, Fidelity
will raise the voluntary expense
caps on each class of the fund by
1.25%.
FUND FACTS
GOAL: a high level of current
income free from federal
income tax and California
state personal income tax by
investing primarily in
municipal securities
START DATE: February 20, 1996
SIZE: as of October 31, 1997,
more than $5 million
MANAGER: Jonathan Short,
since inception; joined Fidelity
in 1990
(checkmark)
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 23.6 20.4
ELECTRIC REVENUE 16.3 9.8
WATER & SEWER 11.7 20.1
LEASE REVENUE 10.4 9.2
SPECIAL TAX 9.4 10.1
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 13.0 14.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 7.4 7.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
AAA 53.0%
AA, A 32.8%
BAA 10.6%
SHORT-TERM
INVESTMENTS 3.6%
AAA 46.1%
AA, A 38.3%
BAA 9.6%
SHORT-TERM
INVESTMENTS 6.0%
ROW: 1, COL: 1, VALUE: 53.0
ROW: 1, COL: 2, VALUE: 32.8
ROW: 1, COL: 3, VALUE: 10.6
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 6, VALUE: 3.6
ROW: 1, COL: 1, VALUE: 46.1
ROW: 1, COL: 2, VALUE: 38.3
ROW: 1, COL: 3, VALUE: 9.6
ROW: 1, COL: 4, VALUE: 0.0
ROW: 1, COL: 5, VALUE: 0.0
ROW: 1, COL: 6, VALUE: 6.0
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 96.4%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - 96.4%
Cabrillo Unified School Dist. (Cap. Appreciation)
Series A, 0% 8/1/10 (AMBAC Insured) Aaa $ 200,000 $ 105,500
California Dept. Wtr. Resource (Central Valley
Proj.) Series O, 4.75% 12/1/18 Aa2 100,000 93,250
California Edl. Facs. Auth. Rev. Rfdg.
(Southern California Univ.)
Series A, 5.65% 10/1/10 Aa3 100,000 106,625
California Edl. Facs. Auth. Rev. (Student Loan)
(California Loan Prog.) Series A, 6% 3/1/16
(MBIA Insured) (b) Aaa 100,000 103,875
California Gen. Oblig.:
7% 3/1/06 A1 90,000 105,300
6% 10/1/08 A1 100,000 111,000
6.50% 9/1/10 A1 150,000 174,375
5.75% 11/1/12 A1 130,000 140,888
Rfdg. 5.60% 9/1/21 A1 100,000 102,500
California Health Facs. Fin. Auth. Rev. Rfdg.
(Sutter Health Sys.) Series C, 5.50% 8/15/07
(FSA Insured) Aaa 50,000 53,438
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Series E, 6.375% 8/1/27 (b)(c) Aa2 200,000 210,750
Series L, 5.70% 8/1/25 (MBIA Insured) (b)(c) Aaa 100,000 103,375
Series R, 5.25% 8/1/16 (MBIA Insured) (b)(c) Aaa 100,000 101,625
California Poll. Cont. Fing. Auth. Poll. Cont. Rev.
Rfdg. (San Diego Gas & Elec.) Series A,
5.90% 6/1/14 A2 100,000 108,000
California Pub. Works Board Lease Rev.:
(Var. Commty. College Projs.) Series A,
6% 3/1/05 (AMBAC Insured) Aaa 80,000 87,800
(Var. Univ. of California Projs.) Series B,
5% 6/1/05 A1 230,000 235,750
California Statewide Commtys. Dev. Auth.
Rev. Ctfs. of Prtn.:
(Children's Hosp.) 6% 6/1/13
(MBIA Insured) Aaa 100,000 109,750
(St. Joseph Health Sys.) 5.50% 7/1/07 Aa3 75,000 79,219
Central Valley Fing. Auth. Cogeneration Proj.
Rev. (Carson Ice Gen. Proj.) 5.70% 7/1/03 BBB 100,000 105,000
Contra Costa Schools Fing. Auth. Rev. (Vista Unified
School Dist. School Sites) (Cap. Appreciation)
Series A, 0% 9/1/17 (AMBAC Insured)
(Pre-Refunded to 9/1/02 @ 36.34) (d) Aaa 400,000 118,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Duarte Ctfs. of Prtn. (City of Hope Med. Ctr.)
6.25% 4/1/23 Baa1 $ 100,000 $ 104,250
East Bay Muni. Util. Dist.:
Wastewtr. Treatment Sys. Rev. Rfdg.
6% 6/1/06 (FGIC Insured) Aaa 100,000 110,875
Wtr. Sys. Rev. :
6.50% 6/1/04 (AMBAC Insured)
(Pre-refunded to 6/1/04 @ 102) (d) Aaa 75,000 85,500
Rfdg. 6% 6/1/01 (FGIC Insured) Aaa 75,000 79,688
Foothill/Eastern Trans. Corridor Agcy. Toll Rd.
Rev. (Sr. Lien) Series A, 6% 1/1/34 Baa 100,000 103,125
Fresno Swr. Rev. Series A-1, 5% 9/1/08
(AMBAC Insured) Aaa 100,000 102,875
Los Angeles County Ctfs. of Prtn.
(Cap. Appreciation) (Disney Parking Proj.)
0% 9/1/16 Baa1 100,000 33,000
Los Angeles County Convention & Exhibition Ctr.
Auth. Rev. Rfdg. Series A, 6% 8/15/10
(MBIA Insured) Aaa 100,000 110,750
Los Angeles County Trans. Commission Sales Tax
Rev. Rfdg. Series B, 6.50% 7/1/10 (e) A1 150,000 171,563
Los Angeles Hbr. Dept. Rev.:
7.60% 10/1/18 (Escrowed to Maturity) (d) AAA 100,000 128,000
Series B, 5.25% 11/1/05 (b)(c) Aa 100,000 104,000
Los Angeles Unified School Dist. Series A,
6% 7/1/14 (FGIC Insured) Aaa 240,000 266,100
Metropolitan Wtr. Dist. Southern California
Wtrwks. Rev. Rfdg. Series B, 4.75% 7/1/09
(MBIA Insured) Aaa 100,000 99,375
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Crossover Rfdg. (Geothermal Proj. #3)
Series A, 5.85% 7/1/10 (AMBAC Insured) Aaa 100,000 109,250
Riverside County Asset Leasing Corp. Leasehold
Rev. (Riverside County Hosp. Proj.) Series B,
5.70% 6/1/16 (MBIA Insured) Aaa 50,000 52,563
Riverside County Pub. Fing. Auth. (Tax Allocation
Rev. Redev. Proj.) Series A, 5.25% 10/1/12 Baa2 100,000 98,500
Sacramento Fing. Auth. Lease Rev. Rfdg.
Series A, 5.40% 11/1/20 (AMBAC Insured) Aaa 75,000 76,688
San Bernadino County Ctfs. of Prtn.
(Med. Ctr. Fing. Proj.):
5.25% 8/1/04 Baa1 150,000 153,188
5.50% 8/1/05 (MBIA Insured) Aaa 50,000 52,813
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
San Diego County Reg'l. Trans. Commission
Sales Tax Rev. Second Series A, 5.25% 4/1/02
(AMBAC Insured) Aaa $ 150,000 $ 156,000
San Francisco Bay Area Rapid Transit Dist. Sales
Tax Rev. 5.50% 7/1/20 (FGIC Insured) Aaa 100,000 100,750
San Francisco City & County Swr. Rev. Rfdg.
5.50% 10/1/01 (AMBAC Insured) Aaa 75,000 78,750
San Joaquin County Ctfs. of Prtn. (Gen. Hosp.
Proj.) 5.80% 9/1/02 A3 100,000 104,000
Santa Rosa Wastewtr. Rev. Rfdg. & Sub-Reg'l.
Wastewtr. Proj. Series A, 4.75% 9/1/16
(FGIC Insured) Aaa 100,000 92,750
Southern California Pub. Pwr. Auth. Rev. Rfdg.
(Sub-Paol Verde Proj.) Series A, 5% 7/1/04
(FSA Insured) Aaa 400,000 413,000
Turlock Irrigation Dist. Rev. Rfdg. Series A,
6% 1/1/07 (MBIA Insured) Aaa 75,000 83,245
TOTAL MUNICIPAL BONDS
(Cost $5,231,894) $ 5,426,618
MUNICIPAL NOTES - 3.6%
CALIFORNIA - 3.6%
California Poll. Cont. Fing. Auth. Resource Recovery
Rev. Rfdg. (Ultra Pwr. Rocklin Prog.)
Series 1988 A, 4.15%, LOC Bank of America
Nat'l. Trust & Saving, VRDN (b) P-1 100,000 100,000
Chula Vista Ind. Dev. Rev. Rfdg. (San Diego
Gas. & Elec. Co.) Series B, 3.85%,
VRDN (b) P-1 100,000 100,000
TOTAL MUNICIPAL NOTES
(Cost $200,000) 200,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $5,431,894) $ 5,626,618
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
1 Municipal Bond Index Contract December 1997 $ 119,900 $ (1,944)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 2.1%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
2. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
5. Security collateralized by an amount sufficient to pay interest and
principal.
6. 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 $17,156.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 83.6% AAA, AA, A 88.6%
Baa 8.8% BBB 6.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 0%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 23.6%
Electric Revenue 16.3
Water and Sewer 11.7
Lease Revenue 10.4
Special Tax 9.4
Housing 7.4
Healthcare 6.2
Escrowed/Prerefunded 5.9
Others (individually less than 5%) 9.1
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1997, the aggregate cost of investment securities for
income tax purposes was $5,431,894. Net unrealized appreciation
aggregated $194,724, of which $196,190 related to appreciated
investment securities and $1,466 related to depreciated investment
securities.
The fund hereby designates approximately $352 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1997, the fund was required to defer approximately
$4,099 of losses on futures contracts and options.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax and 2.01% of the fund's income dividends
was subject to the federal alternative minimum tax.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $5,431,894) - $ 5,626,618
SEE ACCOMPANYING SCHEDULE
INTEREST RECEIVABLE 70,746
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 5,160
TOTAL ASSETS 5,702,524
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 97,861
DISTRIBUTIONS PAYABLE 4,423
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 125
DISTRIBUTION FEES PAYABLE 1,249
OTHER PAYABLES AND ACCRUED EXPENSES 35,588
TOTAL LIABILITIES 139,246
NET ASSETS $ 5,563,278
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 5,358,665
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) 11,833
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 192,780
NET ASSETS $ 5,563,278
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $10.26
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($171,591 (DIVIDED BY) 16,724 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.26) $10.77
CLASS T: $10.27
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($2,381,456 (DIVIDED BY) 231,961 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.27) $10.64
CLASS B: $10.25
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,006,391 (DIVIDED BY) 98,228 SHARES) A
INSTITUTIONAL CLASS: $10.21
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($2,003,840 (DIVIDED BY) 196,330 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 262,947
EXPENSES
MANAGEMENT FEE $ 19,882
TRANSFER AGENT FEES 9,642
DISTRIBUTION FEES 12,738
ACCOUNTING FEES AND EXPENSES 61,326
NON-INTERESTED TRUSTEES' COMPENSATION 21
CUSTODIAN FEES AND EXPENSES 1,963
REGISTRATION FEES 70,476
AUDIT 29,870
LEGAL 90
MISCELLANEOUS 108
TOTAL EXPENSES BEFORE REDUCTIONS 206,116
EXPENSE REDUCTIONS (155,420) 50,696
NET INVESTMENT INCOME 212,251
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 38,165
FUTURES CONTRACTS (24,385) 13,780
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 156,150
FUTURES CONTRACTS 1,471 157,621
NET GAIN (LOSS) 171,401
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 383,652
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED FEBRUARY 20, 1996
OCTOBER 31, (COMMENCEMENT
1997 OF OPERATIONS) TO
OCTOBER 31,
1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 212,251 $ 98,467
NET INVESTMENT INCOME
NET REALIZED GAIN (LOSS) 13,780 (856)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 157,621 35,159
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 383,652 132,770
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME (212,251) (98,467)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 558,898 4,798,676
TOTAL INCREASE (DECREASE) IN NET ASSETS 730,299 4,832,979
NET ASSETS
BEGINNING OF PERIOD 4,832,979 -
END OF PERIOD $ 5,563,278 $ 4,832,979
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.930 $ 9.750
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .425 .066
NET REALIZED AND UNREALIZED GAIN (LOSS) .330 .180
TOTAL FROM INVESTMENT OPERATIONS .755 .246
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.425) (.066)
NET ASSET VALUE, END OF PERIOD $ 10.260 $ 9.930
TOTAL RETURN B, C 7.77% 2.53%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 172 $ 102
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% D .90% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.27% 3.98% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD SEPTEMBER 3,1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.920 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .415 .261
NET REALIZED AND UNREALIZED GAIN (LOSS) .350 (.080) D
TOTAL FROM INVESTMENT OPERATIONS .765 .181
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.415) (.261)
NET ASSET VALUE, END OF PERIOD $ 10.270 $ 9.920
TOTAL RETURN B, C 7.77% 1.99%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,381 $ 2,244
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% E 1.00% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.00% .87% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.17% 3.92% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE ONE TIME SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.900 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .350 .229
NET REALIZED AND UNREALIZED GAIN (LOSS) .350 (.100) D
TOTAL FROM INVESTMENT OPERATIONS .700 .129
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.350) (.229)
NET ASSET VALUE, END OF PERIOD $ 10.250 $ 9.900
TOTAL RETURN B, C 7.09% 1.35%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,006 $ 646
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% E 1.65% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS 1.64% F 1.62% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.52% 3.38% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.910 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .439 .307
NET REALIZED AND UNREALIZED GAIN (LOSS) .300 (.090) D
TOTAL FROM INVESTMENT OPERATIONS .739 .217
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.439) (.307)
NET ASSET VALUE, END OF PERIOD $ 10.210 $ 9.910
TOTAL RETURN B, C 7.64% 2.27%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 2,004 $ 1,841
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% E .75% A,
E
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS .74% F .72% A,
F
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.42% 4.51% A
PORTFOLIO TURNOVER RATE 21% 21% A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN 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.
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 (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD
PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE CLASS' EXPENSES
(SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
G FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
19. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor California Municipal Income Fund(the fund) is a fund
of Fidelity Advisor Series V(the trust) and is authorized to issue an
unlimited number of shares. Effective November 1, 1997, the fund was
closed to new and existing 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, 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 its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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
between 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 and options transactions, market discount and
capital loss carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences that will reverse in a subsequent period. Any
taxable 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.
20. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. With
respect to purchase commitments, the fund identifies securities as
segregated in its custodial records with a value at least equal to the
amount of the commitment. The payables and receivables associated with
the purchases and sales of when-issued securities having the same
settlement date and broker are offset. When-issued securities that
have been purchased from and sold to different brokers are reflected
as both payables and receivables in the statement of assets and
liabilities under the caption "Delayed delivery." Losses may arise due
to changes in the market value of the underlying securities, if the
counterparty does not perform under the contract, or if the issuer
does not issue the securities due to political, economic, or other
factors.
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
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS - CONTINUED
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.
21. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $1,856,603 and $1,037,546, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,641,238 and $1,658,771, respectively.
22. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a monthly fee that is calculated on
the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of the fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is 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.
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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 209 $ 209
CLASS T 5,723 5,723
CLASS B 6,806 1,891
$ 12,738 $ 7,823
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997) and 3.50% for
selling Class T shares of the fund and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1% (4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 983 $ 0
CLASS T 2,736 1,288
CLASS B 3,578 0*
$ 7,297 $ 1,288
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B and Institutional Class shares. UMB
has entered into a sub-arrangement with Fidelity Investments
Institutional Operations Company, Inc. (FIIOC) with respect to all
classes of the fund to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC, an affiliate of FMR,
receives account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES - CONTINUED
classes of the fund. All fees are paid to FIIOC by UMB, which is
reimbursed by each class for such payments. FIIOC pays for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ 741 .53%
CLASS T UMB 4,172 .18%
CLASS B UMB 1,816 .24%
INSTITUTIONAL CLASS UMB 2,913 .15%
$ 9,642
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
23. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 29,158
CLASS T 1.00% 52,950
CLASS B 1.65% 26,954
INSTITUTIONAL CLASS .75% 46,058
$ 155,120
Effective January 1, 1998, FMR has voluntarily agreed to reimburse
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) above the following annual rates or range
of annual rates of average net assets for each class:
CLASS A 2.15%
CLASS T 2.25%
CLASS B 2.90%
INSTITUTIONAL CLASS 2.00%
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $300 under the custodian
arrangement.
24. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 42% of
the total outstanding shares of the fund.
25. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED
1997 1996 A, B
CLASS A
FROM NET INTEREST INCOME $ 5,953 $ 635
CLASS T
FROM NET INTEREST INCOME 95,395 32,566
CLASS B
FROM NET INTEREST INCOME 26,601 9,737
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME 84,302 55,529
$ 212,251 $ 98,467
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
2. DISTRIBUTIONS FOR CLASS B, CLASS T AND INSTITUTIONAL CLASS ARE FOR
THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
26. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 A, B 1997 1996 A, B
CLASS A 5,896 10,225 $ 59,466 $ 99,695
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 555 68 5,590 677
SHARES REDEEMED (20) - (200) -
NET INCREASE (DECREASE) 6,431 10,293 $ 64,856 $ 100,372
CLASS T 75,489 248,275 $ 757,877 $ 2,423,465
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 5,229 2,001 52,742 19,573
SHARES REDEEMED (74,924) (24,109) (754,841) (235,454)
NET INCREASE (DECREASE) 5,794 226,167 $ 55,778 $ 2,207,584
CLASS B 46,691 64,662 $ 473,247 $ 629,107
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 1,519 573 15,287 5,592
SHARES REDEEMED (15,217) - (155,259) -
NET INCREASE (DECREASE) 32,993 65,235 $ 333,275 $ 634,699
INSTITUTIONAL CLASS 3,395 180,001 $ 33,250 $ 1,800,010
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 8,310 5,760 83,239 56,011
SHARES REDEEMED (1,136) - (11,500) -
NET INCREASE (DECREASE) 10,569 185,761 $ 104,989 $ 1,856,021
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
2. SHARE TRANSACTIONS FOR CLASS B, CLASS T AND INSTITUTIONAL CLASS ARE
FOR THE PERIOD FEBRUARY 20, 1996 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1996.
27. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 26,420
CLASS T 15,359
CLASS B 13,644
INSTITUTIONAL CLASS 15,053
$ 70,476
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor California Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor California Municipal
Income Fund, including the schedule of portfolio investments, as of
October 31, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for the year ended
October 31, 1997 and for the period February 20, 1996 (commencement of
operations) to October 31, 1996, and the financial highlights of Class
A, Class B, Class T and Institutional Class for each of the periods
indicated therein. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor
California Municipal Income Fund as of October 31, 1997, the results
of its operations for the year then ended, the changes in its net
assets for the year ended October 31, 1997 and for the period February
20, 1996 (commencement of operations) to October 31, 1996, and the
financial highlights of Class A, Class B, Class T and Institutional
Class for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Vice President
Dwight D. Churchill, Vice President
Jonathan D. Short, Vice President
Thomas D. Maher, Assistant Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Edward C. Johnson 3d
Robert M. Gates *
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International
Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
MUNICIPAL INCOME FUND
(FORMERLY FIDELITY ADVISOR
HIGH INCOME MUNICIPAL FUND)
- - INSTITUTIONAL CLASS
ANNUAL REPORT
OCTOBER 31, 1997
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.
REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS
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:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
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's 0.25% 12b-1 fee. If Fidelity had
not reimbursed certain class expenses, the total returns and dividends
would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - 9.44% 40.18% 144.13%
INSTITUTIONAL CLASS
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 43.70% 132.42%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 42.76% 124.43%
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, one year, five
years or 10 years. For example, if you had invested $1,000 in a fund
that had a 5% return over the past year, the value of your investment
would be $1,050. You can compare Institutional Class' returns to those
of the Lehman Brothers Municipal Bond Index - a total return
performance benchmark for investment-grade municipal bonds with
maturities of at least one year. To measure how Institutional Class'
performance stacked up against its peers, you can compare it to the
high-yield municipal debt funds average, which reflects the
performance of mutual funds with similar objectives tracked by Lipper
Analytical Services, Inc. The past one year average represents a peer
group of 48 mutual funds. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effect of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - 9.44% 6.99% 9.34%
INSTITUTIONAL CLASS
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 7.52% 8.80%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 7.37% 8.36%
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
IMAHDR PRASUN SHR__CHT 19971031 19971111 104955 S00000000000001
FA High Inc Muni -CL I LB Municipal Bond
00679 LB015
1987/10/31 10000.00 10000.00
1987/11/30 10169.65 10261.10
1987/12/31 10343.87 10409.99
1988/01/31 10724.29 10780.79
1988/02/29 10843.23 10894.75
1988/03/31 10717.51 10768.37
1988/04/30 10770.09 10850.21
1988/05/31 10823.98 10818.85
1988/06/30 11025.67 10977.13
1988/07/31 11060.79 11048.70
1988/08/31 11098.52 11058.42
1988/09/30 11267.67 11258.58
1988/10/31 11421.62 11456.73
1988/11/30 11433.96 11351.79
1988/12/31 11564.73 11467.92
1989/01/31 11710.35 11705.07
1989/02/28 11722.09 11571.52
1989/03/31 11812.30 11543.86
1989/04/30 12082.24 11817.91
1989/05/31 12279.64 12063.37
1989/06/30 12420.28 12227.19
1989/07/31 12529.24 12393.60
1989/08/31 12626.16 12272.27
1989/09/30 12664.23 12235.70
1989/10/31 12797.94 12385.34
1989/11/30 12955.49 12602.08
1989/12/31 13078.66 12705.17
1990/01/31 13099.30 12645.07
1990/02/28 13193.18 12757.62
1990/03/31 13275.95 12761.44
1990/04/30 13154.52 12669.05
1990/05/31 13424.09 12945.62
1990/06/30 13582.26 13059.41
1990/07/31 13791.75 13251.38
1990/08/31 13698.69 13058.97
1990/09/30 13796.10 13066.41
1990/10/31 13985.51 13303.44
1990/11/30 14332.52 13570.97
1990/12/31 14423.96 13630.00
1991/01/31 14591.82 13812.92
1991/02/28 14704.02 13933.09
1991/03/31 14790.47 13938.11
1991/04/30 15031.30 14123.48
1991/05/31 15217.10 14249.04
1991/06/30 15252.52 14234.94
1991/07/31 15449.74 14408.32
1991/08/31 15589.26 14598.07
1991/09/30 15772.12 14788.14
1991/10/31 15946.89 14921.24
1991/11/30 16006.87 14962.87
1991/12/31 16180.96 15283.97
1992/01/31 16360.33 15318.82
1992/02/29 16449.21 15323.72
1992/03/31 16531.73 15329.39
1992/04/30 16680.93 15465.82
1992/05/31 16830.58 15647.85
1992/06/30 17061.36 15910.42
1992/07/31 17655.44 16387.42
1992/08/31 17518.73 16227.64
1992/09/30 17628.06 16333.77
1992/10/31 17415.32 16173.21
1992/11/30 17764.35 16462.87
1992/12/31 17978.53 16630.96
1993/01/31 18282.63 16824.37
1993/02/28 18928.21 17432.91
1993/03/31 18730.79 17248.65
1993/04/30 18929.42 17422.68
1993/05/31 19086.18 17520.60
1993/06/30 19392.18 17813.02
1993/07/31 19406.58 17836.35
1993/08/31 19906.41 18207.71
1993/09/30 20182.07 18415.09
1993/10/31 20192.89 18450.63
1993/11/30 19995.55 18288.08
1993/12/31 20457.28 18674.15
1994/01/31 20695.49 18887.40
1994/02/28 20148.51 18398.22
1994/03/31 19074.53 17649.04
1994/04/30 19201.09 17798.71
1994/05/31 19314.64 17953.02
1994/06/30 19243.53 17843.33
1994/07/31 19590.66 18170.40
1994/08/31 19621.43 18233.27
1994/09/30 19314.06 17965.60
1994/10/31 18975.49 17646.53
1994/11/30 18365.43 17327.49
1994/12/31 18810.54 17708.86
1995/01/31 19446.01 18214.98
1995/02/28 19969.96 18744.67
1995/03/31 20074.95 18960.05
1995/04/30 20140.94 18982.42
1995/05/31 20785.47 19588.15
1995/06/30 20622.42 19417.74
1995/07/31 20690.09 19601.82
1995/08/31 20903.77 19850.37
1995/09/30 21112.24 19976.02
1995/10/31 21361.32 20266.47
1995/11/30 21784.90 20602.69
1995/12/31 21978.22 20800.68
1996/01/31 22099.61 20957.73
1996/02/29 22049.86 20816.26
1996/03/31 21602.72 20550.23
1996/04/30 21515.33 20492.07
1996/05/31 21437.01 20483.88
1996/06/30 21689.23 20706.95
1996/07/31 21833.19 20895.38
1996/08/31 21882.96 20890.37
1996/09/30 22080.99 21182.83
1996/10/31 22303.04 21422.41
1996/11/30 22736.09 21814.44
1996/12/31 22658.10 21722.82
1997/01/31 22731.17 21763.87
1997/02/28 22964.72 21963.67
1997/03/31 22723.07 21670.89
1997/04/30 22905.99 21852.28
1997/05/31 23190.89 22180.93
1997/06/30 23492.41 22417.16
1997/07/31 24172.30 23038.12
1997/08/31 23959.18 22822.25
1997/09/30 24262.46 23093.15
1997/10/31 24409.44 23241.64
IMATRL PRASUN SHR__CHT 19971031 19971111 104958 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Institutional
Class on October 31, 1987. As the chart shows, by October 31, 1997,
the value of the investment would have grown to $24,413 - a 144.13%
increase on the initial investment. For comparison, look at how the
Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year - did over the same period. With dividends reinvested,
the same $10,000 would have grown to $23,242 - a 132.42% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
DIVIDEND RETURN 6.01% 5.76% 6.71% 5.27% 6.49%
CAPITAL APPRECIATION RETURN 3.43% -1.35% 5.88% -11.30% 9.46%
TOTAL RETURN 9.44% 4.41% 12.59% -6.03% 15.95%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 5.33(CENTS) 31.98(CENTS) 67.26(CENTS)
ANNUALIZED DIVIDEND RATE 5.19% 5.30% 5.67%
30-DAY ANNUALIZED YIELD 4.49% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.02% - -
</TABLE>
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $12.09 over the past
one month, $11.97 over the past six months, and $11.86 over the past
one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The 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
30-day yield would have been 3.29%.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index
- - a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The
second half, however, saw a large
amount of new issuance come to
market, and while demand
remained strong, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. The cold months
of winter contrasted with what
many felt was an overheating
economy ripe for an inflation
appearance. In late March, the
Federal Reserve Board raised
short-term interest rates by
0.25%, and while this gesture was
anticipated by investors, the bond
markets nonetheless reacted
negatively. From April through
mid-September, though, market
conditions were friendly.
Favorable economic data soothed
concerns, and the Fed's reluctance
to cut rates further was another
positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended October 31, 1997, the fund's
Institutional Class shares had a total return of 9.44%. To get a sense
of how the fund did relative to its competitors, the high-yield
municipal debt funds average returned 9.28%, according to Lipper
Analytical Services. To gauge how the fund did relative to the general
municipal market, the Lehman Brothers Municipal Bond Index returned
8.49% for the same one-year period.
Q. WHAT WAS YOUR STRATEGY DURING THE PAST SIX MONTHS?
A. I continued to keep the fund's duration - or sensitivity to changes
in interest rates - neutral. By that I mean that I didn't buy or sell
bonds based on where I thought interest rates were headed. Rather, I
structured the fund to match the interest-rate sensitivity of the
market for high-yield municipal bonds. In my view, the final weeks of
the period served as a useful reminder that it isn't easy to predict
the direction of interest rates - and ultimately bond yields and bond
prices - with consistency over a long period of time. Few investors -
including many professionals - anticipated that currency problems in
Southeast Asia would take their toll on U.S. bond markets. Rather than
spend time trying to anticipate such unforeseen events, I invested in
those securities that I think will perform well given any market
environment.
Q. WHICH BONDS PERFORMED WELL DURING THE PERIOD?
A. Thanks in part to the strength of its economy, New York City's
bonds were some of the best-performing securities for the fund and the
entire municipal market. Likewise, a strong economy and a
credit-rating upgrade boosted the prices of many California bonds.
Also, bonds rated Baa by Moody's Investors Services were some of the
market's best performers. During the period, these
lower-investment-grade bonds did better than higher-rated bonds and
made a positive contribution to the fund's performance.
Q. THAT SAID, YOU PARED THE FUND'S HOLDINGS IN BAA-RATED BONDS. WHAT
PROMPTED THAT MOVE?
A. I wanted to take advantage of these bonds' strong performance by
locking in their gains. Furthermore, I felt that I wasn't sacrificing
much in the way of additional yield by upgrading the portfolio and
moving into more Aaa- and Aa-rated bonds. Generally speaking, the
lower the quality of the bond, the more yield it pays. That's because
a higher yield compensates investors for a greater amount of credit
risk - that is, the risk that an issuer will default on its debt. In
this case, I didn't feel that the yield for the lower-quality
Baa-rated securities compensated investors for the additional risk.
Q. THE FUND'S LARGEST SECTOR CONCENTRATION AT THE END OF THE PERIOD -
WHICH YOU BOOSTED BY ABOUT 7% OVER THE PAST SIX MONTHS - WAS IN
GENERAL OBLIGATION BONDS (GOS). WHAT MADE THEM SO ATTRACTIVE DURING
THE PERIOD?
A. GOs are municipal bonds backed by the taxing power of a city,
county or state and are repaid by general revenues such as taxes.
That's in contrast to revenue generated from a specific facility, such
as a tunnel. Generally speaking, GOs tend to do well when the local
economy is strong - as it has been over the past year in most areas of
the country - because tax revenues rise from sources including
increased personal income and corporate profits. I liked them because
the economy continued to show broad-based strength. With the economy
continuing to grow at a steady pace and tax revenues rising, GOs
generally performed well during the period.
Q. WHAT'S YOUR OUTLOOK?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. As a result, I plan to
continue to focus the fund in higher-quality securities, because I
believe they will be able to weather problems better than their
lower-quality counterparts.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(solid bullet)
(solid bullet)
FUND FACTS
GOAL:
START DATE:
SIZE:
MANAGER:
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 17.9 14.8
CALIFORNIA 9.5 11.1
COLORADO 5.7 5.0
PENNSYLVANIA 5.6 5.8
WASHINGTON 4.6 3.2
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATIONS 27.1 20.2
ELECTRIC REVENUE 15.9 16.1
HEALTH CARE 15.8 17.6
TRANSPORTATION 10.5 9.4
INDUSTRIAL DEVELOPMENT 7.9 12.2
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 13.2 14.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 6.9 6.9
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
ROW: 1, COL: 1, VALUE: 33.6
ROW: 1, COL: 2, VALUE: 24.2
ROW: 1, COL: 3, VALUE: 25.8
ROW: 1, COL: 4, VALUE: 2.3
ROW: 1, COL: 5, VALUE: 1.3
ROW: 1, COL: 6, VALUE: 10.2
ROW: 1, COL: 7, VALUE: 1.6
AAA 26.4%
AA, A 20.8%
BAA 29.2%
BA, B 4.2%
CAA, C 0.3%
NON-RATED 15.3%
SHORT-TERM
INVESTMENTS 3.8%
AAA 34.6%
AA, A 25.2%
BAA 26.8%
BA, B 1.3%
CAA, C 0.3%
NON-RATED 10.2%
SHORT-TERM
INVESTMENTS 1.6%
ROW: 1, COL: 1, VALUE: 26.4
ROW: 1, COL: 2, VALUE: 20.8
ROW: 1, COL: 3, VALUE: 28.2
ROW: 1, COL: 4, VALUE: 4.2
ROW: 1, COL: 5, VALUE: 1.3
ROW: 1, COL: 6, VALUE: 15.3
ROW: 1, COL: 7, VALUE: 3.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT OCTOBER 31,
1997 AND APRIL 30, 1997 ACCOUNT FOR 4.3% AND 11.5% RESPECTIVELY, OF
THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 98.4%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
ALABAMA - 1.0%
Shelby County Gen. Oblig. Series A,
7.70% 8/1/17 - $ 4,000,000 $ 4,430,000
ARIZONA - 0.7%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Reg'l. Area Road Proj.)
Series A, 6% 7/1/03 (AMBAC Insured) Aaa 1,300,000 1,410,500
Cochise County Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.) Series A,
6.75% 12/1/26 - 1,705,000 1,794,512
3,205,012
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (g) Aaa 1,315,000 1,379,106
CALIFORNIA - 9.5%
California Dept. Wtr. Resources Rev. (Ctr. Valley
Proj.) (Wtr. Sys.) Series J-2, 6.125% 12/1/13 Aa2 2,190,000
2,288,550
California Gen. Oblig. 6%, 10/1/09 A1 2,500,000 2,784,375
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A, 5.70% 8/1/16 (MBIA Insured) Aaa 860,000 877,200
Series B, 5.20% 8/1/26 (MBIA Insured) (g) Aaa 1,025,000 1,045,500
Series R, 6.15% 8/1/27 (MBIA Insured) (g) Aaa 1,500,000 1,561,875
California Pub. Wks. Board Lease Rev. Rfdg.:
(California Univ. Proj.) Series A
5.50% 10/1/13 A 2,000,000 2,050,000
(Dept. of Corrections State Prisons):
Series A, 5% 12/1/19 (AMBAC Insured) Aaa 1,750,000 1,708,437
Series D, 5.75% 9/1/06 (MBIA Insured) Aaa 5,000,000 5,443,750
(Various California State Univ. Projs.) Series A,
5.50% 6/1/14 A1 1,500,000 1,550,625
Central Valley Fing. Auth. Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6% 7/1/09 BBB- 4,500,000 4,719,375
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Series A,
6% 6/1/12 (MBIA Insured) Aaa 2,000,000 2,115,000
Foothill/Eastern Trans. Corridor Agcy. California
Toll Road Rev. (Sr. Lien) (Cap. Appreciation)
Series A, 0% 1/1/14 Baa 2,000,000 802,500
Los Angeles County Ctfs. of Prtn.
(Cap. Appreciation) (Disney Parking Proj.):
0% 3/1/14 Baa1 1,000,000 388,750
0% 9/1/14 Baa1 7,260,000 2,740,650
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj. #3) Series A,
5.85% 7/1/10 (AMBAC Insured) Aaa $ 1,500,000 $ 1,638,750
Sacramento City Fing. Auth. Lease Rev.:
(Cap. Appreciation) Series B, 0% 11/1/11
(MBIA Insured) Aaa 1,225,000 595,656
Rfdg. Series A, 5.40% 11/1/20
(AMBAC Insured) Aaa 2,000,000 2,045,000
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Procter & Gamble Proj.):
5.40% 7/1/98 BBB- 1,100,000 1,109,944
6.375% 7/1/10 BBB- 1,000,000 1,083,750
6.50% 7/1/14 BBB- 3,800,000 4,108,750
40,658,437
COLORADO - 5.7%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist):
6.625% 2/1/13 Baa2 6,900,000 7,322,625
6.625% 2/1/22 Baa2 4,000,000 4,210,000
(National Benevolent Assoc. Proj.)
Series A, 6.50% 6/1/25 Baa1 1,360,000 1,439,900
Colorado Springs Arpt. Rev. (Cap. Appreciation)
Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 962,425
0% 1/1/08 (MBIA Insured) Aaa 870,000 535,050
Denver City & County Arpt. Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Insured) (g) Aaa 2,115,000 1,684,069
Series D, 0% 11/15/04 (MBIA Insured) (g) Aaa 1,700,000 1,219,750
Rfdg. Series D, 5% 11/15/98 (g) Baa1 1,200,000 1,209,660
Series A:
6.60% 11/15/97 (g) Baa1 1,000,000 1,000,740
6.90% 11/15/98 (g) Baa1 1,000,000 1,026,960
8% 11/15/17 (g) Baa1 1,000,000 1,020,950
7.5% 11/15/23 (Pre-Refunded to
11/15/04 @ 102) (g)(h) Baa1 430,000 509,013
7.5% 11/15/23 (g) Baa1 2,070,000 2,367,562
24,508,704
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CONNECTICUT - 4.2%
Connecticut Health & Edl. Facs. Auth. Rev.:
(New Britain Mem. Hosp.) Series A:
7.50% 7/1/06 BBB- $ 2,615,000 $ 2,863,425
7.75% 7/1/22 BBB- 1,500,000 1,655,625
(The Griffin Hosp.) Series A:
6% 7/1/13 Baa2 1,810,000 1,848,462
5.75% 7/1/23 Baa2 3,280,000 3,239,000
Connecticut Spl. Tax Oblig. Rev.
(Trans. Infrastructure):
Series B, 5.80% 9/1/04 A1 2,000,000 2,147,500
Series C, 5.50% 11/1/06 (FSA Insured) Aaa 3,000,000 3,176,250
Eastern Connecticut Resource Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A, 5.50% 1/1/20 (g) A- 3,350,000 3,262,063
18,192,325
DELAWARE - 0.9%
Delaware Trans. Auth. Sys. Rev. 6% 7/1/06
(AMBAC Insured) Aaa 3,455,000 3,809,138
DISTRICT OF COLUMBIA - 1.8%
District of Columbia Gen. Oblig. Rfdg. Series A,
6% 6/1/07 (MBIA Insured) Aaa 2,000,000 2,182,500
District of Columbia Hosp. Rev. (Hosp. for Sick
Children) Series A, 8.875% 1/1/21 - 965,000 1,056,675
District of Columbia Redev. Land Agcy. Sport
Arena Spl. Tax Rev.:
5.30% 11/1/99 Baa 1,700,000 1,710,625
5.625% 11/1/10 Baa 705,000 715,575
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 5.95% 4/1/14 (MBIA Insured) (e) Aaa 2,000,000 2,080,000
7,745,375
FLORIDA - 0.8%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 600,000 653,250
Florida Mid-Bay Bridge Auth. Rev.
Series A, 7.50% 10/1/17 - 2,500,000 2,753,125
3,406,375
GEORGIA - 0.9%
Georgia Gen. Oblig. Series C, 6.25% 8/1/09 Aaa 3,500,000 3,955,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
HAWAII - 2.5%
Hawaii Gen. Oblig. 6.25% 3/1/03
(FGIC Insured) Aaa $ 10,000,000 $ 10,850,000
IDAHO - 0.1%
Boise Urban Renewal Agcy. Parking Rev. (Tax
Increment) Series A-C, 8.125% 9/1/15 BBB+ 375,000 388,005
ILLINOIS - 4.4%
Chicago Board of Ed. (Chicago School Reform)
6.25% 12/1/09 (MBIA Insured) Aaa 3,000,000 3,363,750
Chicago O'Hare Int'l. Arpt. Rev.:
(Passenger Facs. Charge) Series A,
5.60% 1/1/10 (AMBAC Insured) Aaa 2,500,000 2,609,375
Rfdg. (2nd Lien) (Gen. Arpt. Proj.) Series A:
6.25% 1/1/09 (AMBAC Insured) (g) Aaa 3,700,000 4,060,750
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,519,000
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev. Rfdg.
(American Airlines, Inc. Proj.) 8.20% 12/1/24 Baa2 1,000,000
1,206,250
Du Page County Commty. High School Dist. #99
(Downers Grove) Series A, 6% 2/1/06
(AMBAC Insured) Aaa 1,640,000 1,795,800
Illinois Edl. Facs. Auth. Rev. Rfdg. (DePaul Univ.)
6% 10/1/05 (AMBAC Insured) Aaa 1,200,000 1,306,500
Illinois Health Facs. Auth. Rev.:
(Covenant Retirement Commty.) Series A,
7.60% 12/1/12 A- 750,000 837,187
(Memorial Hosp.):
7.125% 5/1/10 BBB 1,000,000 1,066,250
7.25% 5/1/22 BBB 1,000,000 1,066,250
18,831,112
INDIANA - 0.2%
Indianapolis Econ. Dev. Rev. Rfdg. & Impt.
(Nat'l. Benevolent Assoc.) 7.625% 10/1/22 Baa1 1,000,000 1,086,250
KENTUCKY - 2.8%
Kenton County Arpt. Board Arpt. Rev.:
(Cincinnati/Northern Kentucky Int'l.)
Series A, 6% 3/1/05 (MBIA Insured) (g) Aaa 5,570,000 5,994,712
(Spl. Facs. Delta Air Lines, Inc.) 7.80% 12/1/15 Ba2 3,500,000
3,753,750
Series A, 7.50% 2/1/20 (g) Baa3 2,000,000 2,215,000
11,963,462
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
MARYLAND - 1.2%
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Good Samaritan Hosp.) 5.75% 7/1/13 A1 $ 2,680,000 $ 2,830,750
(Johns Hopkins Univ.) 6% 7/1/10 (e) Aa2 2,000,000 2,182,500
5,013,250
MASSACHUSETTS - 4.0%
Massachusetts Bay Trans. Auth. 5.625% 3/1/26 A1 5,875,000 5,992,500
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Fairview Extended Care) Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @ 103) (h) - 5,000,000 6,000,000
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 500,000 498,125
Massachusetts Ind. Fin. Agcy. Rev.
(Atlanticare Med. Ctr.) Series B, 10.125%
11/1/14 - 700,000 749,000
(Emerson College) Series A, 8.90% 1/1/18 - 1,000,000 1,107,500
(Massachusetts Biomedical) (Cap. Appreciation):
Series A-2:
0% 8/1/08 - 800,000 464,000
0% 8/1/10 - 4,500,000 2,300,625
17,111,750
MICHIGAN - 1.7%
Detroit Hosp. Fin. Auth. Hosp. Facs. Rev. Rfdg.
(Michigan Health Care Corp. Proj.)
10% 12/1/20 (b) C 6,680,000 1,202,400
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa1 700,000 759,500
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev.
(Lakeside Commty. Hosp. Proj.) 10% 3/1/20 (b) - 150,000 375
Michigan Strategic Fund Ltd. Oblig. Rev.
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20
(Pre-Refunded to 5/15/00 @ 102) (h) Aaa 600,000 679,500
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 (b) - 2,075,000 373,500
Royal Oak Hosp. Fin. Auth. Rev. Rfdg.
(William Beaumont Hosp.) 6.25% 1/1/09 Aa3 2,310,000 2,552,550
Tawas City Hosp. Fin. Auth. Hosp. Rev. (St. Joseph
Hosp. Proj.) Series A, 8.50% 3/15/12 - 1,875,000 1,930,894
7,498,719
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
MINNESOTA - 1.9%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. Rfdg. (Healthspan
Health Sys. Corp.) Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa $ 2,500,000 $ 2,331,250
Minnesota Hsg. Fin. Hsg. Agcy. (Single Family Mtg.)
Series D, 6.40% 7/1/15 (g) Aa2 2,000,000 2,110,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.) Series A, 9.75% 11/1/17
(Pre-Refunded to 11/1/97 @ 102) (h) Baa 380,000 387,600
Western Minnesota Muni. Pwr. Agcy. Rev. Rfdg.
Series A, 6.25% 1/1/06 (AMBAC Insured) Aaa 3,000,000 3,367,500
8,196,350
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990-A, 9.25% 3/1/12 (FGIC Insured) Aaa 235,000 253,212
MISSOURI - 0.4%
St. Louis Reg'l. Convention & Sports Complex
Auth. Series C:
7.90% 8/15/21 (Pre-Refunded to
8/15/03 @ 100) (h) Aaa 1,485,000 1,759,725
7.90% 8/15/21 - 65,000 71,988
1,831,713
NEBRASKA - 1.4%
Nebraska Pub. Pwr. Dist. Rev.:
(Elec. Sys.) Series A, 6% 1/1/06 A1 1,500,000 1,606,875
Rfdg. (Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 4,590,000
4,343,288
5,950,163
NEVADA - 0.6%
Las Vegas Downtown Redev. Agcy. Tax
Increment Rev. (Fremont Proj.) Series A:
6% 6/15/10 BBB+ 1,500,000 1,524,375
6.10% 6/15/14 BBB+ 1,000,000 1,030,000
2,554,375
NEW HAMPSHIRE - 0.8%
New Hampshire Higher Edl. & Health Facs.
Auth. Rev.:
(Littleton Hosp. Assoc., Inc.) Series A,
9.50% 5/1/20 - 490,000 524,913
(Riverwoods at Exeter):
8% 3/1/01 - 750,000 769,125
9% 3/1/23 - 1,830,000 2,253,188
3,547,226
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW JERSEY - 1.5%
New Jersey Econ. Dev. Auth. Econ. Dev. Rev. Rfdg.
(Stolt Term. Proj.) 10.50% 1/15/18 - $ 60,000 $ 62,397
New Jersey Trans. Trust Fund Auth. Rfdg.
Series A, 5.50% 6/15/11 (MBIA Insured) Aaa 4,000,000 4,165,000
Passaic County Util. Auth. Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0% 3/1/02
(MBIA Insured) Aaa 2,500,000 2,071,875
6,299,272
NEW MEXICO - 2.0%
Albuquerque Arpt. Rev. Rfdg.:
6.75% 7/1/11 (AMBAC Insured) (g) Aaa 1,805,000 2,080,263
6.70% 7/1/18 (AMBAC Insured) (g) Aaa 3,970,000 4,421,588
New Mexico Edl. Assistance Foundation Student
Loan Rev. Series B, 5.25% 4/1/05
(AMBAC Insured) (g) Aaa 1,935,000 1,966,444
8,468,295
NEW YORK - 17.9%
New York City Gen. Oblig.:
Rfdg. Series A, 7% 8/1/03 Baa1 2,000,000 2,235,000
Rfdg. Series B, 6.75% 8/15/03 Baa1 2,000,000 2,212,500
Rfdg. Until. Tax Series E, 6.50% 2/15/04
(FGIC Insured) Aaa 1,500,000 1,668,750
Series B:
7.50% 2/1/02 Baa1 2,000,000 2,225,000
5.70% 8/15/02 Baa1 1,165,000 1,221,794
Series D, 5.50% 2/15/04 Baa1 5,000,000 5,206,250
Series H:
6.875% 2/1/02 (Escrowed to Maturity) (h) Aaa 400,000 440,500
6.875% 2/1/02 Baa1 1,300,000 1,415,375
New York City Ind. Dev. Auth. Ind. Dev. Rev.:
(Japan Airlines Co. Ltd. Proj.) Series 91,
6% 11/1/15 (FSA Insured) LOC Morgan
Guaranty Trust Co. (g) Aaa 1,000,000 1,062,500
(Terminal One Group Assoc. Proj.)
5.90% 1/1/06 (g) A 8,680,000 9,255,050
New York Metropolitan Trans. Commission Auth.:
5% 7/1/02 (e) Baa1 2,370,000 2,396,900
5% 7/1/03 (e) Baa1 2,490,000 2,506,932
5.50% 7/1/07 (e) Baa1 2,645,000 2,702,423
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York City Muni. Assistance Corp. Rfdg.
Series H, 6% 7/1/05 Aa2 $ 6,500,000 $ 7,117,500
New York State Dorm. Auth. Rev.:
(City Univ. Sys. Consolidated) Series A,
5.70% 7/1/05 Baa1 3,000,000 3,168,750
Rfdg. (State Univ. Edl. Facs.):
Series A, 5.50% 5/15/05 A3 2,750,000 2,890,938
Series B, 5.50% 5/15/08 A3 12,150,000 12,818,250
New York State Local Gov't. Assistance Corp.
Rfdg. Series C, 5.50% 4/1/17 A3 7,500,000 7,659,375
New York State Thruway Auth. Gen. Rev.
(Spl. Oblig.) (Cap. Appreciation) Series A,
0% 1/1/04 BBB 4,000,000 2,915,000
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridges):
5.90% 4/1/07 Baa1 2,000,000 2,125,000
6% 1/1/11 (Pre-Refunded to
11/1/01 @ 100) (h) Baa1 2,445,000 2,570,305
Suffolk County Wtr. Auth. Wtrwks. Rev. Rfdg.
(Sub-Lien) 6% 6/1/17 (MBIA Insured) Aaa 1,000,000 1,112,500
76,926,592
NORTH CAROLINA - 2.9%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys.
Rev. Rfdg.:
Series A, 5.50% 1/1/05 (MBIA Insured) Aaa 4,000,000 4,230,000
Series B, 7.25% 1/1/07 Baa1 1,000,000 1,156,250
Series C:
5.125% 1/1/03 Baa1 2,000,000 2,027,500
5.25% 1/1/04 Baa1 1,365,000 1,390,594
North Carolina Muni. Pwr. Agcy. #1
Catawba Elec. Rev. Rfdg.:
5.75% 1/1/02 A3 1,750,000 1,820,000
6.25% 1/1/17 (AMBAC Insured) Aaa 1,800,000 1,912,500
12,536,844
OHIO - 2.7%
Gateway Econ. Dev. Corp. (Greater Cleveland
Stadiums) Series 1990, 6.50% 9/15/14 (g) - 3,000,000 3,120,000
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp. Proj.) 5.60% 5/15/01 BBB+ 1,000,000 1,025,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Control Loan Fund):
State Matching Series, 6.50% 1/1/04
(MBIA Insured) Aaa $ 1,835,000 $ 2,068,962
Wtr. Quality Series, 5.625% 6/1/06
(MBIA Insured) Aaa 2,000,000 2,152,500
Student Loan Rfdg. Corp. Cincinnati Student
Loan Rev. Series B, 8.875% 8/1/08 (g) - 2,910,000 3,091,875
11,458,337
OKLAHOMA - 1.0%
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 4,000,000 4,455,000
PENNSYLVANIA - 5.6%
Allegheny County Ind. Dev. Auth. Rev. (1st. Mtg.
YMCA Pittsburgh Proj.) Series 1990,
8.75% 03/1/10 - 355,000 390,500
Butler County Ind. Dev. Auth. Health Ctr. Rev.
Rfdg. (Sherwood Oaks Proj.) 5.75% 6/1/11 A 3,000,000 3,048,750
Cumberland County Muni. Auth. Rev. Rfdg.:
(Carlisle Hosp. & Health) 6.80% 11/15/14 Baa2 3,250,000 3,505,938
(Carlisle Hosp. & Health) 6.80% 11/15/23 Baa2 1,000,000 1,073,750
Delaware County Auth. Rev. (1st. Mtg. Riddle
Village Proj.):
Series 1992, 8.75% 6/1/10 (Pre-Refunded
to 6/1/02 @ 102) (h) Aaa 2,870,000 3,440,413
7% 6/1/00 (Escrowed to Maturity) (h) Aaa 1,000,000 1,022,380
8.25% 6/1/22 (Escrowed to Maturity) (h) Aaa 2,250,000 2,764,688
9.25% 6/1/22 (Pre-Refunded to
6/1/02 @ 102) (h) Aaa 2,905,000 3,544,100
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Fac.) Series A,
6.10% 7/1/13 Baa1 1,900,000 2,009,250
Montgomery County Health & Edl. Facs. Rev.
(United Hosp. Proj.):
8.10% 11/1/97 (Escrowed to Maturity) (h) Baa1 35,000 35,000
7% 11/1/06 (Pre-Refunded to
11/1/97 @ 102) (h) Baa1 120,000 120,000
8.50% 11/1/17 (Pre-Refunded to
11/1/97 @ 102) (h) Baa1 525,000 535,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Ind. Dev. Auth. Rev. Econ. Dev.
5.80% 7/1/09 (AMBAC Insured) Aaa $ 1,345,000 $ 1,469,412
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. (Graduate Health Sys. Oblig.
Group) 7.25% 7/1/18 Ba2 1,100,000 1,193,500
24,153,181
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Econ. Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14 (FSA Insured) (g) Aaa 4,000,000 4,760,000
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Elec. Agcy. Elec. Rev. Rfdg.
Series A, 6.25% 1/1/05 (FGIC Insured) Aaa 1,715,000 1,886,500
TENNESSEE - 0.2%
Metropolitan Gov't Nashville & Davidson County
Elec. Rev. (Cap. Appreciation) Series A,
0% 5/15/06 (MBIA Insured) Aaa 1,000,000 671,250
TEXAS - 4.5%
Brazos River Auth. Poll. Cont. Rev.
(Texas Utils. Elec. Co.) Series A,
9.25% 3/1/18 (g) Baa2 1,300,000 1,346,319
Conroe Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) Aaa 750,000 426,562
Dallas-Fort Worth Int'l. Arpt. Facs. Impt. Corp.
Rev. (American Airlines, Inc.)
7.50% 11/1/25 (g) Baa2 6,000,000 6,547,500
Midlothian Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/04
(PSF Guaranteed) Aaa 1,845,000 1,383,750
Plano Independent School Dist. 6% 2/15/03 Aaa 4,510,000 4,853,887
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 Aa2 5,000,000 4,912,500
19,470,518
UTAH - 2.9%
Intermountain Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg.:
Series A, 6.50% 7/1/09 (AMBAC Insured) Aaa 1,000,000 1,152,500
Series B:
5.75% 7/1/16 (MBIA Insured) Aaa 2,500,000 2,575,000
6% 7/1/16 (MBIA Insured) Aaa 7,000,000 7,428,750
Series D, 5% 7/1/21 (MBIA Insured) Aaa 1,200,000 1,150,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 250,000 280,937
12,587,687
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
VIRGINIA - 3.2%
Loudoun County Ind. Dev. Auth. Residential Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 - $ 1,000,000 $ 1,108,750
8.75% 11/1/24 - 8,500,000 9,222,500
Virginia Pub. School Auth. Series B,
6.50% 8/1/15 Aa2 3,000,000 3,277,500
13,608,750
WASHINGTON - 4.6%
King County Gen. Oblig. Series D,
5.75%, 12/1/11 Aa1 3,990,000 4,269,300
Washington Pub. Pwr. Supply Sys.:
Nuclear Proj. #2 Rev. 5.40% 7/1/12 Aa1 14,000,000 14,105,000
Nuclear Proj. #3 Rev. Rfdg. Series B, 7%
7/1/05 (FGIC Insured) (f) Aaa 1,150,000 1,229,062
19,603,362
TOTAL MUNICIPAL BONDS
(Cost $407,962,800) $ 423,250,647
CASH EQUIVALENTS- 1.6%
SHARES
Municipal Central Cash Fund (c)(d)
(Cost $6,701,398) 6,701,398 6,701,398
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $414,664,198) $ 429,952,045
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/ (LOSS)
Purchased
95 U.S. Treasury Bond Futures Dec. 1997 $ 11,254,531 $ 32,838
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 2.6%.
LEGEND
3. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
4. Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
5. Information in this report regarding holdings by state and security
types do 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.
6. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73% The yield refers to the income earned by investing
in the fund over the seven-day period, expressed as an annual
percentage.
7. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
8. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of the security
pledged amounted to $261,844.
9. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
10. 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 investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 59.1% AAA, AA, A 57.9%
Baa 21.4% BBB 25.4%
Ba 1.3% BB 0.0%
B 0.0% B 0.6%
Caa 0.0% CCC 0.0%
Ca, C 0.3% CC, C 0.0%
D 0.3%
The percentage not rated by Moody's or S&P amounted to 10.2%. FMR has
determined that unrated debt securities that are lower quality account
for 4.3% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 27.1%
Electric Revenue 15.9
Health Care 15.8
Transportation 10.5
Industrial Development 7.9
Escrowed/Pre-refunded 6.0
Special Tax 5.9
Others (individually less than 5%) 10.9
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1997, the aggregate cost of investment securities for
income tax purposes was $414,664,198. Net unrealized appreciation
aggregated $15,287,847, of which $23,032,967 related to appreciated
investment securities and $7,745,120 related to depreciated investment
securities.
The fund hereby designates approximately $198,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1997, the fund had a capital loss carryforward of
approximately $16,425,000 of which $2,646,000, $7,511,000 and
$6,268,000 will expire on October 31, 2002, 2003 and 2004 ,
respectively.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 18.9% of the fund's income dividends
was subject to the federal alternative minimum tax (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $414,664,198) - $ 429,952,045
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 17,530,753
INTEREST RECEIVABLE 7,605,709
RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 24,886
OTHER RECEIVABLES 5,107
TOTAL ASSETS 455,118,500
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 3,186,713
REGULAR DELIVERY
DELAYED DELIVERY 11,764,735
PAYABLE FOR FUND SHARES REDEEMED 707,200
DISTRIBUTIONS PAYABLE 715,599
ACCRUED MANAGEMENT FEE 144,422
OTHER PAYABLES AND ACCRUED EXPENSES 234,614
TOTAL LIABILITIES 16,753,283
NET ASSETS $ 438,365,217
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 440,429,453
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (17,384,921)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 15,320,685
NET ASSETS $ 438,365,217
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $12.15
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($3,754,762 (DIVIDED BY) 309,028 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $12.15) $12.76
CLASS T: $12.15
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($392,074,970 (DIVIDED BY) 32,257,701 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $12.15) $12.59
CLASS B: $12.13
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($41,024,326 (DIVIDED BY) 3,382,815 SHARES) A
INSTITUTIONAL CLASS: $12.12
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($1,511,159 (DIVIDED BY) 124,669 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 27,699,948
EXPENSES
MANAGEMENT FEE $ 1,826,656
TRANSFER AGENT FEES 850,499
DISTRIBUTION FEES 1,423,974
ACCOUNTING FEES AND EXPENSES 191,896
NON-INTERESTED TRUSTEES' COMPENSATION 3,084
CUSTODIAN FEES AND EXPENSES 29,733
REGISTRATION FEES 73,673
AUDIT 43,905
LEGAL 5,869
MISCELLANEOUS 13,048
TOTAL EXPENSES BEFORE REDUCTIONS 4,462,337
EXPENSE REDUCTIONS (38,563) 4,423,774
NET INTEREST INCOME 23,276,174
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 898,167
FUTURES CONTRACTS 84,152 982,319
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 14,836,543
FUTURES CONTRACTS 32,838 14,869,381
NET GAIN (LOSS) 15,851,700
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 39,127,874
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 23,276,174 $ 32,576,734
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 982,319 (5,991,620)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 14,869,381 (1,724,709)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 39,127,874 24,860,405
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (24,140,139) (31,712,769)
FROM NET INTEREST INCOME
IN EXCESS OF NET INTEREST INCOME (86,644) -
TOTAL DISTRIBUTIONS (24,226,783) (31,712,769)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (97,485,396) (69,878,601)
TOTAL INCREASE (DECREASE) IN NET ASSETS (82,584,305) (76,730,965)
NET ASSETS
BEGINNING OF PERIOD 520,949,522 597,680,487
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 438,365,217 $ 520,949,522
INCOME OF $0 AND $863,965, RESPECTIVELY)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 H
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.740 $ 11.630
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .583 F .105 F, G
NET REALIZED AND UNREALIZED GAIN (LOSS) .445 .109 E
TOTAL FROM INVESTMENT OPERATIONS 1.028 .214
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.616) G (.104)
IN EXCESS OF NET INTEREST INCOME (.002) I -
TOTAL DISTRIBUTIONS (.618) (.104)
NET ASSET VALUE, END OF PERIOD $ 12.150 $ 11.740
TOTAL RETURN B, C 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 3,755 $ 202
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% .90% A,
D D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.87% 5.73% A
PORTFOLIO TURNOVER RATE 36% 49%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E THE 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.
F NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
G NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
H FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
I THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 C 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.760 $ 11.880 $ 11.220 $ 12.720 $ 11.650
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INTEREST INCOME .597 D .677 D, E .700 .689 .710
NET REALIZED AND UNREALIZED .407 (.136) .660 (1.430) 1.100
GAIN (LOSS)
TOTAL FROM INVESTMENT 1.004 .541 1.360 (.741) 1.810
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.612) E (.661) (.700) (.689) (.710)
IN EXCESS OF NET (.002) B - - - -
INTEREST INCOME
FROM NET REALIZED GAIN - - - (.060) (.030)
IN EXCESS OF NET REALIZED GAIN - - - (.010) -
TOTAL DISTRIBUTIONS (.614) (.661) (.700) (.759) (.740)
NET ASSET VALUE, END OF PERIOD $ 12.150 $ 11.760 $ 11.880 $ 11.220 $ 12.720
TOTAL RETURN A 8.89% 4.68% 12.50% (6.03)% 15.95%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 392,075 $ 480,432 $ 565,131 $ 544,422 $ 497,575
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE .89% .89% .91% .89% .92%
NET ASSETS
RATIO OF NET INTEREST INCOME TO 5.04% 5.74% 6.06% 5.78% 5.59%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 36% 49% 37% 38% 27%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
C EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
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.
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.740 $ 11.860 $ 11.210 $ 11.610
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .515 E .596 E, F .612 .188
NET REALIZED AND UNREALIZED GAIN (LOSS) .416 (.136) .650 (.400)
TOTAL FROM INVESTMENT OPERATIONS .931 .460 1.262 (.212)
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.539) F (.580) (.612) (.188)
IN EXCESS OF NET INTEREST INCOME (.002) H - - -
TOTAL DISTRIBUTION (.541) (.580) (.612) (.188)
NET ASSET VALUE, END OF PERIOD $ 12.130 $ 11.740 $ 11.860 $ 11.210
TOTAL RETURN B, C 8.15% 3.98% 11.57% (1.86)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 41,024 $ 39,389 $ 32,395 $ 9,968
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.56% 1.57% 1.86% D 2.09% A
RATIO OF NET INTEREST INCOME TO AVERAGE 4.35% 5.06% 5.18% 4.58% A
NET ASSETS
PORTFOLIO TURNOVER RATE 36% 49% 37% 38%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
G FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO OCTOBER 31, 1994.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.720 $ 11.880 $ 11.700
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .609 E .707 E, F .232
NET REALIZED AND UNREALIZED GAIN (LOSS) .464 (.197) .180
TOTAL FROM INVESTMENT OPERATIONS 1.073 .510 .412
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.671) F (.670) (.232)
IN EXCESS OF NET INTEREST INCOME (.002) H - -
TOTAL DISTRIBUTIONS (.673) (.670) (.232)
NET ASSET VALUE, END OF PERIOD $ 12.120 $ 11.720 $ 11.880
TOTAL RETURN B, C 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,511 $ 927 $ 154
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% D .75% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 5.11% 5.88% 5.89% A
PORTFOLIO TURNOVER RATE 36% 49% 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
G FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
28. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Income Fund (formerly Fidelity Advisor High
Income Municipal Fund) (the fund) is a fund of Fidelity Advisor Series
V (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, and Institutional Class
shares, each of which has equal rights as to assets and voting
privileges. In June 1997, the Board of Trustees approved the creation
of an additional class of shares, Class C shares. Offering of the new
class commenced on November 3, 1997. Class C shares are subject to an
annual distribution and service fee of 1.00% (of which .75% represents
a distribution fee and .25% represents a shareholder service fee) of
the class' average net assets, and a 1.00% contingent deferred sales
charge levied on Class C share redemptions made within one year of
purchase. Each class has exclusive voting rights with respect to its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between 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.
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 discounts, losses deferred
due to wash sales and futures.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences that will reverse in
a subsequent period. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
29. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the funds may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by FMR Texas,
Inc., 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 received by the funds are
recorded as interest income in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased or sold on
a delayed delivery basis are identified as such in the fund's schedule
of investments. With respect to purchase commitments, the fund
identifies securities as segregated in its custodial records with
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY SECURITIES - CONTINUED
a value at least equal to the amount of the commitment. Losses may
arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts and options to
manage its exposure to the bond market and to fluctuations in interest
rates. Buying futures, writing puts, and buying calls tend to increase
the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend 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.
30. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $163,740,525 and $270,077,248, respectively.
The market value of futures contracts opened and closed during the
period amounted to $58,934,461 and $47,796,920, respectively.
31. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net assets
.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is 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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 2,810 $ 2,810
CLASS T 1,062,341 1,062,341
CLASS B 358,823 99,673
$ 1,423,974 $ 1,164,824
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1%(4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities,
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 57,657 $ 43,008
CLASS T 173,689 121,043
CLASS B 174,350 0*
$ 405,696 $ 164,051
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, and Institutional Class shares. UMB
has entered into a sub-arrangement with Fidelity Investments
Institutional Operations Company, Inc. (FIIOC) with respect to all
classes of the fund to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC, an affiliate of FMR,
receives account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. All fees are paid to FIIOC by UMB, which is
reimbursed by each class for such payments. FIIOC pays for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 3,890 .21
CLASS T 772,501 .18
CLASS B 71,281 .18
INSTITUTIONAL CLASS 2,827 .26
$ 850,499
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
32. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 23,575
INSTITUTIONAL CLASS .75% 12,852
$ 36,427
5. EXPENSE REDUCTIONS - CONTINUED
In addition, the fund has entered into an arrangement with its each
class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, Class T expenses were reduced by $2,136 under this
arrangement.
33. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1997 1996 A
CLASS A
FROM NET INVESTMENT INCOME $ 94,032 $ 1,272
IN EXCESS OF NET INTEREST INCOME 40 -
TOTAL $ 94,072 $ 1,272
CLASS T
FROM NET INVESTMENT INCOME $ 22,160,320 $ 29,846,407
IN EXCESS OF NET INTEREST INCOME 79,597 -
TOTAL $ 22,239,917 $ 29,846,407
CLASS B
FROM NET INVESTMENT INCOME $ 1,825,294 $ 1,818,282
IN EXCESS OF NET INTEREST INCOME 6,838 -
TOTAL $ 1,832,132 $ 1,818,282
INSTITUTIONAL CLASS
FROM NET INVESTMENT INCOME $ 60,493 $ 46,808
IN EXCESS OF NET INTEREST INCOME 169 -
TOTAL $ 60,662 $ 46,808
$ 24,226,783 $ 31,712,769
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
34. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 A 1997 1996 A
CLASS A $ 3,663,457 $ 218,730
SHARES SOLD 307,664 18,733
REINVESTMENT OF DISTRIBUTIONS
3,770 78 45,120 910
SHARES REDEEMED (19,585) (1,632) (234,062) (19,114)
NET INCREASE (DECREASE) 291,849 17,179 $ 3,474,515 $ 200,526
CLASS T $ 26,303,589 $ 77,377,354
SHARES SOLD 2,221,421 6,539,718
REINVESTMENT OF DISTRIBUTIONS
1,143,394 1,597,120 13,582,690 18,850,193
SHARES REDEEMED (11,972,642) (14,847,912) (141,705,601) (174,513,587)
NET INCREASE (DECREASE) (8,607,827) (6,711,074) $ (101,819,322) $ (78,286,040)
CLASS B $ 8,459,000 $ 14,098,773
SHARES SOLD 713,815 1,193,226
REINVESTMENT OF DISTRIBUTIONS
90,487 95,237 1,073,258 1,121,011
SHARES REDEEMED (777,996) (664,327) (9,216,485) (7,798,479)
NET INCREASE (DECREASE) 26,306 624,136 $ 315,773 $ 7,421,305
INSTITUTIONAL CLASS $ 1,278,313 $ 1,653,013
SHARES SOLD 107,503 140,918
REINVESTMENT OF DISTRIBUTIONS
3,746 3,139 44,614 36,744
SHARES REDEEMED (65,730) (77,867) (779,289) (904,149)
NET INCREASE (DECREASE) 45,519 66,190 $ 543,638 $ 785,608
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
35. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 26,962
CLASS T 19,643
CLASS B 13,308
INSTITUTIONAL CLASS 13,760
$ 73,673
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor Municipal Income Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor Municipal Income Fund
(formerly Fidelity Advisor High Income Municipal Fund), including the
schedule of portfolio investments, as of October 31, 1997, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period then ended and the financial highlights of Class A, Class T,
Class B and Institutional Class for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor
Municipal Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B and Institutional Class for
each of the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
NEW YORK MUNICIPAL INCOME
FUND - CLASS A, CLASS T AND CLASS B
ANNUAL REPORT
OCTOBER 31, 1997
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 31 NOTES TO THE FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT 38 THE AUDITORS' OPINION.
ACCOUNTANTS
DISTRIBUTIONS 39
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:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
FIDELITY ADVISOR NEW YORK 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's 0.25% 12b-1 fee.
Effective August 1, 1997, the maximum sales charge on Class A shares
was increased to 4.75%. If Fidelity had not reimbursed certain class
expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS A 8.09% 19.30%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS A 2.95% 13.63%
(INCL. MAX. 4.75% SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year or since the fund
started on August 21, 1995. 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
Lehman Brothers New York 4 Plus Year Municipal Bond Index - a total
return performance benchmark for New York investment-grade municipal
bonds with maturities of at least four years. To measure how Class A's
performance stacked up against its peers, you can compare it to the
New York municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past one year average represents a peer group of 93
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS A 8.09% 8.36%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS A 2.95% 5.99%
(INCL. MAX. 4.75% SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971110 120855 S00000000000001
FA NY Muni Inc -CL A LB Municipal Bond
00259 LB015
1995/08/31 9525.00 10000.00
1995/09/30 9558.27 10063.30
1995/10/31 9731.25 10209.62
1995/11/30 9903.07 10379.00
1995/12/31 10013.90 10478.74
1996/01/31 10087.40 10557.85
1996/02/29 9998.18 10486.59
1996/03/31 9844.08 10352.57
1996/04/30 9802.57 10323.27
1996/05/31 9800.59 10319.14
1996/06/30 9922.59 10431.52
1996/07/31 10017.05 10526.45
1996/08/31 9976.11 10523.92
1996/09/30 10124.68 10671.25
1996/10/31 10240.23 10791.95
1996/11/30 10433.13 10989.44
1996/12/31 10363.95 10943.28
1997/01/31 10363.73 10963.97
1997/02/28 10458.66 11064.62
1997/03/31 10309.04 10917.12
1997/04/30 10397.83 11008.50
1997/05/31 10578.03 11174.07
1997/06/30 10687.18 11293.07
1997/07/31 11009.95 11605.89
1997/08/31 10877.23 11497.14
1997/09/30 11007.53 11633.61
1997/10/31 11068.58 11708.42
IMATRL PRASUN SHR__CHT 19971031 19971110 120857 R00000000000029
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor New York Municipal Income Fund - Class A
on August 31, 1995, shortly after the fund started, and the current
maximum 4.75% sales charge was paid. As the chart shows, by October
31, 1997, the value of the investment would have grown to $11,072 - a
10.72% increase on the initial investment. For comparison, look at how
the Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year - did over the same period. With dividends reinvested,
the same $10,000 would have grown to $11,708 - a 17.08% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31, AUGUST 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
1997 1996 OCTOBER 31, 1995
DIVIDEND RETURN 4.64% 4.36% 0.85%
CAPITAL APPRECIATION RETURN 3.45% 0.87% 4.00%
TOTAL RETURN 8.09% 5.23% 4.85%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 effects of sales charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.97(CENTS) 23.40(CENTS) 46.47(CENTS)
ANNUALIZED DIVIDEND RATE 4.35% 4.35% 4.40%
30-DAY ANNUALIZED YIELD 4.09% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.20% - -
</TABLE>
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 $10.75 over the past one
month, $10.66 over the past six months and $10.55 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 maximum 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 43.21% combined effective 1997
federal, state and New York City tax bracket but does not reflect the
payment of the federal alternative minimum tax, if applicable. If
Fidelity had not reimbursed certain class expenses, the yield and the
tax-equivalent yield would have been 3.06% and 5.39%, respectively.
FIDELITY ADVISOR NEW YORK 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 total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS T 8.18% 19.27%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS T 4.40% 15.10%
(INCL. MAX. 3.50% SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year or since the fund
started on August 21, 1995. 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
Lehman Brothers New York 4 Plus Year Municipal Bond Index - a total
return performance benchmark for New York investment-grade municipal
bonds with maturities of at least four years. To measure how Class T's
performance stacked up against its peers, you can compare it to the
New York municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past one year average represents a peer group of 93
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS T 8.18% 8.35%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS T 4.40% 6.61%
(INCL. MAX. 3.50% SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971110 121233 S00000000000001
FA NY Muni Inc -CL T LB Municipal Bond
00611 LB015
1995/08/31 9650.00 10000.00
1995/09/30 9683.70 10063.30
1995/10/31 9858.95 10209.62
1995/11/30 10033.03 10379.00
1995/12/31 10145.31 10478.74
1996/01/31 10219.79 10557.85
1996/02/29 10129.39 10486.59
1996/03/31 9973.27 10352.57
1996/04/30 9931.22 10323.27
1996/05/31 9929.21 10319.14
1996/06/30 10052.81 10431.52
1996/07/31 10148.51 10526.45
1996/08/31 10107.03 10523.92
1996/09/30 10270.22 10671.25
1996/10/31 10366.77 10791.95
1996/11/30 10571.27 10989.44
1996/12/31 10500.22 10943.28
1997/01/31 10509.13 10963.97
1997/02/28 10604.65 11064.62
1997/03/31 10442.11 10917.12
1997/04/30 10531.18 11008.50
1997/05/31 10712.81 11174.07
1997/06/30 10822.44 11293.07
1997/07/31 11148.35 11605.89
1997/08/31 11013.05 11497.14
1997/09/30 11154.27 11633.61
1997/10/31 11215.14 11708.42
IMATRL PRASUN SHR__CHT 19971031 19971110 121235 R00000000000029
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor New York Municipal Income Fund - Class T
on August 31, 1995, shortly after the fund started, and the current
maximum 3.50% sales charge was paid. As the chart shows, by October
31, 1997, the value of the investment would have grown to $11,215 - a
12.15% increase on the initial investment. For comparison, look at how
the Lehman Brothers Municipal Bond Index - a total return performance
benchmark for investment-grade municipal bonds with maturities of at
least one year - did over the same period. With dividends reinvested,
the same $10,000 would have grown to $11,708 - a 17.08% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31, AUGUST 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
1997 1996 OCTOBER 31, 1995
DIVIDEND RETURN 4.54% 4.38% 0.85%
CAPITAL APPRECIATION RETURN 3.64% 0.77% 4.00%
TOTAL RETURN 8.18% 5.15% 4.85%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.88(CENTS) 22.85(CENTS) 45.41(CENTS)
ANNUALIZED DIVIDEND RATE 4.25% 4.25% 4.30%
30-DAY ANNUALIZED YIELD 3.98% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 7.01% - -
</TABLE>
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 $10.76 over the past one
month, $10.67 over the past six months, and $10.56 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all 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 maximum 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 43.21% combined effective 1997
federal, state and New York City tax bracket but does not reflect the
payment of the federal alternative minimum tax, if applicable. If
Fidelity had not reimbursed certain class expenses, the yield and the
tax-equivalent yield would have been 3.10% and 5.46%, respectively.
FIDELITY ADVISOR NEW YORK 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. Class B's contingent deferred sales
charges included in the past one year and life of fund total return
figures are 5% and 3%, respectively. If Fidelity had not reimbursed
certain class expenses, the total returns and dividends would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS B 7.49% 17.51%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS B 2.49% 14.51%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year or since the fund
started on August 21, 1995. 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
Lehman Brothers New York 4 Plus Year Municipal Bond Index - a total
return performance benchmark for New York investment-grade municipal
bonds with maturities of at least four years. To measure how Class B's
performance stacked up against its peers, you can compare it to the
New York municipal debt funds average, which reflects the performance
of mutual funds with similar objectives tracked by Lipper Analytical
Services, Inc. The past one year average represents a peer group of 93
mutual funds. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 LIFE OF
YEAR FUND
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS B 7.49% 7.62%
ADVISOR NEW YORK MUNICIPAL INCOME - CLASS B 2.49% 6.36%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS NEW YORK 4 PLUS YEAR 9.60% N/A
MUNICIPAL BOND INDEX
NEW YORK MUNICIPAL DEBT FUNDS AVERAGE 8.04% N/A
AVERAGE ANNUAL 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 LIFE OF FUND
IMAHDR PRASUN SHR__CHT 19971031 19971110 121035 S00000000000001
FA NY Muni Inc -CL B LB Municipal Bond
00612 LB015
1995/08/31 10000.00 10000.00
1995/09/30 10031.16 10063.30
1995/10/31 10198.60 10209.62
1995/11/30 10382.57 10379.00
1995/12/31 10481.89 10478.74
1996/01/31 10553.22 10557.85
1996/02/29 10464.34 10486.59
1996/03/31 10297.37 10352.57
1996/04/30 10238.77 10323.27
1996/05/31 10231.09 10319.14
1996/06/30 10353.23 10431.52
1996/07/31 10446.47 10526.45
1996/08/31 10397.80 10523.92
1996/09/30 10560.15 10671.25
1996/10/31 10653.60 10791.95
1996/11/30 10858.23 10989.44
1996/12/31 10779.27 10943.28
1997/01/31 10782.45 10963.97
1997/02/28 10875.14 11064.62
1997/03/31 10702.33 10917.12
1997/04/30 10798.39 11008.50
1997/05/31 10968.11 11174.07
1997/06/30 11074.55 11293.07
1997/07/31 11402.08 11605.89
1997/08/31 11267.76 11497.14
1997/09/30 11395.69 11633.61
1997/10/31 11451.57 11708.42
IMATRL PRASUN SHR__CHT 19971031 19971110 121036 R00000000000029
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor New York Municipal Income Fund - Class B
on August 31, 1995, shortly after the fund started. As the chart
shows, by October 31, 1997, the value of the investment, including the
effect of the applicable contingent deferred sales charge, would have
grown to $11,452 - a 14.52% increase on the initial investment. For
comparison, look at how the Lehman Brothers Municipal Bond Index - a
total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year - did over the same period.
With dividends reinvested, the same $10,000 would have grown to
$11,708 - a 17.08% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31, AUGUST 21, 1995
(COMMENCEMENT
OF OPERATIONS) TO
1997 1996 OCTOBER 31, 1995
DIVIDEND RETURN 3.84% 3.69% 0.75%
CAPITAL APPRECIATION RETURN 3.65% 0.77% 3.90%
TOTAL RETURN 7.49% 4.46% 4.65%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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 effects of sales charges.
DIVIDENDS AND YIELDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 3.28(CENTS) 19.33(CENTS) 38.52(CENTS)
ANNUALIZED DIVIDEND RATE 3.59% 3.60% 3.65%
30-DAY ANNUALIZED YIELD 3.45% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.08% - -
</TABLE>
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 $10.75 over the past one
month, $10.66 over the past six months, and $10.55 over the past one
year, you can compare the class' income over these three periods. The
30-day annualized YIELD is a standard formula for all bond funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. 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 43.21% combined effective 1997
federal, state and New York City tax bracket but does not reflect the
payment of the federal alternative minimum tax, if applicable. If
Fidelity had not reimbursed certain class expenses, the yield and the
tax-equivalent yield would have been 1.53% and 2.69%, respectively.
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
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index -
a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The second
half, however, saw a large amount
of new issuance come to market,
and while demand remained
strong, it took time for investors to
become acclimated to this new
supply. In the interim, muni bond
prices fell. The cold months of
winter contrasted with what many
felt was an overheating economy
ripe for an inflation appearance. In
late March, the Federal Reserve
Board raised short-term interest
rates by 0.25%, and while this
gesture was anticipated by
investors, the bond markets
nonetheless reacted negatively.
From April through mid-September,
though, market conditions were
friendly. Favorable economic data
soothed concerns, and the Fed's
reluctance to cut rates further was
another positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with Norm Lind, Portfolio Manager of Fidelity Advisor New
York Municipal Income Fund
Q. NORM, HOW DID THE FUND PERFORM?
A. For the 12 months that ended October 31, 1997, the fund's Class A,
Class T and Class B shares generated returns of 8.09%, 8.18% and
7.49%, respectively. To compare the fund's performance to that of its
peer group, the New York municipal debt funds average had a return of
8.04%, according to Lipper Analytical Services. To gauge how the fund
did relative to the overall New York municipal market, the Lehman
Brothers New York 4 Plus Year Municipal Bond Index returned 9.60%.
Q. WHY DID THE FUND LAG THE LEHMAN BROTHERS INDEX?
A. Because throughout the past six months, the fund had a much lighter
weighting in New York City bonds than the index. Thanks in part to the
strength of its economy, New York City bonds were some of the
best-performing securities in the entire national municipal market.
Since I try to avoid having the fund's performance overly dependent on
the fortunes of one issuer, I kept the fund's exposure to New York
City bonds at about half the size of the index.
Q. YET THE FUND WAS ABLE TO KEEP PACE WITH THE AVERAGE FUND OF ITS
TYPE DURING THE PERIOD. WHICH OF THE FUND'S HOLDINGS HELPED
PERFORMANCE?
A. Non-callable bonds - which can't be redeemed by their issuers
before maturity - were some of the fund's best performers. Falling
interest rates can prompt municipal issuers to refinance their older,
more expensive debt if current rates are lower than the rate they're
paying. Having a fair amount of "call protection" by owning
non-callable bonds was an advantage during the summer and fall when
interest rates were falling. I was able to hold onto these securities
even when bond yields were falling. Furthermore, the prices of many of
the fund's non-callable bonds rose as demand for them increased.
Q. WHAT OTHER FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Some opportunistic trading in and out of state-appropriated bonds
was beneficial for the fund. The state set a dubious record by issuing
its budget more than 100 days later than scheduled. Because the state
was constrained from issuing new state-appropriated debt during the
prolonged budget process, the existing supply of these high-yielding
bonds wasn't adequate to meet the demand for them. As a result, prices
for state-appropriated bonds generally rose. Not only did the fund
benefit from their rising prices in the summer and autumn, but it also
was helped by their high yields. When these bonds started to look rich
- - or expensive relative to their historical value and to other bonds
in the market - I sold some to lock in gains. More recently, the state
began issuing a fair amount of state-appropriated debt, so supply
increased and prices generally fell. I used this as an opportunity to
add more state-appropriated bonds at what I believed were attractive
prices.
Q. WHICH SECTORS DID YOU FAVOR AND WHY? WHICH DID YOU AVOID?
A. General obligation bonds (GOs) made up the largest sector
concentration of the fund at the end of the period, as well as the
largest sector of the New York municipal bond market as a whole. GOs
are municipal bonds backed by the full faith and credit - which
includes the taxing power - of a city, county or state, and are repaid
by general revenues such as taxes. That's in contrast to revenue
generated from a specific facility such as a tunnel. Generally
speaking, GOs tend to do well when the local economy is strong - as it
has been over the past year - because tax revenues rise as a function
of increased personal income, corporate profits and other sources. On
the other hand, I generally avoided electric utility bonds. There are
still plenty of unanswered questions concerning the bailout of Long
Island Lighting Company. That, coupled with the uncertainty
surrounding the possible deregulation of the electric utility industry
in the state, has cast somewhat of a pall over the performance of
electric bonds.
Q. WHAT'S YOUR OUTLOOK?
A. As always, the direction of interest rates will be the primary
factor determining the performance of municipal bonds. At present, it
doesn't appear that the market has any firm conviction about whether
interest rates will rise or fall. Many observers argue that recent
economic and fiscal problems in Southeast Asia ultimately will slow
the U.S. economy enough to ward off future interest rate hikes. Others
argue that the economy is still strong enough to prompt the Federal
Reserve Board to raise interest rates as a guard against runaway
inflation. As for municipal bonds, there are several factors working
in their favor. First, they currently are priced attractively compared
to U.S. Treasuries. And, for a number of reasons, the beginning of a
new year often brings on more demand for municipals. That's positive
because strong demand could help municipal bond prices.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(solid bullet)
(solid bullet)
FUND FACTS
GOAL:
START DATE:
SIZE:
MANAGER:
(checkmark)
INVESTMENT CHANGES
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATION 46.7 49.4
WATER & SEWER 13.7 14.3
SPECIAL TAX 10.3 10.9
TRANSPORTATION 9.6 10.1
EDUCATION 7.0 5.0
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 14.6 13.7
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 7.5 7.6
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
ROW: 1, COL: 1, VALUE: 35.5
ROW: 1, COL: 2, VALUE: 33.1
ROW: 1, COL: 3, VALUE: 29.0
ROW: 1, COL: 4, VALUE: 2.4
AAA 35.1%
AA, A 32.5%
BAA 31.1%
SHORT-TERM
INVESTMENTS 1.3%
AAA 35.5%
AA, A 33.1%
BAA 29.0%
SHORT-TERM
INVESTMENTS 2.4%
ROW: 1, COL: 1, VALUE: 35.1
ROW: 1, COL: 2, VALUE: 32.0
ROW: 1, COL: 3, VALUE: 31.1
ROW: 1, COL: 4, VALUE: 1.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 97.6%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - 96.4%
Albany County Gen. Oblig.
5.75% 6/1/09 (FGIC Insured) (e) Aaa $ 200,000 $ 211,750
Brookhaven Gen. Oblig.
5.375% 10/1/05 (FGIC Insured) Aaa 205,000 216,782
Erie County Gen. Oblig.
Series B, 5.60% 6/15/10 (FGIC Insured) Aaa 100,000 105,250
Metropolitan Trans. Auth. (Commuter Facs.)
5.40% 7/1/10 (d) Baa1 100,000 99,108
Metropolitan Trans. Auth. Svc. Contract
(Commuter Facs.) Series O, 5.75% 7/1/13 Baa1 400,000 420,000
Monroe County Pub. Impt.:
6.50% 6/1/04 Aa 100,000 111,625
5.25% 6/1/08 (FGIC Insured) Aaa 100,000 103,625
Monroe Woodbury Central School Dist.
5.625% 5/15/24 (MBIA Insured) Aaa 100,000 101,625
Nassau County Rfdg. (Combined Swr. Dist.)
Series F, 5.10% 7/1/05 (MBIA Insured) Aaa 230,000 237,475
New York City Gen. Oblig.:
Rfdg. Series B, 6.20% 8/15/06 Baa1 90,000 98,213
Series A-1, 6.50% 8/1/16 Baa1 200,000 214,250
Series B, 5.875%, 8/15/13 Baa1 200,000 207,000
Series C, 6.40% 8/1/03 Baa1 150,000 162,375
Series D, 6% 2/15/16 Baa1 275,000 284,969
Series E, 6% 8/1/26 Baa1 150,000 154,500
Series I, 6.125% 4/15/11 Baa1 150,000 159,563
New York City Muni. Assistance Corp.:
Rfdg. Series E, 6% 7/1/05 Aa2 300,000 328,500
Series G, 5.50% 7/1/04 Aa2 50,000 53,063
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr.
Sys. Rev.:
Series A, 6% 6/15/25 A2 275,000 286,688
Series B:
5.875% 6/15/26 A2 200,000 207,000
5.50% 6/15/27 (MBIA Insured) Aaa 50,000 50,250
New York City Trust Cultural Resources Rev.
(American Museum of Natural History)
Series B, 5.65% 4/1/22 (MBIA Insured) Aaa 150,000 153,938
New York State Dorm. Auth. Lease Rev. Rfdg.
(State Univ. Dorm. Facs.) Series A:
6% 7/1/03 (AMBAC Insured) Aaa 150,000 162,188
5.30% 7/1/24 (AMBAC Insured) Aaa 100,000 98,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York State Dorm. Auth. Rev.:
(Consolidated City Univ. Sys.)
2nd Series A, 5.75% 7/1/07 Baa1 $ 450,000 $ 477,000
(Strong Memorial Hosp.) 5.10% 7/1/04 A1 100,000 102,625
Rfdg.:
(FIT Student Hsg. Corp.)
5.75% 7/1/05 (AMBAC Insured) Aaa 125,000 134,219
(Ithaca College)
5.25% 7/1/26 (AMBAC Insured) Aaa 100,000 98,875
(State Univ. Edl. Facs.)
Series A:
6.50% 5/15/05 A3 200,000 223,000
6.50% 5/15/06 A3 100,000 112,375
New York State Energy Research & Dev. Auth.
Facs. Rev. Rfdg. (Consolidated Edison Co.)
Series A, 6.10% 8/15/20 A1 100,000 106,000
New York State Envir. Facs. Corp. Poll. Cont. Rev.
(State Wtr. Revolving Fund Pooled Loan):
Series B, 5.90% 11/15/14 Aaa 150,000 156,938
Series D, 6.40% 11/15/06 Aaa 100,000 113,250
New York State Local Gov't. Assistance Corp.:
Series A, 6% 4/1/24 A3 255,000 264,563
Series B, 6% 4/1/18 A3 225,000 232,313
New York State Med. Care Facs. Fin. Agcy. Rev.
(North Shore Univ. Hosp. Mtg. Proj.)
Series A, 7.25% 11/1/11 (MBIA Insured) Aaa 100,000 109,625
New York State Mtg. Agcy. Rev.
(Homeowner Mtg.):
Rfdg. Series 60, 6.05% 4/1/26 (c) Aaa 100,000 104,125
Series 49, 5.85% 10/1/17 Aa2 100,000 103,125
5.50% 4/1/19 (AMBAC Insured) (c) Aaa 100,000 100,250
New York State Pwr. Auth. Rev. & Gen. Purpose
Rfdg. Series CC, 5.125% 1/1/11 Aa2 200,000 204,500
New York State Thruway Auth. Hwy. &
Bridge Trust Fund Series B:
6% 4/1/03 (AMBAC Insured) Aaa 210,000 227,325
6% 4/1/04 (MBIA Insured) Aaa 100,000 109,125
New York State Urban Dev. Corp. Rev. Rfdg.
(State Facs.) 5.75% 4/1/11 Baa1 185,000 194,713
Shelter Island Unified Free School Dist.
6.20% 12/15/08 (AMBAC Insured) Aaa 160,000 180,400
Suffolk County Wtr. Auth. Wtrwks. Rev. Rfdg.
(Sub-Lien) 6% 6/1/17 (MBIA Insured) Aaa 100,000 111,250
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
Syracuse Gen. Oblig. Series D, 7.70% 12/1/99
(MBIA Insured) Aaa $ 120,000 $ 128,400
Triborough Bridge & Tunnel Auth. Rev. Rfdg.
(Gen. Purpose) Series Y, 6% 1/1/12 Aa 340,000 375,700
8,197,933
NEW YORK & NEW JERSEY - 1.2%
New York & New Jersey Port Auth. Consolidated
85th Series, 5.375% 3/1/28 A1 100,000 102,250
TOTAL MUNICIPAL BONDS
(Cost $7,924,773) 8,300,183
MUNICIPAL NOTES - 2.4%
NEW YORK - 2.4%
New York State Energy Research & Dev. Auth.
Poll. Cont. Rev. (Niagara Mohawk Pwr. Proj.)
Series 1988-A, 3.95%,
LOC Morgan Guaranty Trust Co.,
VRDN (b)(c) (Cost $200,000) A-1 200,000 200,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $8,124,773) $ 8,500,183
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
1 Municipal Bond Future Contract Dec. 97 $ 121,743 $ (100)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.4%
SECURITY TYPE ABBREVIATIONS
VRDN - Variable Rate Demand Notes
LEGEND
2. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
5. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
6. 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 $10,587.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.6% AAA, AA, A 66.1%
Baa 29.0% BBB 29.1%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.0%.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 46.7%
Water and Sewer 13.7
Special Tax 10.3
Transportation 9.6
Education 7.0
Others (individually less than 5%) 12.7
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31,1997, the aggregate cost of investment securities for
income tax purposes was $8,124,773. Net unrealized appreciation
aggregated $375,410, of which $377,565 related to appreciated
investment securities and $2,155 related to depreciated investment
securities.
The fund hereby designates approximately $2,346 as a capital gain
dividend for the purpose of the dividend paid deduction.
During fiscal year ended October 31,1997, 100% of the fund's income
dividends was free from federal income tax, and 3.12% of the fund's
income dividends was subject to the federal alternative minimum tax.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $8,124,773) - SEE $ 8,500,183
ACCOMPANYING SCHEDULE
INTEREST RECEIVABLE 129,536
RECEIVABLE FROM INVESTMENT ADVISER FOR EXPENSE REDUCTIONS 5,844
TOTAL ASSETS 8,635,563
LIABILITIES
PAYABLE TO CUSTODIAN BANK $ 25,377
PAYABLE FOR INVESTMENTS PURCHASED 99,108
DELAYED DELIVERY
PAYABLE FOR FUND SHARES REDEEMED 3,000
DISTRIBUTIONS PAYABLE 6,889
DISTRIBUTION FEES PAYABLE 3,372
PAYABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 125
OTHER PAYABLES AND ACCRUED EXPENSES 26,643
TOTAL LIABILITIES 164,514
NET ASSETS $ 8,471,049
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 8,073,478
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON 22,261
INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 375,310
NET ASSETS $ 8,471,049
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $10.79
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($138,035 (DIVIDED BY) 12,792 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $10.79) $11.33
CLASS T: $10.80
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($4,062,666 (DIVIDED BY) 376,283 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $10.80) $11.19
CLASS B: $10.79
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($3,490,366 (DIVIDED BY) 323,573 SHARES) A
INSTITUTIONAL CLASS: $10.80
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($779,982 (DIVIDED BY) 72,198 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSETS LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
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<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 427,570
EXPENSES
MANAGEMENT FEE $ 31,669
TRANSFER AGENT FEES 15,707
DISTRIBUTION FEES 37,286
ACCOUNTING FEES AND EXPENSES 60,768
NON-INTERESTED TRUSTEES' COMPENSATION 45
CUSTODIAN FEES AND EXPENSES 1,563
REGISTRATION FEES 77,471
AUDIT 35,292
LEGAL 6,172
MISCELLANEOUS 273
TOTAL EXPENSES BEFORE REDUCTIONS 266,246
EXPENSE REDUCTIONS (167,684) 98,562
NET INTEREST INCOME 329,008
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 22,285
FUTURES CONTRACTS 6,382 28,667
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 270,508
FUTURES CONTRACTS (1,363) 269,145
NET GAIN (LOSS) 297,812
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 626,820
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 329,008 $ 252,837
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 28,667 39,120
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 269,145 5,377
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 626,820 297,334
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (329,008) (252,837)
FROM NET INTEREST INCOME
FROM NET REALIZED GAIN (43,520) -
TOTAL DISTRIBUTIONS (372,528) (252,837)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) 826,818 3,469,707
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,081,110 3,514,204
NET ASSETS
BEGINNING OF PERIOD 7,389,939 3,875,735
END OF PERIOD $ 8,471,049 $ 7,389,939
FINANCIAL HIGHLIGHTS - CLASS A
YEARS ENDED OCTOBER 31,
1997 1996 E
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.490 $ 10.290
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .465 .072
NET REALIZED AND UNREALIZED GAIN (LOSS) .360 .200
TOTAL FROM INVESTMENT OPERATIONS .825 .272
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.465) (.072)
FROM NET REALIZED GAIN (.060) -
TOTAL DISTRIBUTIONS (.525) (.072)
NET ASSET VALUE, END OF PERIOD $ 10.790 $ 10.490
TOTAL RETURN B, C 8.09% 2.65%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 138 $ 102
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% D .90% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.37% 4.43% A
PORTFOLIO TURNOVER RATE 16% 17%
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 TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD SEPTEMBER 3,1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
FINANCIAL HIGHLIGHTS CLASS - T
</TABLE>
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<S> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.480 $ 10.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .454 .444 .084
NET REALIZED AND UNREALIZED GAIN (LOSS) .380 .080 .400
TOTAL FROM INVESTMENT OPERATIONS .834 .524 .484
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.454) (.444) (.084)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.514) (.444) (.084)
NET ASSET VALUE, END OF PERIOD $ 10.800 $ 10.480 $ 10.400
TOTAL RETURN B, C 8.18% 5.15% 4.85%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 4,063 $ 4,125 $ 2,033
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.00% D 1.00% D 1.00% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER 1.00% .97% E 1.00% A
EXPENSE REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.27% 4.30% 4.16% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21, 1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
FINANCIAL HIGHLIGHTS CLASS - B
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
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SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.470 $ 10.390 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .385 .375 .074
NET REALIZED AND UNREALIZED GAIN (LOSS) .380 .080 .390
TOTAL FROM INVESTMENT OPERATIONS .765 .455 .464
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.385) (.375) (.074)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.445) (.375) (.074)
NET ASSET VALUE, END OF PERIOD $ 10.790 $ 10.470 $ 10.390
TOTAL RETURN B, C 7.49% 4.46% 4.65%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 3,490 $ 2,445 $ 1,161
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.65% D 1.66% D 1.75% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE 1.65% 1.62% E 1.75% A
REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 3.60% 3.62% 3.52% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN(SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21,1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
YEARS ENDED OCTOBER 31,
1997 1996 1995 F
<TABLE>
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<S> <C> <C> <C>
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.470 $ 10.400 $ 10.000
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .481 .468 .095
NET REALIZED AND UNREALIZED GAIN (LOSS) .390 .070 .400
TOTAL FROM INVESTMENT OPERATIONS .871 .538 .495
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.481) (.468) (.095)
FROM NET REALIZED GAIN (.060) - -
TOTAL DISTRIBUTIONS (.541) (.468) (.095)
NET ASSET VALUE, END OF PERIOD $ 10.800 $ 10.470 $ 10.400
TOTAL RETURN B, C 8.55% 5.28% 4.96%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 780 $ 718 $ 683
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% D .75% A,
D
RATIO OF EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE .75% .68% E .75% A
REDUCTIONS
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.53% 4.53% 4.75% A
PORTFOLIO TURNOVER RATE 16% 17% 0%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN(SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
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 PERIOD AUGUST 21, 1995 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1995.
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
36. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor New York Municipal Income Fund(the fund) is a fund of
Fidelity Advisor Series V(the trust) and is authorized to issue an
unlimited number of shares. Effective November 1, 1997, the fund was
closed to new and existing 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 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 its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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
between 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 certain futures and options transactions, market
discount and excise tax regulation.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and
may affect the per-share allocation between net interest income and
realized and unrealized gain (loss). Accumulated undistributed net
realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any
taxable gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
37. OPERATING POLICIES.
WHEN-ISSUED SECURITIES. The fund may purchase or sell securities on a
when-issued basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities is fixed at the time the transaction is negotiated. The
market values of the securities purchased on a when-issued or forward
commitment basis are identified as such in the fund's Schedule of
Investments. The fund may receive compensation for interest forgone in
the purchase of a when-issued security. With respect to purchase
commitments, the fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the
commitment. The payables and receivables associated with the purchases
and sales of when-issued securities having the same settlement date
and broker are offset. When-issued securities that have been purchased
from and sold to different brokers are reflected as both payables and
receivables in the Statement of Assets and Liabilities under the
caption "Delayed delivery." Losses may arise due to changes in the
market value of the underlying securities, if the counterparty does
not perform under the contract, or if the issuer does not issue the
securities due to political, economic, or other factors.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the bond market and to fluctuations in interest rates.
Buying futures tends to increase the fund's exposure to the underlying
instrument, while selling futures tends to decrease the fund's
exposure to the underlying instrument or hedge other fund investments.
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.
38. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,291,722 and $1,277,172, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,250,132 and $1,368,781 respectively.
39. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Manangement
and Research Company (FMR) receives a monthly fee that is calculated
on the basis of a group fee rate plus a fixed individual fund fee rate
applied to the average net assets of the fund. The group fee rate is
the weighted average of a series of rates and is based on the monthly
average net assets of all the mutual funds advised by FMR. The rates
ranged from .1100% to .3700% for the period. The annual individual
fund fee rate is .25%. In the event that these rates were lower than
the contractual rates in effect during the period, FMR voluntarily
implemented the above rates, as they resulted in the same or a lower
management fee. For the period, the management fee was equivalent to
an annual rate of .39% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
This fee is 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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 249 $ 249
CLASS T 10,671 10,671
CLASS B 26,366 8,086
$ 37,286 $ 19,006
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1% (4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 1,685 $ 375
CLASS T 9,627 6,295
CLASS B 21,032 0 *
$ 32,344 $ 6,670
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH THE
SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, and Institutional Class shares. UMB
has entered into sub-arrangements 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 receives account fees and
asset-based fees that vary according to the account size and type of
account of the shareholders of the respective classes of the fund. All
fees are paid to FIIOC by UMB, which is reimbursed by each class for
such payments. FIIOC pays for typesetting, printing and mailing of all
shareholder reports. For the period, each class paid the following
transfer agent fees:
TRANSFER AMOUNT % OF
AGENT AVERAGE
NET ASSETS
CLASS A UMB $ 745 .45
CLASS T UMB 8,127 .19
CLASS B UMB 5,577 .19
INSTITUTIONAL CLASS UMB 1,258 .17
$ 15,707
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
40. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 36,360
CLASS T 1.00% 61,998
CLASS B 1.65% 46,461
INSTITUTIONAL CLASS .75% 22,851
$ 167,670
5. EXPENSE REDUCTIONS - CONTINUED
Effective January 1, 1998, FMR has voluntarily agreed to reimburse
operating expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) above the following annual rates or range
of annual rates of average net assets for each class:
CLASS A 2.15%
CLASS T 2.25%
CLASS B 2.90%
INSTITUTIONAL CLASS 2.00%
In addition, the fund has entered into an arrangement with its
custodian whereby credits realized as a result of uninvested cash
balances were used to reduce a portion of expenses. During the period,
the fund's custodian fees were reduced by $14 under this arrangement.
41. BENEFICIAL INTEREST.
At the end of the period, FMR was record owner of approximately 29% of
the total outstanding shares of the fund.
42. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1997 1996 A
CLASS A
FROM NET INTEREST INCOME $ 7,257 $ 707
FROM NET REALIZED GAIN 588 -
TOTAL $ 7,845 $ 707
CLASS T
FROM NET INTEREST INCOME $ 182,406 $ 150,521
FROM NET REALIZED GAIN 24,294 -
TOTAL $ 206,700 $ 150,521
CLASS B
FROM NET INTEREST INCOME $ 105,678 $ 70,019
FROM NET REALIZED GAIN 14,507 -
TOTAL $ 120,185 $ 70,019
INSTITUTIONAL CLASS
FROM NET INTEREST INCOME $ 33,667 $ 31,590
FROM NET REALIZED GAIN 4,131 -
TOTAL $ 37,798 $ 31,590
TOTAL $ 372,528 $ 252,837
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
43. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 A 1997 1996 A
CLASS A 9,337 9,691 $ 98,503 $ 99,722
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 725 67 7,654 699
SHARES REDEEMED (7,028) - (75,752) -
NET INCREASE (DECREASE) 3,034 9,758 $ 30,405 $ 100,421
CLASS T 78,019 226,391 $ 820,626 $ 2,359,874
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 16,282 11,198 171,954 116,533
SHARES REDEEMED (111,522) (39,533) (1,179,190) (411,400)
NET INCREASE (DECREASE) (17,221) 198,056 $ (186,610) $ 2,065,007
CLASS B 150,679 133,150 $ 1,590,916 $ 1,388,144
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 6,611 4,418 69,774 45,991
SHARES REDEEMED (67,182) (15,772) (715,664) (161,162)
NET INCREASE (DECREASE) 90,108 121,796 $ 945,026 $ 1,272,973
INSTITUTIONAL CLASS 409 - $ 4,300 $ -
SHARES SOLD
REINVESTMENT OF DISTRIBUTIONS 3,592 3,003 37,977 31,306
SHARES REDEEMED (409) - (4,280) -
NET INCREASE (DECREASE) 3,592 3,003 $ 37,997 $ 31,306
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
44. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 33,973
CLASS T 14,464
CLASS B 14,270
INSTITUTIONAL CLASS 14,764
$ 77,471
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor New York Municipal Income Fund:
We have audited the accompanying statement of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor New York Municipal
Income Fund, including the schedule of portfolio investments, as of
October 31, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights of Class
A, Class T, Class B and Institutional Class for each of the periods
indicated therein. These financial statements and financial highlights
are the responsibility of the fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor New
York Municipal Income Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B and Institutional Class for
each of the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
DISTRIBUTIONS
The Board of Trustees of Fidelity Advisor New York Municipal Income
Fund voted to pay to shareholders of record at the opening of business
on record date, the following distributions derived from capital gains
realized from sales of portfolio securities:
PAY DATE RECORD DATE CAPITAL GAINS
Class A 12/8/97 12/5/97 $.04
Class T 12/8/97 12/5/97 $.04
Class B 12/8/97 12/5/97 $.04
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Norman Lind, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Thomas D. Maher, Assistant Vice President
Leonard M. Rush, Assistant Treasurer
Thomas J. Simpson, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Intitutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(REGISTERED TRADEMARK)
MUNICIPAL INCOME FUND
(FORMERLY FIDELITY ADVISOR
HIGH INCOME MUNICIPAL FUND) - CLASS A, CLASS T AND CLASS B
ANNUAL REPORT
OCTOBER 31, 1997
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.
REPORT OF INDEPENDENT 46 THE AUDITORS' OPINION.
ACCOUNTANTS
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:
Although financial turmoil in Pacific Basin countries was a catalyst
for significant volatility in U.S. markets in late October, the
Standard & Poor's 500 Index remained up more than 25% year-to-date,
twice its historical annual average. Meanwhile, bond markets -
primarily influenced by a relatively steady flow of positive news on
the inflation front - continued to post moderate returns through the
first 10 months of 1997.
While it's impossible to predict the future direction of the markets
with any degree of certainty, there are certain basic principles that
can help investors plan for their future needs.
The longer your investment time frame, the less likely it is that you
will be affected by short-term market volatility. A 10-year investment
horizon appropriate for saving for a college education, for example,
enables you to weather market cycles in a long-term fund, which may
have a higher risk potential, but also has a higher potential rate of
return.
An intermediate-length fund could make sense if your investment
horizon is two to four years, while a short-term bond fund could be
the right choice if you need your money in one or two years.
If your time horizon is less than a year, you might want to consider
moving some of your bond investment into a money market fund. These
funds seek income and a stable share price by investing in
high-quality, short-term investments. Of course, it's important to
remember that there is no assurance that a money market fund will
achieve its goal of maintaining a stable net asset value of $1.00 per
share, and that these types of funds are neither insured nor
guaranteed by any agency of the U.S. government.
Finally, no matter what your time horizon or portfolio diversity, it
makes good sense to follow a regular investment plan, investing a
certain amount of money in a fund at the same time each month or
quarter and periodically reviewing your overall portfolio. By doing
so, you won't get caught up in the excitement of a rapidly rising
market, nor will you buy all your shares at market highs. While this
strategy - known as dollar cost averaging - won't assure a profit or
protect you from a loss in a declining market, it should help you
lower the average cost of your purchases.
Remember to contact your investment professional if you need help with
your investments.
Best regards,
Edward C. Johnson 3d
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's 0.25% 12b-1 fee.
Effective August 1, 1997, the maximum 4.25% sales charge on Class A
shares was increased to 4.75%. If Fidelity had not reimbursed certain
class expenses, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS A 9.02% 39.63% 143.16%
ADVISOR MUNICIPAL INCOME - CLASS A 3.84% 32.99% 131.61%
(INCL. MAX. 4.75% SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 43.70% 132.42%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 42.76% 124.43%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class A's returns to those of the Lehman
Brothers Municipal Bond Index - a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one
year. To measure how Class A's performance stacked up against its
peers, you can compare it to the high-yield municipal debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 48 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS A 9.02% 6.90% 9.29%
ADVISOR MUNICIPAL INCOME - CLASS A 3.84% 5.87% 8.76%
(INCL. MAX. 4.75% SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 7.52% 8.80%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 7.37% 8.36%
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
IMAHDR PRASUN SHR__CHT 19971031 19971111 104533 S00000000000001
FA High Inc Muni -CL A LB Municipal Bond
00257 LB015
1987/10/31 9525.00 10000.00
1987/11/30 9686.59 10261.10
1987/12/31 9852.53 10409.99
1988/01/31 10214.89 10780.79
1988/02/29 10328.18 10894.75
1988/03/31 10208.43 10768.37
1988/04/30 10258.51 10850.21
1988/05/31 10309.85 10818.85
1988/06/30 10501.95 10977.13
1988/07/31 10535.40 11048.70
1988/08/31 10571.34 11058.42
1988/09/30 10732.45 11258.58
1988/10/31 10879.09 11456.73
1988/11/30 10890.84 11351.79
1988/12/31 11015.40 11467.92
1989/01/31 11154.11 11705.07
1989/02/28 11165.30 11571.52
1989/03/31 11251.22 11543.86
1989/04/30 11508.33 11817.91
1989/05/31 11696.35 12063.37
1989/06/30 11830.32 12227.19
1989/07/31 11934.10 12393.60
1989/08/31 12026.42 12272.27
1989/09/30 12062.68 12235.70
1989/10/31 12190.04 12385.34
1989/11/30 12340.11 12602.08
1989/12/31 12457.43 12705.17
1990/01/31 12477.08 12645.07
1990/02/28 12566.50 12757.62
1990/03/31 12645.34 12761.44
1990/04/30 12529.68 12669.05
1990/05/31 12786.45 12945.62
1990/06/30 12937.10 13059.41
1990/07/31 13136.64 13251.38
1990/08/31 13048.00 13058.97
1990/09/30 13140.78 13066.41
1990/10/31 13321.20 13303.44
1990/11/30 13651.73 13570.97
1990/12/31 13738.82 13630.00
1991/01/31 13898.71 13812.92
1991/02/28 14005.58 13933.09
1991/03/31 14087.92 13938.11
1991/04/30 14317.31 14123.48
1991/05/31 14494.29 14249.04
1991/06/30 14528.02 14234.94
1991/07/31 14715.87 14408.32
1991/08/31 14848.77 14598.07
1991/09/30 15022.94 14788.14
1991/10/31 15189.41 14921.24
1991/11/30 15246.55 14962.87
1991/12/31 15412.36 15283.97
1992/01/31 15583.21 15318.82
1992/02/29 15667.87 15323.72
1992/03/31 15746.48 15329.39
1992/04/30 15888.59 15465.82
1992/05/31 16031.12 15647.85
1992/06/30 16250.94 15910.42
1992/07/31 16816.81 16387.42
1992/08/31 16686.59 16227.64
1992/09/30 16790.72 16333.77
1992/10/31 16588.09 16173.21
1992/11/30 16920.55 16462.87
1992/12/31 17124.55 16630.96
1993/01/31 17414.21 16824.37
1993/02/28 18029.12 17432.91
1993/03/31 17841.07 17248.65
1993/04/30 18030.27 17422.68
1993/05/31 18179.58 17520.60
1993/06/30 18471.05 17813.02
1993/07/31 18484.77 17836.35
1993/08/31 18960.86 18207.71
1993/09/30 19223.42 18415.09
1993/10/31 19233.73 18450.63
1993/11/30 19045.76 18288.08
1993/12/31 19485.56 18674.15
1994/01/31 19712.46 18887.40
1994/02/28 19191.45 18398.22
1994/03/31 18168.49 17649.04
1994/04/30 18289.04 17798.71
1994/05/31 18397.20 17953.02
1994/06/30 18329.46 17843.33
1994/07/31 18660.10 18170.40
1994/08/31 18689.41 18233.27
1994/09/30 18396.64 17965.60
1994/10/31 18074.15 17646.53
1994/11/30 17493.07 17327.49
1994/12/31 17917.04 17708.86
1995/01/31 18522.32 18214.98
1995/02/28 19021.38 18744.67
1995/03/31 19121.39 18960.05
1995/04/30 19184.25 18982.42
1995/05/31 19798.16 19588.15
1995/06/30 19642.86 19417.74
1995/07/31 19706.85 19601.82
1995/08/31 19906.21 19850.37
1995/09/30 20066.74 19976.02
1995/10/31 20333.86 20266.47
1995/11/30 20717.64 20602.69
1995/12/31 20900.56 20800.68
1996/01/31 21014.57 20957.73
1996/02/29 20982.02 20816.26
1996/03/31 20538.68 20550.23
1996/04/30 20456.63 20492.07
1996/05/31 20432.51 20483.88
1996/06/30 20670.53 20706.95
1996/07/31 20805.63 20895.38
1996/08/31 20850.92 20890.37
1996/09/30 21027.31 21182.83
1996/10/31 21234.85 21422.41
1996/11/30 21605.87 21814.44
1996/12/31 21525.64 21722.82
1997/01/31 21622.89 21763.87
1997/02/28 21816.49 21963.67
1997/03/31 21575.81 21670.89
1997/04/30 21757.48 21852.28
1997/05/31 22017.23 22180.93
1997/06/30 22293.29 22417.16
1997/07/31 22929.78 23038.12
1997/08/31 22720.38 22822.25
1997/09/30 23019.22 23093.15
1997/10/31 23160.87 23241.64
IMATRL PRASUN SHR__CHT 19971031 19971111 104536 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class A on
October 31, 1987 and the current 4.75% sales charge was paid. As the
chart shows, by October 31, 1997, the value of the investment would
have grown to $23,161 - a 131.61% increase on the initial investment.
For comparison, look at how the Lehman Brothers Municipal Bond Index -
a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year - did over the same period.
With dividends reinvested, the same $10,000 would have grown to
$23,242 - a 132.42% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
DIVIDEND RETURN 5.51% 5.61% 6.62% 5.27% 6.49%
CAPITAL APPRECIATION RETURN 3.51% -1.18% 5.88% -11.30% 9.46%
TOTAL RETURN 9.02% 4.43% 12.50% -6.03% 15.95%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.94(CENTS) 29.32(CENTS) 61.83(CENTS)
ANNUALIZED DIVIDEND RATE 4.80% 4.85% 5.20%
30-DAY ANNUALIZED YIELD 4.14% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.47% - -
</TABLE>
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $12.12 over the past
one month, $11.99 over the past six months and $11.88 over the past
one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class A's
current maximum 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. If Fidelity had not reimbursed certain class expenses, the
30-day yield would have been 2.89%.
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 return would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS T 8.89% 39.73% 143.34%
ADVISOR MUNICIPAL INCOME - CLASS T 5.08% 34.84% 134.83%
(INCL. MAX. 3.50% SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 43.70% 132.42%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 42.76% 124.43%
CUMULATIVE TOTAL RETURNS show Class T's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class T's returns to those of the Lehman
Brothers Municipal Bond Index - a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one
year. To measure how Class T's performance stacked up against its
peers, you can compare it to the high-yield municipal debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 48 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS T 8.89% 6.92% 9.30%
ADVISOR MUNICIPAL INCOME - CLASS T 5.08% 6.16% 8.91%
(INCL. MAX. 3.50% SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 7.52% 8.80%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 7.37% 8.36%
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
IMAHDR PRASUN SHR__CHT 19971031 19971111 105000 S00000000000001
FA High Inc Muni -CL T LB Municipal Bond
00169 LB015
1987/10/31 9650.00 10000.00
1987/11/30 9813.71 10261.10
1987/12/31 9981.83 10409.99
1988/01/31 10348.94 10780.79
1988/02/29 10463.72 10894.75
1988/03/31 10342.40 10768.37
1988/04/30 10393.13 10850.21
1988/05/31 10445.14 10818.85
1988/06/30 10639.77 10977.13
1988/07/31 10673.66 11048.70
1988/08/31 10710.07 11058.42
1988/09/30 10873.30 11258.58
1988/10/31 11021.86 11456.73
1988/11/30 11033.77 11351.79
1988/12/31 11159.96 11467.92
1989/01/31 11300.49 11705.07
1989/02/28 11311.82 11571.52
1989/03/31 11398.87 11543.86
1989/04/30 11659.36 11817.91
1989/05/31 11849.85 12063.37
1989/06/30 11985.57 12227.19
1989/07/31 12090.72 12393.60
1989/08/31 12184.24 12272.27
1989/09/30 12220.99 12235.70
1989/10/31 12350.01 12385.34
1989/11/30 12502.05 12602.08
1989/12/31 12620.91 12705.17
1990/01/31 12640.82 12645.07
1990/02/28 12731.42 12757.62
1990/03/31 12811.29 12761.44
1990/04/30 12694.11 12669.05
1990/05/31 12954.25 12945.62
1990/06/30 13106.88 13059.41
1990/07/31 13309.04 13251.38
1990/08/31 13219.23 13058.97
1990/09/30 13313.23 13066.41
1990/10/31 13496.01 13303.44
1990/11/30 13830.88 13570.97
1990/12/31 13919.12 13630.00
1991/01/31 14081.11 13812.92
1991/02/28 14189.38 13933.09
1991/03/31 14272.80 13938.11
1991/04/30 14505.20 14123.48
1991/05/31 14684.50 14249.04
1991/06/30 14718.68 14234.94
1991/07/31 14909.00 14408.32
1991/08/31 15043.64 14598.07
1991/09/30 15220.09 14788.14
1991/10/31 15388.75 14921.24
1991/11/30 15446.63 14962.87
1991/12/31 15614.63 15283.97
1992/01/31 15787.71 15318.82
1992/02/29 15873.49 15323.72
1992/03/31 15953.12 15329.39
1992/04/30 16097.10 15465.82
1992/05/31 16241.51 15647.85
1992/06/30 16464.21 15910.42
1992/07/31 17037.50 16387.42
1992/08/31 16905.57 16227.64
1992/09/30 17011.07 16333.77
1992/10/31 16805.78 16173.21
1992/11/30 17142.60 16462.87
1992/12/31 17349.29 16630.96
1993/01/31 17642.74 16824.37
1993/02/28 18265.72 17432.91
1993/03/31 18075.21 17248.65
1993/04/30 18266.89 17422.68
1993/05/31 18418.16 17520.60
1993/06/30 18713.45 17813.02
1993/07/31 18727.35 17836.35
1993/08/31 19209.69 18207.71
1993/09/30 19475.70 18415.09
1993/10/31 19486.14 18450.63
1993/11/30 19295.70 18288.08
1993/12/31 19741.27 18674.15
1994/01/31 19971.15 18887.40
1994/02/28 19443.31 18398.22
1994/03/31 18406.92 17649.04
1994/04/30 18529.05 17798.71
1994/05/31 18638.63 17953.02
1994/06/30 18570.01 17843.33
1994/07/31 18904.98 18170.40
1994/08/31 18934.68 18233.27
1994/09/30 18638.07 17965.60
1994/10/31 18311.34 17646.53
1994/11/30 17722.64 17327.49
1994/12/31 18152.17 17708.86
1995/01/31 18765.40 18214.98
1995/02/28 19271.01 18744.67
1995/03/31 19372.33 18960.05
1995/04/30 19436.01 18982.42
1995/05/31 20057.98 19588.15
1995/06/30 19900.64 19417.74
1995/07/31 19965.47 19601.82
1995/08/31 20167.44 19850.37
1995/09/30 20330.08 19976.02
1995/10/31 20600.71 20266.47
1995/11/30 20989.52 20602.69
1995/12/31 21174.85 20800.68
1996/01/31 21290.35 20957.73
1996/02/29 21257.38 20816.26
1996/03/31 20808.22 20550.23
1996/04/30 20725.09 20492.07
1996/05/31 20700.65 20483.88
1996/06/30 20941.80 20706.95
1996/07/31 21078.67 20895.38
1996/08/31 21124.55 20890.37
1996/09/30 21314.12 21182.83
1996/10/31 21564.86 21422.41
1996/11/30 21883.53 21814.44
1996/12/31 21799.40 21722.82
1997/01/31 21897.25 21763.87
1997/02/28 22111.48 21963.67
1997/03/31 21868.02 21670.89
1997/04/30 22051.60 21852.28
1997/05/31 22314.66 22180.93
1997/06/30 22594.01 22417.16
1997/07/31 23238.52 23038.12
1997/08/31 23045.73 22822.25
1997/09/30 23329.43 23093.15
1997/10/31 23482.52 23241.64
IMATRL PRASUN SHR__CHT 19971031 19971111 105002 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class T on
October 31, 1987 and the current 3.50% sales charge was paid. As the
chart shows, by October 31, 1997, the value of the investment would
have grown to $23,483 - a 134.83% increase on the initial investment.
For comparison, look at how the Lehman Brothers Municipal Bond Index -
a total return performance benchmark for investment-grade municipal
bonds with maturities of at least one year - did over the same period.
With dividends reinvested, the same $10,000 would have grown to
$23,242 - a 132.42% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
DIVIDEND RETURN 5.47% 5.69% 6.62% 5.27% 6.49%
CAPITAL APPRECIATION RETURN 3.42% -1.01% 5.88% -11.30% 9.46%
TOTAL RETURN 8.89% 4.68% 12.50% -6.03% 15.95%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTH MONTHS YEAR
DIVIDENDS PER SHARE 4.96(CENTS) 29.30(CENTS) 61.45(CENTS)
ANNUALIZED DIVIDEND RATE 4.82% 4.84% 5.18%
30-DAY ANNUALIZED YIELD 4.18% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 6.53% - -
</TABLE>
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. If you annualize this
number, based on an average net asset value of $12.12 over the past
one month, $12.00 over the past six months and $11.87 over the past
one year, you can compare the class' income over these three periods.
The 30-day annualized YIELD is a standard formula for all funds based
on the yields of the bonds in the fund, averaged over the past 30
days. This figure shows you the yield characteristics of the fund's
investments at the end of the period. It also helps you compare funds
from different companies on an equal basis. The offering share price
used in the calculation of the yield includes the effect of Class T's
current maximum 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/shareholder service 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's 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's contingent deferred sales charges included
in the past one year, past five years and 10 years total return
figures are 5%, 2% and 0%, respectively. If Fidelity had not
reimbursed certain class expenses, the past five year and past 10 year
total returns would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS B 8.15% 36.06% 136.95%
ADVISOR MUNICIPAL INCOME - CLASS B 3.15% 34.06% 136.95%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 43.70% 132.42%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 42.76% 124.43%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage
terms over a set period - in this case, one year, five years or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be
$1,050. You can compare Class B's returns to those of the Lehman
Brothers Municipal Bond Index - a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one
year. To measure how Class B's performance stacked up against its
peers, you can compare it to the high-yield municipal debt funds
average, which reflects the performance of mutual funds with similar
objectives tracked by Lipper Analytical Services, Inc. The past one
year average represents a peer group of 48 mutual funds. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effect of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
ADVISOR MUNICIPAL INCOME - CLASS B 8.15% 6.35% 9.01%
ADVISOR MUNICIPAL INCOME - CLASS B 3.15% 6.04% 9.01%
(INCL. CONTINGENT DEFERRED SALES CHARGE)
LEHMAN BROTHERS MUNICIPAL BOND INDEX 8.49% 7.52% 8.80%
HIGH-YIELD MUNICIPAL DEBT FUNDS AVERAGE 9.28% 7.37% 8.36%
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
IMAHDR PRASUN SHR__CHT 19971031 19971111 104547 S00000000000001
FA High Inc Muni -CL B LB Municipal Bond
00669 LB015
1987/10/31 10000.00 10000.00
1987/11/30 10169.65 10261.10
1987/12/31 10343.87 10409.99
1988/01/31 10724.29 10780.79
1988/02/29 10843.23 10894.75
1988/03/31 10717.51 10768.37
1988/04/30 10770.09 10850.21
1988/05/31 10823.98 10818.85
1988/06/30 11025.67 10977.13
1988/07/31 11060.79 11048.70
1988/08/31 11098.52 11058.42
1988/09/30 11267.67 11258.58
1988/10/31 11421.62 11456.73
1988/11/30 11433.96 11351.79
1988/12/31 11564.73 11467.92
1989/01/31 11710.35 11705.07
1989/02/28 11722.09 11571.52
1989/03/31 11812.30 11543.86
1989/04/30 12082.24 11817.91
1989/05/31 12279.64 12063.37
1989/06/30 12420.28 12227.19
1989/07/31 12529.24 12393.60
1989/08/31 12626.16 12272.27
1989/09/30 12664.23 12235.70
1989/10/31 12797.94 12385.34
1989/11/30 12955.49 12602.08
1989/12/31 13078.66 12705.17
1990/01/31 13099.30 12645.07
1990/02/28 13193.18 12757.62
1990/03/31 13275.95 12761.44
1990/04/30 13154.52 12669.05
1990/05/31 13424.09 12945.62
1990/06/30 13582.26 13059.41
1990/07/31 13791.75 13251.38
1990/08/31 13698.69 13058.97
1990/09/30 13796.10 13066.41
1990/10/31 13985.51 13303.44
1990/11/30 14332.52 13570.97
1990/12/31 14423.96 13630.00
1991/01/31 14591.82 13812.92
1991/02/28 14704.02 13933.09
1991/03/31 14790.47 13938.11
1991/04/30 15031.30 14123.48
1991/05/31 15217.10 14249.04
1991/06/30 15252.52 14234.94
1991/07/31 15449.74 14408.32
1991/08/31 15589.26 14598.07
1991/09/30 15772.12 14788.14
1991/10/31 15946.89 14921.24
1991/11/30 16006.87 14962.87
1991/12/31 16180.96 15283.97
1992/01/31 16360.33 15318.82
1992/02/29 16449.21 15323.72
1992/03/31 16531.73 15329.39
1992/04/30 16680.93 15465.82
1992/05/31 16830.58 15647.85
1992/06/30 17061.36 15910.42
1992/07/31 17655.44 16387.42
1992/08/31 17518.73 16227.64
1992/09/30 17628.06 16333.77
1992/10/31 17415.32 16173.21
1992/11/30 17764.35 16462.87
1992/12/31 17978.53 16630.96
1993/01/31 18282.63 16824.37
1993/02/28 18928.21 17432.91
1993/03/31 18730.79 17248.65
1993/04/30 18929.42 17422.68
1993/05/31 19086.18 17520.60
1993/06/30 19392.18 17813.02
1993/07/31 19406.58 17836.35
1993/08/31 19906.41 18207.71
1993/09/30 20182.07 18415.09
1993/10/31 20192.89 18450.63
1993/11/30 19995.55 18288.08
1993/12/31 20457.28 18674.15
1994/01/31 20695.49 18887.40
1994/02/28 20148.51 18398.22
1994/03/31 19074.53 17649.04
1994/04/30 19201.09 17798.71
1994/05/31 19314.64 17953.02
1994/06/30 19240.37 17843.33
1994/07/31 19562.53 18170.40
1994/08/31 19593.70 18233.27
1994/09/30 19268.79 17965.60
1994/10/31 18882.51 17646.53
1994/11/30 18263.09 17327.49
1994/12/31 18711.14 17708.86
1995/01/31 19314.10 18214.98
1995/02/28 19822.22 18744.67
1995/03/31 19913.71 18960.05
1995/04/30 19949.03 18982.42
1995/05/31 20575.53 19588.15
1995/06/30 20400.69 19417.74
1995/07/31 20454.08 19601.82
1995/08/31 20648.19 19850.37
1995/09/30 20802.45 19976.02
1995/10/31 21067.43 20266.47
1995/11/30 21453.25 20602.69
1995/12/31 21629.91 20800.68
1996/01/31 21736.81 20957.73
1996/02/29 21691.78 20816.26
1996/03/31 21220.71 20550.23
1996/04/30 21122.78 20492.07
1996/05/31 21084.03 20483.88
1996/06/30 21317.08 20706.95
1996/07/31 21444.56 20895.38
1996/08/31 21479.96 20890.37
1996/09/30 21661.19 21182.83
1996/10/31 21904.93 21422.41
1996/11/30 22219.13 21814.44
1996/12/31 22122.85 21722.82
1997/01/31 22192.66 21763.87
1997/02/28 22417.76 21963.67
1997/03/31 22159.09 21670.89
1997/04/30 22315.14 21852.28
1997/05/31 22589.85 22180.93
1997/06/30 22842.46 22417.16
1997/07/31 23482.83 23038.12
1997/08/31 23273.49 22822.25
1997/09/30 23548.39 23093.15
1997/10/31 23694.96 23241.64
IMATRL PRASUN SHR__CHT 19971031 19971111 104549 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Advisor Municipal Income Fund - Class B on
October 31, 1987. As the chart shows, by October 31, 1997, the value
of the investment would have grown to $23,695 - a 136.95% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Municipal Bond Index - a total return performance benchmark
for investment-grade municipal bonds with maturities of at least one
year - did over the same period. With dividends reinvested, the same
$10,000 would have grown to $23,242 - a 132.42% increase.
UNDERSTANDING
PERFORMANCE
HOW A FUND DID YESTERDAY IS
NO GUARANTEE OF HOW IT WILL DO
TOMORROW. BOND PRICES, FOR
EXAMPLE, GENERALLY MOVE IN
THE OPPOSITE DIRECTION OF
INTEREST RATES. IN TURN, THE SHARE
PRICE, RETURN AND YIELD OF A
FUND THAT INVESTS IN BONDS WILL
VARY. THAT MEANS IF YOU SELL
YOUR SHARES DURING A MARKET
DOWNTURN, YOU MIGHT LOSE
MONEY. BUT IF YOU CAN RIDE OUT
THE MARKET'S UPS AND DOWNS,
YOU MAY HAVE A GAIN.
(CHECKMARK)
TOTAL RETURN COMPONENTS
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993
DIVIDEND RETURN 4.81% 4.99% 5.77% 4.90% 6.49%
CAPITAL APPRECIATION RETURN 3.34% -1.01% 5.80% -11.37% 9.46%
TOTAL RETURN 8.15% 3.98% 11.57% -6.47% 15.95%
TOTAL RETURN COMPONENTS include both dividend returns and capital
appreciation returns. A dividend return reflects the actual dividends
paid by the class. A capital appreciation 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED OCTOBER 31, 1997 PAST 1 PAST 6 PAST 1
MONTHS MONTHS YEAR
DIVIDENDS PER SHARE 4.33(CENTS) 25.45(CENTS) 54.11(CENTS)
ANNUALIZED DIVIDEND RATE 4.22% 4.22% 4.56%
30-DAY ANNUALIZED YIELD 3.73% - -
30-DAY ANNUALIZED TAX-EQUIVALENT YIELD 5.83% - -
</TABLE>
DIVIDENDS per share show the income paid by the class for a set period
and do not reflect any tax reclassifications. The annualized dividend
rate is based on an average net asset value of $12.09 over the past
one month, $11.97 over the past six months, and $11.85 over the past
one year. The 30-day annualized YIELD is a standard formula for all
funds based on the yields of the bonds in the fund, averaged over the
past 30 days. This figure shows you the yield characteristics of the
fund's investments at the end of the period. It also helps you compare
funds from different companies on an equal basis. The offering share
price used in the calculation of the yield excludes the effect of
Class B's contingent deferred sales charge. 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
With investor sentiment, shifting
supply/demand conditions and
Federal Reserve Board
policymaking playing key roles,
municipal bonds lagged their
taxable brethren for the 12 months
that ended October 31, 1997. The
Lehman Brothers Municipal Bond
Index - a broad measure of the
overall municipal bond market -
returned 8.49%, while the Lehman
Brothers Aggregate Bond Index
- - a barometer of the taxable bond
market - returned 8.89%.
Through much of the first half of the
period, the supply/demand
scenario within the muni market
was favorable: low supply and
high demand that led to rising
municipal bond prices. The
second half, however, saw a large
amount of new issuance come to
market, and while demand
remained strong, it took time for
investors to become acclimated to
this new supply. In the interim, muni
bond prices fell. The cold months
of winter contrasted with what
many felt was an overheating
economy ripe for an inflation
appearance. In late March, the
Federal Reserve Board raised
short-term interest rates by
0.25%, and while this gesture was
anticipated by investors, the bond
markets nonetheless reacted
negatively. From April through
mid-September, though, market
conditions were friendly.
Favorable economic data soothed
concerns, and the Fed's reluctance
to cut rates further was another
positive influence. The muni
market was unable to continue its
momentum in late September and
October, however, as new bonds
continued to flood the muni bond
market and demand lessened.
An interview with George Fischer, Portfolio Manager of Fidelity
Advisor Municipal Income Fund
Q. HOW DID THE FUND PERFORM, GEORGE?
A. For the 12-month period that ended October 31, 1997, the fund's
Class A, Class T and Class B shares had total returns of 9.02%, 8.89%
and 8.15%, respectively. To get a sense of how the fund did relative
to its competitors, the high-yield municipal debt funds average
returned 9.28%, according to Lipper Analytical Services. To gauge how
the fund did relative to the general municipal market, the Lehman
Brothers Municipal Bond Index returned 8.49% for the same one-year
period.
Q. WHAT WAS YOUR STRATEGY DURING THE PAST SIX MONTHS?
A. I continued to keep the fund's duration - or sensitivity to changes
in interest rates - neutral. By that I mean that I didn't buy or sell
bonds based on where I thought interest rates were headed. Rather, I
structured the fund to match the interest-rate sensitivity of the
market for high-yield municipal bonds. In my view, the final weeks of
the period served as a useful reminder that it isn't easy to predict
the direction of interest rates - and ultimately bond yields and bond
prices - with consistency over a long period of time. Few investors -
including many professionals - anticipated that currency problems in
Southeast Asia would take their toll on U.S. bond markets. Rather than
spend time trying to anticipate such unforeseen events, I invested in
those securities that I think will perform well given any market
environment.
Q. WHICH BONDS PERFORMED WELL DURING THE PERIOD?
A. Thanks in part to the strength of its economy, New York City's
bonds were some of the best-performing securities for the fund and the
entire municipal market. Likewise, a strong economy and a
credit-rating upgrade boosted the prices of many California bonds.
Also, bonds rated Baa by Moody's Investors Services were some of the
market's best performers. During the period, these
lower-investment-grade bonds did better than higher-rated bonds and
made a positive contribution to the fund's performance.
Q. THAT SAID, YOU PARED THE FUND'S HOLDINGS IN BAA-RATED BONDS. WHAT
PROMPTED THAT MOVE?
A. I wanted to take advantage of these bonds' strong performance by
locking in their gains. Furthermore, I felt that I wasn't sacrificing
much in the way of additional yield by upgrading the portfolio and
moving into more Aaa- and Aa-rated bonds. Generally speaking, the
lower the quality of the bond, the more yield it pays. That's because
a higher yield compensates investors for a greater amount of credit
risk - that is, the risk that an issuer will default on its debt. In
this case, I didn't feel that the yield for the lower-quality
Baa-rated securities compensated investors for the additional risk.
Q. THE FUND'S LARGEST SECTOR CONCENTRATION AT THE END OF THE PERIOD -
WHICH YOU BOOSTED BY ABOUT 7% OVER THE PAST SIX MONTHS - WAS IN
GENERAL OBLIGATION BONDS (GOS). WHAT MADE THEM SO ATTRACTIVE DURING
THE PERIOD?
A. GOs are municipal bonds backed by the taxing power of a city,
county or state and are repaid by general revenues such as taxes.
That's in contrast to revenue generated from a specific facility, such
as a tunnel. Generally speaking, GOs tend to do well when the local
economy is strong - as it has been over the past year in most areas of
the country - because tax revenues rise from sources including
increased personal income and corporate profits. I liked them because
the economy continued to show broad-based strength. With the economy
continuing to grow at a steady pace and tax revenues rising, GOs
generally performed well during the period.
Q. WHAT'S YOUR OUTLOOK?
A. Toward the end of the period, the bond markets became volatile in
response to uncertainty created by currency and market instability in
Southeast Asia. In my view, we're likely to see volatility hanging
around until those problems are sorted through. As a result, I plan to
continue to focus the fund in higher-quality securities, because I
believe they will be able to weather problems better than their
lower-quality counterparts.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET AND OTHER CONDITIONS.
(solid bullet)
(solid bullet)
FUND FACTS
GOAL:
START DATE:
SIZE:
MANAGER:
(checkmark)
INVESTMENT CHANGES
TOP FIVE STATES AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE STATES
6 MONTHS AGO
NEW YORK 17.9 14.8
CALIFORNIA 9.5 11.1
COLORADO 5.7 5.0
PENNSYLVANIA 5.6 5.8
WASHINGTON 4.6 3.2
TOP FIVE SECTORS AS OF OCTOBER 31, 1997
% OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS IN THESE SECTORS
6 MONTHS AGO
GENERAL OBLIGATIONS 27.1 20.2
ELECTRIC REVENUE 15.9 16.1
HEALTH CARE 15.8 17.6
TRANSPORTATION 10.5 9.4
INDUSTRIAL DEVELOPMENT 7.9 12.2
AVERAGE YEARS TO MATURITY AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 13.2 14.4
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
DURATION AS OF OCTOBER 31, 1997
6 MONTHS AGO
YEARS 6.9 6.9
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH
A FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER
FACTORS ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE.
ACCORDINGLY, A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS
EXAMPLE.
QUALITY DIVERSIFICATION (MOODY'S RATINGS)
AS OF OCTOBER 31, 1997 AS OF APRIL 30, 1997
ROW: 1, COL: 1, VALUE: 33.6
ROW: 1, COL: 2, VALUE: 24.2
ROW: 1, COL: 3, VALUE: 25.8
ROW: 1, COL: 4, VALUE: 2.3
ROW: 1, COL: 5, VALUE: 1.3
ROW: 1, COL: 6, VALUE: 10.2
ROW: 1, COL: 7, VALUE: 1.6
AAA 26.4%
AA, A 20.8%
BAA 29.2%
BA, B 4.2%
CAA, C 0.3%
NON-RATED 15.3%
SHORT-TERM
INVESTMENTS 3.8%
AAA 34.6%
AA, A 25.2%
BAA 26.8%
BA, B 1.3%
CAA, C 0.3%
NON-RATED 10.2%
SHORT-TERM
INVESTMENTS 1.6%
ROW: 1, COL: 1, VALUE: 26.4
ROW: 1, COL: 2, VALUE: 20.8
ROW: 1, COL: 3, VALUE: 28.2
ROW: 1, COL: 4, VALUE: 4.2
ROW: 1, COL: 5, VALUE: 1.3
ROW: 1, COL: 6, VALUE: 15.3
ROW: 1, COL: 7, VALUE: 3.8
WHERE MOODY'S RATINGS ARE NOT AVAILABLE, WE HAVE USED S&P RATINGS.
AMOUNTS SHOWN ARE AS A PERCENTAGE OF THE FUND'S INVESTMENTS. UNRATED
DEBT SECURITIES THAT ARE EQUIVALENT TO BA AND BELOW AT OCTOBER 31,
1997 AND APRIL 30, 1997 ACCOUNT FOR 4.3% AND 11.5% RESPECTIVELY, OF
THE FUND'S INVESTMENTS.
INVESTMENTS OCTOBER 31, 1997
SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES
MUNICIPAL BONDS - 98.4%
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
ALABAMA - 1.0%
Shelby County Gen. Oblig. Series A,
7.70% 8/1/17 - $ 4,000,000 $ 4,430,000
ARIZONA - 0.7%
Arizona Trans. Board Excise Tax Rev. Rfdg.
(Maricopa County Reg'l. Area Road Proj.)
Series A, 6% 7/1/03 (AMBAC Insured) Aaa 1,300,000 1,410,500
Cochise County Ind. Dev. Auth. Hosp. Rev. Rfdg.
(Sierra Vista Commty. Hosp. Proj.) Series A,
6.75% 12/1/26 - 1,705,000 1,794,512
3,205,012
ARKANSAS - 0.3%
Little Rock Arpt. Passenger Facs. Charge Rev.
5.65% 5/1/16 (AMBAC Insured) (g) Aaa 1,315,000 1,379,106
CALIFORNIA - 9.5%
California Dept. Wtr. Resources Rev. (Ctr. Valley
Proj.) (Wtr. Sys.) Series J-2, 6.125% 12/1/13 Aa2 2,190,000
2,288,550
California Gen. Oblig. 6%, 10/1/09 A1 2,500,000 2,784,375
California Hsg. Fin. Agcy. Rev. (Home Mtg.):
Rfdg. Series A, 5.70% 8/1/16 (MBIA Insured) Aaa 860,000 877,200
Series B, 5.20% 8/1/26 (MBIA Insured) (g) Aaa 1,025,000 1,045,500
Series R, 6.15% 8/1/27 (MBIA Insured) (g) Aaa 1,500,000 1,561,875
California Pub. Wks. Board Lease Rev. Rfdg.:
(California Univ. Proj.) Series A
5.50% 10/1/13 A 2,000,000 2,050,000
(Dept. of Corrections State Prisons):
Series A, 5% 12/1/19 (AMBAC Insured) Aaa 1,750,000 1,708,437
Series D, 5.75% 9/1/06 (MBIA Insured) Aaa 5,000,000 5,443,750
(Various California State Univ. Projs.) Series A,
5.50% 6/1/14 A1 1,500,000 1,550,625
Central Valley Fing. Auth. Cogeneration Proj. Rev.
(Carson Ice Gen. Proj.) 6% 7/1/09 BBB- 4,500,000 4,719,375
East Bay Muni. Util. Dist. Wtr. Sys. Rev. Series A,
6% 6/1/12 (MBIA Insured) Aaa 2,000,000 2,115,000
Foothill/Eastern Trans. Corridor Agcy. California
Toll Road Rev. (Sr. Lien) (Cap. Appreciation)
Series A, 0% 1/1/14 Baa 2,000,000 802,500
Los Angeles County Ctfs. of Prtn.
(Cap. Appreciation) (Disney Parking Proj.):
0% 3/1/14 Baa1 1,000,000 388,750
0% 9/1/14 Baa1 7,260,000 2,740,650
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CALIFORNIA - CONTINUED
Northern California Pwr. Agcy. Pub. Pwr. Rev.
Rfdg. (Geothermal Proj. #3) Series A,
5.85% 7/1/10 (AMBAC Insured) Aaa $ 1,500,000 $ 1,638,750
Sacramento City Fing. Auth. Lease Rev.:
(Cap. Appreciation) Series B, 0% 11/1/11
(MBIA Insured) Aaa 1,225,000 595,656
Rfdg. Series A, 5.40% 11/1/20
(AMBAC Insured) Aaa 2,000,000 2,045,000
Sacramento Cogeneration Auth. Cogeneration
Proj. Rev. (Procter & Gamble Proj.):
5.40% 7/1/98 BBB- 1,100,000 1,109,944
6.375% 7/1/10 BBB- 1,000,000 1,083,750
6.50% 7/1/14 BBB- 3,800,000 4,108,750
40,658,437
COLORADO - 5.7%
Colorado Health Facs. Auth. Rev.:
Rfdg. (Rocky Mountain Adventist):
6.625% 2/1/13 Baa2 6,900,000 7,322,625
6.625% 2/1/22 Baa2 4,000,000 4,210,000
(National Benevolent Assoc. Proj.)
Series A, 6.50% 6/1/25 Baa1 1,360,000 1,439,900
Colorado Springs Arpt. Rev. (Cap. Appreciation)
Series C:
0% 1/1/06 (MBIA Insured) Aaa 1,405,000 962,425
0% 1/1/08 (MBIA Insured) Aaa 870,000 535,050
Denver City & County Arpt. Rev.:
(Cap. Appreciation):
Series A, 0% 11/15/02 (MBIA Insured) (g) Aaa 2,115,000 1,684,069
Series D, 0% 11/15/04 (MBIA Insured) (g) Aaa 1,700,000 1,219,750
Rfdg. Series D, 5% 11/15/98 (g) Baa1 1,200,000 1,209,660
Series A:
6.60% 11/15/97 (g) Baa1 1,000,000 1,000,740
6.90% 11/15/98 (g) Baa1 1,000,000 1,026,960
8% 11/15/17 (g) Baa1 1,000,000 1,020,950
7.5% 11/15/23 (Pre-Refunded to
11/15/04 @ 102) (g)(h) Baa1 430,000 509,013
7.5% 11/15/23 (g) Baa1 2,070,000 2,367,562
24,508,704
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
CONNECTICUT - 4.2%
Connecticut Health & Edl. Facs. Auth. Rev.:
(New Britain Mem. Hosp.) Series A:
7.50% 7/1/06 BBB- $ 2,615,000 $ 2,863,425
7.75% 7/1/22 BBB- 1,500,000 1,655,625
(The Griffin Hosp.) Series A:
6% 7/1/13 Baa2 1,810,000 1,848,462
5.75% 7/1/23 Baa2 3,280,000 3,239,000
Connecticut Spl. Tax Oblig. Rev.
(Trans. Infrastructure):
Series B, 5.80% 9/1/04 A1 2,000,000 2,147,500
Series C, 5.50% 11/1/06 (FSA Insured) Aaa 3,000,000 3,176,250
Eastern Connecticut Resource Recovery Auth.
Solid Waste Rev. (Wheelabrator Lisbon Proj.)
Series A, 5.50% 1/1/20 (g) A- 3,350,000 3,262,063
18,192,325
DELAWARE - 0.9%
Delaware Trans. Auth. Sys. Rev. 6% 7/1/06
(AMBAC Insured) Aaa 3,455,000 3,809,138
DISTRICT OF COLUMBIA - 1.8%
District of Columbia Gen. Oblig. Rfdg. Series A,
6% 6/1/07 (MBIA Insured) Aaa 2,000,000 2,182,500
District of Columbia Hosp. Rev. (Hosp. for Sick
Children) Series A, 8.875% 1/1/21 - 965,000 1,056,675
District of Columbia Redev. Land Agcy. Sport
Arena Spl. Tax Rev.:
5.30% 11/1/99 Baa 1,700,000 1,710,625
5.625% 11/1/10 Baa 705,000 715,575
District of Columbia Rev. Rfdg. (Georgetown Univ.)
Series A, 5.95% 4/1/14 (MBIA Insured) (e) Aaa 2,000,000 2,080,000
7,745,375
FLORIDA - 0.8%
Broward County Resource Recovery Rev.
(SES Broward Co. LP South Proj.)
7.95% 12/1/08 A 600,000 653,250
Florida Mid-Bay Bridge Auth. Rev.
Series A, 7.50% 10/1/17 - 2,500,000 2,753,125
3,406,375
GEORGIA - 0.9%
Georgia Gen. Oblig. Series C, 6.25% 8/1/09 Aaa 3,500,000 3,955,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
HAWAII - 2.5%
Hawaii Gen. Oblig. 6.25% 3/1/03
(FGIC Insured) Aaa $ 10,000,000 $ 10,850,000
IDAHO - 0.1%
Boise Urban Renewal Agcy. Parking Rev. (Tax
Increment) Series A-C, 8.125% 9/1/15 BBB+ 375,000 388,005
ILLINOIS - 4.4%
Chicago Board of Ed. (Chicago School Reform)
6.25% 12/1/09 (MBIA Insured) Aaa 3,000,000 3,363,750
Chicago O'Hare Int'l. Arpt. Rev.:
(Passenger Facs. Charge) Series A,
5.60% 1/1/10 (AMBAC Insured) Aaa 2,500,000 2,609,375
Rfdg. (2nd Lien) (Gen. Arpt. Proj.) Series A:
6.25% 1/1/09 (AMBAC Insured) (g) Aaa 3,700,000 4,060,750
6.375% 1/1/15 (MBIA Insured) Aaa 1,400,000 1,519,000
Chicago O'Hare Int'l. Arpt. Spl. Facs. Rev. Rfdg.
(American Airlines, Inc. Proj.) 8.20% 12/1/24 Baa2 1,000,000
1,206,250
Du Page County Commty. High School Dist. #99
(Downers Grove) Series A, 6% 2/1/06
(AMBAC Insured) Aaa 1,640,000 1,795,800
Illinois Edl. Facs. Auth. Rev. Rfdg. (DePaul Univ.)
6% 10/1/05 (AMBAC Insured) Aaa 1,200,000 1,306,500
Illinois Health Facs. Auth. Rev.:
(Covenant Retirement Commty.) Series A,
7.60% 12/1/12 A- 750,000 837,187
(Memorial Hosp.):
7.125% 5/1/10 BBB 1,000,000 1,066,250
7.25% 5/1/22 BBB 1,000,000 1,066,250
18,831,112
INDIANA - 0.2%
Indianapolis Econ. Dev. Rev. Rfdg. & Impt.
(Nat'l. Benevolent Assoc.) 7.625% 10/1/22 Baa1 1,000,000 1,086,250
KENTUCKY - 2.8%
Kenton County Arpt. Board Arpt. Rev.:
(Cincinnati/Northern Kentucky Int'l.)
Series A, 6% 3/1/05 (MBIA Insured) (g) Aaa 5,570,000 5,994,712
(Spl. Facs. Delta Air Lines, Inc.) 7.80% 12/1/15 Ba2 3,500,000
3,753,750
Series A, 7.50% 2/1/20 (g) Baa3 2,000,000 2,215,000
11,963,462
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
MARYLAND - 1.2%
Maryland Health & Higher Edl. Facs. Auth. Rev.:
Rfdg. (Good Samaritan Hosp.) 5.75% 7/1/13 A1 $ 2,680,000 $ 2,830,750
(Johns Hopkins Univ.) 6% 7/1/10 (e) Aa2 2,000,000 2,182,500
5,013,250
MASSACHUSETTS - 4.0%
Massachusetts Bay Trans. Auth. 5.625% 3/1/26 A1 5,875,000 5,992,500
Massachusetts Health & Edl. Facs. Auth. Rev.:
(Fairview Extended Care) Series A, 10.25% 1/1/21
(Pre-Refunded to 1/1/01 @ 103) (h) - 5,000,000 6,000,000
(New England Med. Ctr. Hosp.) Series G,
5.375% 7/1/24 (MBIA Insured) Aaa 500,000 498,125
Massachusetts Ind. Fin. Agcy. Rev.
(Atlanticare Med. Ctr.) Series B, 10.125%
11/1/14 - 700,000 749,000
(Emerson College) Series A, 8.90% 1/1/18 - 1,000,000 1,107,500
(Massachusetts Biomedical) (Cap. Appreciation):
Series A-2:
0% 8/1/08 - 800,000 464,000
0% 8/1/10 - 4,500,000 2,300,625
17,111,750
MICHIGAN - 1.7%
Detroit Hosp. Fin. Auth. Hosp. Facs. Rev. Rfdg.
(Michigan Health Care Corp. Proj.)
10% 12/1/20 (b) C 6,680,000 1,202,400
Flint Hosp. Bldg. Auth. Rev. (Hurley Med. Ctr.)
7.80% 7/1/14 Baa1 700,000 759,500
Highland Park Hosp. Fin. Auth. Hosp. Facs. Rev.
(Lakeside Commty. Hosp. Proj.) 10% 3/1/20 (b) - 150,000 375
Michigan Strategic Fund Ltd. Oblig. Rev.
(Mercy Svcs. for Aging Proj.) 9.40% 5/15/20
(Pre-Refunded to 5/15/00 @ 102) (h) Aaa 600,000 679,500
(Michigan Health Care Corp. Proj.)
9.10% 12/1/14 (b) - 2,075,000 373,500
Royal Oak Hosp. Fin. Auth. Rev. Rfdg.
(William Beaumont Hosp.) 6.25% 1/1/09 Aa3 2,310,000 2,552,550
Tawas City Hosp. Fin. Auth. Hosp. Rev. (St. Joseph
Hosp. Proj.) Series A, 8.50% 3/15/12 - 1,875,000 1,930,894
7,498,719
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
MINNESOTA - 1.9%
Minneapolis & St. Paul Hsg. & Redev. Auth.
Health Care Sys. Rev. Rfdg. (Healthspan
Health Sys. Corp.) Series A, 4.75% 11/15/18
(AMBAC Insured) Aaa $ 2,500,000 $ 2,331,250
Minnesota Hsg. Fin. Hsg. Agcy. (Single Family Mtg.)
Series D, 6.40% 7/1/15 (g) Aa2 2,000,000 2,110,000
St. Paul Hsg. & Redev. Auth. Hosp. Rev.
(Healtheast Proj.) Series A, 9.75% 11/1/17
(Pre-Refunded to 11/1/97 @ 102) (h) Baa 380,000 387,600
Western Minnesota Muni. Pwr. Agcy. Rev. Rfdg.
Series A, 6.25% 1/1/06 (AMBAC Insured) Aaa 3,000,000 3,367,500
8,196,350
MISSISSIPPI - 0.1%
Mississippi Home Corp. Single Family Sr. Rev. Rfdg.
Series 1990-A, 9.25% 3/1/12 (FGIC Insured) Aaa 235,000 253,212
MISSOURI - 0.4%
St. Louis Reg'l. Convention & Sports Complex
Auth. Series C:
7.90% 8/15/21 (Pre-Refunded to
8/15/03 @ 100) (h) Aaa 1,485,000 1,759,725
7.90% 8/15/21 - 65,000 71,988
1,831,713
NEBRASKA - 1.4%
Nebraska Pub. Pwr. Dist. Rev.:
(Elec. Sys.) Series A, 6% 1/1/06 A1 1,500,000 1,606,875
Rfdg. (Pwr. Supply Sys.) Series C, 5% 1/1/17 A1 4,590,000
4,343,288
5,950,163
NEVADA - 0.6%
Las Vegas Downtown Redev. Agcy. Tax
Increment Rev. (Fremont Proj.) Series A:
6% 6/15/10 BBB+ 1,500,000 1,524,375
6.10% 6/15/14 BBB+ 1,000,000 1,030,000
2,554,375
NEW HAMPSHIRE - 0.8%
New Hampshire Higher Edl. & Health Facs.
Auth. Rev.:
(Littleton Hosp. Assoc., Inc.) Series A,
9.50% 5/1/20 - 490,000 524,913
(Riverwoods at Exeter):
8% 3/1/01 - 750,000 769,125
9% 3/1/23 - 1,830,000 2,253,188
3,547,226
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW JERSEY - 1.5%
New Jersey Econ. Dev. Auth. Econ. Dev. Rev. Rfdg.
(Stolt Term. Proj.) 10.50% 1/15/18 - $ 60,000 $ 62,397
New Jersey Trans. Trust Fund Auth. Rfdg.
Series A, 5.50% 6/15/11 (MBIA Insured) Aaa 4,000,000 4,165,000
Passaic County Util. Auth. Solid Waste Disp. Rev.
Rfdg. (Cap. Appreciation) 0% 3/1/02
(MBIA Insured) Aaa 2,500,000 2,071,875
6,299,272
NEW MEXICO - 2.0%
Albuquerque Arpt. Rev. Rfdg.:
6.75% 7/1/11 (AMBAC Insured) (g) Aaa 1,805,000 2,080,263
6.70% 7/1/18 (AMBAC Insured) (g) Aaa 3,970,000 4,421,588
New Mexico Edl. Assistance Foundation Student
Loan Rev. Series B, 5.25% 4/1/05
(AMBAC Insured) (g) Aaa 1,935,000 1,966,444
8,468,295
NEW YORK - 17.9%
New York City Gen. Oblig.:
Rfdg. Series A, 7% 8/1/03 Baa1 2,000,000 2,235,000
Rfdg. Series B, 6.75% 8/15/03 Baa1 2,000,000 2,212,500
Rfdg. Until. Tax Series E, 6.50% 2/15/04
(FGIC Insured) Aaa 1,500,000 1,668,750
Series B:
7.50% 2/1/02 Baa1 2,000,000 2,225,000
5.70% 8/15/02 Baa1 1,165,000 1,221,794
Series D, 5.50% 2/15/04 Baa1 5,000,000 5,206,250
Series H:
6.875% 2/1/02 (Escrowed to Maturity) (h) Aaa 400,000 440,500
6.875% 2/1/02 Baa1 1,300,000 1,415,375
New York City Ind. Dev. Auth. Ind. Dev. Rev.:
(Japan Airlines Co. Ltd. Proj.) Series 91,
6% 11/1/15 (FSA Insured) LOC Morgan
Guaranty Trust Co. (g) Aaa 1,000,000 1,062,500
(Terminal One Group Assoc. Proj.)
5.90% 1/1/06 (g) A 8,680,000 9,255,050
New York Metropolitan Trans. Commission Auth.:
5% 7/1/02 (e) Baa1 2,370,000 2,396,900
5% 7/1/03 (e) Baa1 2,490,000 2,506,932
5.50% 7/1/07 (e) Baa1 2,645,000 2,702,423
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
NEW YORK - CONTINUED
New York City Muni. Assistance Corp. Rfdg.
Series H, 6% 7/1/05 Aa2 $ 6,500,000 $ 7,117,500
New York State Dorm. Auth. Rev.:
(City Univ. Sys. Consolidated) Series A,
5.70% 7/1/05 Baa1 3,000,000 3,168,750
Rfdg. (State Univ. Edl. Facs.):
Series A, 5.50% 5/15/05 A3 2,750,000 2,890,938
Series B, 5.50% 5/15/08 A3 12,150,000 12,818,250
New York State Local Gov't. Assistance Corp.
Rfdg. Series C, 5.50% 4/1/17 A3 7,500,000 7,659,375
New York State Thruway Auth. Gen. Rev.
(Spl. Oblig.) (Cap. Appreciation) Series A,
0% 1/1/04 BBB 4,000,000 2,915,000
New York State Thruway Auth. Svc. Contract Rev.
(Local Hwy. & Bridges):
5.90% 4/1/07 Baa1 2,000,000 2,125,000
6% 1/1/11 (Pre-Refunded to
11/1/01 @ 100) (h) Baa1 2,445,000 2,570,305
Suffolk County Wtr. Auth. Wtrwks. Rev. Rfdg.
(Sub-Lien) 6% 6/1/17 (MBIA Insured) Aaa 1,000,000 1,112,500
76,926,592
NORTH CAROLINA - 2.9%
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys.
Rev. Rfdg.:
Series A, 5.50% 1/1/05 (MBIA Insured) Aaa 4,000,000 4,230,000
Series B, 7.25% 1/1/07 Baa1 1,000,000 1,156,250
Series C:
5.125% 1/1/03 Baa1 2,000,000 2,027,500
5.25% 1/1/04 Baa1 1,365,000 1,390,594
North Carolina Muni. Pwr. Agcy. #1
Catawba Elec. Rev. Rfdg.:
5.75% 1/1/02 A3 1,750,000 1,820,000
6.25% 1/1/17 (AMBAC Insured) Aaa 1,800,000 1,912,500
12,536,844
OHIO - 2.7%
Gateway Econ. Dev. Corp. (Greater Cleveland
Stadiums) Series 1990, 6.50% 9/15/14 (g) - 3,000,000 3,120,000
Marion County Hosp. Impt. Rev. Rfdg.
(Commty. Hosp. Proj.) 5.60% 5/15/01 BBB+ 1,000,000 1,025,000
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
OHIO - CONTINUED
Ohio Wtr. Dev. Auth. Poll. Cont. Facs. Rev.
(Wtr. Control Loan Fund):
State Matching Series, 6.50% 1/1/04
(MBIA Insured) Aaa $ 1,835,000 $ 2,068,962
Wtr. Quality Series, 5.625% 6/1/06
(MBIA Insured) Aaa 2,000,000 2,152,500
Student Loan Rfdg. Corp. Cincinnati Student
Loan Rev. Series B, 8.875% 8/1/08 (g) - 2,910,000 3,091,875
11,458,337
OKLAHOMA - 1.0%
Tulsa Muni. Arpt. Trust Rev. (American Airlines
Corp. Proj.) 7.35% 12/1/11 Baa2 4,000,000 4,455,000
PENNSYLVANIA - 5.6%
Allegheny County Ind. Dev. Auth. Rev. (1st. Mtg.
YMCA Pittsburgh Proj.) Series 1990,
8.75% 03/1/10 - 355,000 390,500
Butler County Ind. Dev. Auth. Health Ctr. Rev.
Rfdg. (Sherwood Oaks Proj.) 5.75% 6/1/11 A 3,000,000 3,048,750
Cumberland County Muni. Auth. Rev. Rfdg.:
(Carlisle Hosp. & Health) 6.80% 11/15/14 Baa2 3,250,000 3,505,938
(Carlisle Hosp. & Health) 6.80% 11/15/23 Baa2 1,000,000 1,073,750
Delaware County Auth. Rev. (1st. Mtg. Riddle
Village Proj.):
Series 1992, 8.75% 6/1/10 (Pre-Refunded
to 6/1/02 @ 102) (h) Aaa 2,870,000 3,440,413
7% 6/1/00 (Escrowed to Maturity) (h) Aaa 1,000,000 1,022,380
8.25% 6/1/22 (Escrowed to Maturity) (h) Aaa 2,250,000 2,764,688
9.25% 6/1/22 (Pre-Refunded to
6/1/02 @ 102) (h) Aaa 2,905,000 3,544,100
Delaware County Ind. Dev. Auth. Rev. Rfdg.
(Resource Recovery Fac.) Series A,
6.10% 7/1/13 Baa1 1,900,000 2,009,250
Montgomery County Health & Edl. Facs. Rev.
(United Hosp. Proj.):
8.10% 11/1/97 (Escrowed to Maturity) (h) Baa1 35,000 35,000
7% 11/1/06 (Pre-Refunded to
11/1/97 @ 102) (h) Baa1 120,000 120,000
8.50% 11/1/17 (Pre-Refunded to
11/1/97 @ 102) (h) Baa1 525,000 535,500
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
PENNSYLVANIA - CONTINUED
Pennsylvania Ind. Dev. Auth. Rev. Econ. Dev.
5.80% 7/1/09 (AMBAC Insured) Aaa $ 1,345,000 $ 1,469,412
Philadelphia Hosp. & Higher Ed. Facs. Auth.
Hosp. Rev. (Graduate Health Sys. Oblig.
Group) 7.25% 7/1/18 Ba2 1,100,000 1,193,500
24,153,181
RHODE ISLAND - 1.1%
Rhode Island Port Auth. & Econ. Dev. Corp. Arpt.
Rev. Series A, 7% 7/1/14 (FSA Insured) (g) Aaa 4,000,000 4,760,000
SOUTH CAROLINA - 0.4%
Piedmont Muni. Pwr. Elec. Agcy. Elec. Rev. Rfdg.
Series A, 6.25% 1/1/05 (FGIC Insured) Aaa 1,715,000 1,886,500
TENNESSEE - 0.2%
Metropolitan Gov't Nashville & Davidson County
Elec. Rev. (Cap. Appreciation) Series A,
0% 5/15/06 (MBIA Insured) Aaa 1,000,000 671,250
TEXAS - 4.5%
Brazos River Auth. Poll. Cont. Rev.
(Texas Utils. Elec. Co.) Series A,
9.25% 3/1/18 (g) Baa2 1,300,000 1,346,319
Conroe Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/09
(PSF Guaranteed) Aaa 750,000 426,562
Dallas-Fort Worth Int'l. Arpt. Facs. Impt. Corp.
Rev. (American Airlines, Inc.)
7.50% 11/1/25 (g) Baa2 6,000,000 6,547,500
Midlothian Independent School Dist. Rfdg.
(Cap. Appreciation) 0% 2/15/04
(PSF Guaranteed) Aaa 1,845,000 1,383,750
Plano Independent School Dist. 6% 2/15/03 Aaa 4,510,000 4,853,887
Texas Pub. Fin. Auth. Series A, 5% 10/1/14 Aa2 5,000,000 4,912,500
19,470,518
UTAH - 2.9%
Intermountain Pwr. Agcy. Pwr. Supply Sys.
Rev. Rfdg.:
Series A, 6.50% 7/1/09 (AMBAC Insured) Aaa 1,000,000 1,152,500
Series B:
5.75% 7/1/16 (MBIA Insured) Aaa 2,500,000 2,575,000
6% 7/1/16 (MBIA Insured) Aaa 7,000,000 7,428,750
Series D, 5% 7/1/21 (MBIA Insured) Aaa 1,200,000 1,150,500
South Salt Lake City Ind. Rev. (Price Savers
Wholesale Club Proj.) 9% 11/15/13 - 250,000 280,937
12,587,687
MUNICIPAL BONDS - CONTINUED
MOODY'S RATINGS (A) PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 1)
VIRGINIA - 3.2%
Loudoun County Ind. Dev. Auth. Residential Care
Facs. Rev. (Falcons Landing Proj.) Series A:
9.25% 11/1/04 - $ 1,000,000 $ 1,108,750
8.75% 11/1/24 - 8,500,000 9,222,500
Virginia Pub. School Auth. Series B,
6.50% 8/1/15 Aa2 3,000,000 3,277,500
13,608,750
WASHINGTON - 4.6%
King County Gen. Oblig. Series D,
5.75%, 12/1/11 Aa1 3,990,000 4,269,300
Washington Pub. Pwr. Supply Sys.:
Nuclear Proj. #2 Rev. 5.40% 7/1/12 Aa1 14,000,000 14,105,000
Nuclear Proj. #3 Rev. Rfdg. Series B, 7%
7/1/05 (FGIC Insured) (f) Aaa 1,150,000 1,229,062
19,603,362
TOTAL MUNICIPAL BONDS
(Cost $407,962,800) $ 423,250,647
CASH EQUIVALENTS- 1.6%
SHARES
Municipal Central Cash Fund (c)(d)
(Cost $6,701,398) 6,701,398 6,701,398
TOTAL INVESTMENTS IN SECURITIES - 100%
(Cost $414,664,198) $ 429,952,045
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/ (LOSS)
Purchased
95 U.S. Treasury Bond Futures Dec. 1997 $ 11,254,531 $ 32,838
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL
INVESTMENT IN SECURITIES - 2.6%.
LEGEND
2. Standard & Poor's credit ratings are used in the absence of a
rating by Moody's Investors Service, Inc.
3. Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
4. Information in this report regarding holdings by state and security
types do 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.
5. At the period end, the seven-day yield of the Municipal Central
Cash Fund was 3.73% The yield refers to the income earned by investing
in the fund over the seven-day period, expressed as an annual
percentage.
6. Security purchased on a delayed delivery or when-issued basis (see
Note 2 of Notes to Financial Statements).
7. A portion of the security was pledged to cover margin requirements
for futures contracts. At the period end, the value of the security
pledged amounted to $261,844.
8. Private activity obligations whose interest is subject to the
federal alternative minimum tax for individuals.
9. 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 investment in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 59.1% AAA, AA, A 57.9%
Baa 21.4% BBB 25.4%
Ba 1.3% BB 0.0%
B 0.0% B 0.6%
Caa 0.0% CCC 0.0%
Ca, C 0.3% CC, C 0.0%
D 0.3%
The percentage not rated by Moody's or S&P amounted to 10.2%. FMR has
determined that unrated debt securities that are lower quality account
for 4.3% of the total value of investment in securities.
The distribution of municipal securities by revenue source, as a
percentage of total value of investment in securities, is as follows:
General Obligation 27.1%
Electric Revenue 15.9
Health Care 15.8
Transportation 10.5
Industrial Development 7.9
Escrowed/Pre-refunded 6.0
Special Tax 5.9
Others (individually less than 5%) 10.9
TOTAL 100.0%
INCOME TAX INFORMATION
At October 31, 1997, the aggregate cost of investment securities for
income tax purposes was $414,664,198. Net unrealized appreciation
aggregated $15,287,847, of which $23,032,967 related to appreciated
investment securities and $7,745,120 related to depreciated investment
securities.
The fund hereby designates approximately $198,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At October 31, 1997, the fund had a capital loss carryforward of
approximately $16,425,000 of which $2,646,000, $7,511,000 and
$6,268,000 will expire on October 31, 2002, 2003 and 2004 ,
respectively.
During fiscal year ended 1997, 100% of the fund's income dividends was
free from federal income tax, and 18.9% of the fund's income dividends
was subject to the federal alternative minimum tax (unaudited).
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
OCTOBER 31, 1997
ASSETS
INVESTMENT IN SECURITIES, AT VALUE (COST $414,664,198) - $ 429,952,045
SEE ACCOMPANYING SCHEDULE
RECEIVABLE FOR INVESTMENTS SOLD 17,530,753
INTEREST RECEIVABLE 7,605,709
RECEIVABLE FOR DAILY VARIATION ON FUTURES CONTRACTS 24,886
OTHER RECEIVABLES 5,107
TOTAL ASSETS 455,118,500
LIABILITIES
PAYABLE FOR INVESTMENTS PURCHASED $ 3,186,713
REGULAR DELIVERY
DELAYED DELIVERY 11,764,735
PAYABLE FOR FUND SHARES REDEEMED 707,200
DISTRIBUTIONS PAYABLE 715,599
ACCRUED MANAGEMENT FEE 144,422
OTHER PAYABLES AND ACCRUED EXPENSES 234,614
TOTAL LIABILITIES 16,753,283
NET ASSETS $ 438,365,217
NET ASSETS CONSIST OF:
PAID IN CAPITAL $ 440,429,453
ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN (LOSS) (17,384,921)
ON INVESTMENTS
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 15,320,685
NET ASSETS $ 438,365,217
STATEMENT OF ASSETS AND LIABILITIES - CONTINUED
OCTOBER 31, 1997
CALCULATION OF MAXIMUM OFFERING PRICE $12.15
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($3,754,762 (DIVIDED BY) 309,028 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/95.25 OF $12.15) $12.76
CLASS T: $12.15
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($392,074,970 (DIVIDED BY) 32,257,701 SHARES)
MAXIMUM OFFERING PRICE PER SHARE (100/96.50 OF $12.15) $12.59
CLASS B: $12.13
NET ASSET VALUE AND OFFERING PRICE PER SHARE
($41,024,326 (DIVIDED BY) 3,382,815 SHARES) A
INSTITUTIONAL CLASS: $12.12
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($1,511,159 (DIVIDED BY) 124,669 SHARES)
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED OCTOBER 31, 1997
INTEREST INCOME $ 27,699,948
EXPENSES
MANAGEMENT FEE $ 1,826,656
TRANSFER AGENT FEES 850,499
DISTRIBUTION FEES 1,423,974
ACCOUNTING FEES AND EXPENSES 191,896
NON-INTERESTED TRUSTEES' COMPENSATION 3,084
CUSTODIAN FEES AND EXPENSES 29,733
REGISTRATION FEES 73,673
AUDIT 43,905
LEGAL 5,869
MISCELLANEOUS 13,048
TOTAL EXPENSES BEFORE REDUCTIONS 4,462,337
EXPENSE REDUCTIONS (38,563) 4,423,774
NET INTEREST INCOME 23,276,174
REALIZED AND UNREALIZED GAIN (LOSS)
NET REALIZED GAIN (LOSS) ON:
INVESTMENT SECURITIES 898,167
FUTURES CONTRACTS 84,152 982,319
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON:
INVESTMENT SECURITIES 14,836,543
FUTURES CONTRACTS 32,838 14,869,381
NET GAIN (LOSS) 15,851,700
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 39,127,874
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS $ 23,276,174 $ 32,576,734
NET INTEREST INCOME
NET REALIZED GAIN (LOSS) 982,319 (5,991,620)
CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) 14,869,381 (1,724,709)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 39,127,874 24,860,405
FROM OPERATIONS
DISTRIBUTIONS TO SHAREHOLDERS (24,140,139) (31,712,769)
FROM NET INTEREST INCOME
IN EXCESS OF NET INTEREST INCOME (86,644) -
TOTAL DISTRIBUTIONS (24,226,783) (31,712,769)
SHARE TRANSACTIONS - NET INCREASE (DECREASE) (97,485,396) (69,878,601)
TOTAL INCREASE (DECREASE) IN NET ASSETS (82,584,305) (76,730,965)
NET ASSETS
BEGINNING OF PERIOD 520,949,522 597,680,487
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT $ 438,365,217 $ 520,949,522
INCOME OF $0 AND $863,965, RESPECTIVELY)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
<TABLE>
<CAPTION>
<S> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 H
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.740 $ 11.630
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .583 F .105 F, G
NET REALIZED AND UNREALIZED GAIN (LOSS) .445 .109 E
TOTAL FROM INVESTMENT OPERATIONS 1.028 .214
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.616) G (.104)
IN EXCESS OF NET INTEREST INCOME (.002) I -
TOTAL DISTRIBUTIONS (.618) (.104)
NET ASSET VALUE, END OF PERIOD $ 12.150 $ 11.740
TOTAL RETURN B, C 9.02% 1.84%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 3,755 $ 202
RATIO OF EXPENSES TO AVERAGE NET ASSETS .90% .90% A,
D D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 4.87% 5.73% A
PORTFOLIO TURNOVER RATE 36% 49%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E THE 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.
F NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
G NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
H FOR THE PERIOD SEPTEMBER 3, 1996 (COMMENCEMENT OF SALE OF CLASS A
SHARES) TO OCTOBER 31, 1996.
I THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS T
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 C 1993
SELECTED PER-SHARE DATA
NET ASSET VALUE, $ 11.760 $ 11.880 $ 11.220 $ 12.720 $ 11.650
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
NET INTEREST INCOME .597 D .677 D, E .700 .689 .710
NET REALIZED AND UNREALIZED .407 (.136) .660 (1.430) 1.100
GAIN (LOSS)
TOTAL FROM INVESTMENT 1.004 .541 1.360 (.741) 1.810
OPERATIONS
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.612) E (.661) (.700) (.689) (.710)
IN EXCESS OF NET (.002) B - - - -
INTEREST INCOME
FROM NET REALIZED GAIN - - - (.060) (.030)
IN EXCESS OF NET REALIZED GAIN - - - (.010) -
TOTAL DISTRIBUTIONS (.614) (.661) (.700) (.759) (.740)
NET ASSET VALUE, END OF PERIOD $ 12.150 $ 11.760 $ 11.880 $ 11.220 $ 12.720
TOTAL RETURN A 8.89% 4.68% 12.50% (6.03)% 15.95%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 392,075 $ 480,432 $ 565,131 $ 544,422 $ 497,575
(000 OMITTED)
RATIO OF EXPENSES TO AVERAGE .89% .89% .91% .89% .92%
NET ASSETS
RATIO OF NET INTEREST INCOME TO 5.04% 5.74% 6.06% 5.78% 5.59%
AVERAGE NET ASSETS
PORTFOLIO TURNOVER RATE 36% 49% 37% 38% 27%
</TABLE>
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE.
B THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
C EFFECTIVE NOVEMBER 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A RESULT, NET INTEREST INCOME PER SHARE MAY
REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
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.
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.740 $ 11.860 $ 11.210 $ 11.610
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .515 E .596 E, F .612 .188
NET REALIZED AND UNREALIZED GAIN (LOSS) .416 (.136) .650 (.400)
TOTAL FROM INVESTMENT OPERATIONS .931 .460 1.262 (.212)
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.539) F (.580) (.612) (.188)
IN EXCESS OF NET INTEREST INCOME (.002) H - - -
TOTAL DISTRIBUTION (.541) (.580) (.612) (.188)
NET ASSET VALUE, END OF PERIOD $ 12.130 $ 11.740 $ 11.860 $ 11.210
TOTAL RETURN B, C 8.15% 3.98% 11.57% (1.86)%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 41,024 $ 39,389 $ 32,395 $ 9,968
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.56% 1.57% 1.86% D 2.09% A
RATIO OF NET INTEREST INCOME TO AVERAGE 4.35% 5.06% 5.18% 4.58% A
NET ASSETS
PORTFOLIO TURNOVER RATE 36% 49% 37% 38%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS DO NOT INCLUDE THE CONTINGENT DEFERRED SALES CHARGE
AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
E NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
G FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALE OF CLASS B
SHARES) TO OCTOBER 31, 1994.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEARS ENDED OCTOBER 31,
1997 1996 1995 G
SELECTED PER-SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.720 $ 11.880 $ 11.700
INCOME FROM INVESTMENT OPERATIONS
NET INTEREST INCOME .609 E .707 E, F .232
NET REALIZED AND UNREALIZED GAIN (LOSS) .464 (.197) .180
TOTAL FROM INVESTMENT OPERATIONS 1.073 .510 .412
LESS DISTRIBUTIONS
FROM NET INTEREST INCOME (.671) F (.670) (.232)
IN EXCESS OF NET INTEREST INCOME (.002) H - -
TOTAL DISTRIBUTIONS (.673) (.670) (.232)
NET ASSET VALUE, END OF PERIOD $ 12.120 $ 11.720 $ 11.880
TOTAL RETURN B, C 9.44% 4.41% 3.55%
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (000 OMITTED) $ 1,511 $ 927 $ 154
RATIO OF EXPENSES TO AVERAGE NET ASSETS .75% D .75% D .75% A,
D
RATIO OF NET INTEREST INCOME TO AVERAGE NET ASSETS 5.11% 5.88% 5.89% A
PORTFOLIO TURNOVER RATE 36% 49% 37%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS).
D FMR AGREED TO REIMBURSE A PORTION OF THE CLASS' EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE CLASS' EXPENSE RATIO WOULD
HAVE BEEN HIGHER (SEE NOTE 5 OF NOTES TO FINANCIAL STATEMENTS).
E NET INTEREST INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
F NET INTEREST INCOME PER SHARE IN 1996 REFLECTS A PAYMENT RECEIVED
FROM AN ISSUER IN BANKRUPTCY WHICH WAS DISTRIBUTED IN 1997.
G FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF SALE OF INSTITUTIONAL
CLASS SHARES) TO OCTOBER 31, 1995.
H THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
NOTES TO FINANCIAL STATEMENTS
For the period ended October 31, 1997
45. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Advisor Municipal Income Fund (formerly Fidelity Advisor High
Income Municipal Fund) (the fund) is a fund of Fidelity Advisor Series
V (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, and Institutional Class
shares, each of which has equal rights as to assets and voting
privileges. In June 1997, the Board of Trustees approved the creation
of an additional class of shares, Class C shares. Offering of the new
class commenced on November 3, 1997. Class C shares are subject to an
annual distribution and service fee of 1.00% (of which .75% represents
a distribution fee and .25% represents a shareholder service fee) of
the class' average net assets, and a 1.00% contingent deferred sales
charge levied on Class C share redemptions made within one year of
purchase. Each class has exclusive voting rights with respect to its
distribution plan. 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, registration, and certain
other class-specific fees, expenses, and expense reductions.
The financial statements have been prepared in conformity with
generally accepted accounting principles which permit 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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
between 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.
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 discounts, losses deferred
due to wash sales and futures.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences that will reverse in
a subsequent period. Any taxable income or gain remaining at fiscal
year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
46. OPERATING POLICIES.
MUNICIPAL CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by
the Securities and Exchange Commission, the funds may invest in the
Municipal Central Cash Fund (the Cash Fund) managed by FMR Texas,
Inc., 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 received by the funds are
recorded as interest income in the accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is
negotiated. The market values of the securities purchased or sold on
a delayed delivery basis are identified as such in the fund's schedule
of investments. With respect to purchase commitments, the fund
identifies securities as segregated in its custodial records with
2. OPERATING POLICIES - CONTINUED
DELAYED DELIVERY SECURITIES - CONTINUED
a value at least equal to the amount of the commitment. Losses may
arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contract.
FUTURES CONTRACTS. The fund may use futures contracts and options to
manage its exposure to the bond market and to fluctuations in interest
rates. Buying futures, writing puts, and buying calls tend to increase
the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing calls tend 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.
47. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $163,740,525 and $270,077,248, respectively.
The market value of futures contracts opened and closed during the
period amounted to $58,934,461 and $47,796,920, respectively.
48. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .1100% to .3700% for the
period. The annual individual fund fee rate is .25%. In the event that
these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted
in the same or a lower management fee. For the period, the management
fee was equivalent to an annualized rate of .39% of average net assets
.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Trustees have adopted separate distribution plans with
respect to each class of shares (collectively referred to as "the
Plans"). Under certain of the Plans, the class pays Fidelity
Distributors Corporation (FDC), an affiliate of FMR, a distribution
and service fee. This fee is 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 paid to securities dealers, banks and other financial
institutions for the distribution of each class' applicable shares,
and providing shareholder support services:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 2,810 $ 2,810
CLASS T 1,062,341 1,062,341
CLASS B 358,823 99,673
$ 1,423,974 $ 1,164,824
Under the Plans, FMR or FDC may use its resources to pay
administrative and promotional expenses related to the sale of each
class' shares. The Plans also authorize payments to third parties that
assist in the sale of each class' shares or render shareholder support
services.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares (4.25% prior to August 1, 1997), and 3.50% for
selling Class T shares of the fund, and the proceeds of a contingent
deferred sales charge levied on Class B share redemptions occurring
within six years of purchase (five years prior to January 2, 1997).
The Class B charge is based on declining rates which range from 5% to
1%(4% to 1% prior to January 2, 1997) 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.
For the period, FDC received the following sales charge amounts
related to each class, a portion of which is paid to securities,
dealers, banks, and other financial institutions:
PAID TO DEALERS'
FDC PORTION
CLASS A $ 57,657 $ 43,008
CLASS T 173,689 121,043
CLASS B 174,350 0*
$ 405,696 $ 164,051
* WHEN CLASS B SHARES ARE INITIALLY SOLD, FDC PAYS COMMISSIONS FROM
ITS OWN RESOURCES TO DEALERS THROUGH WHICH
THE SALES ARE MADE.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT AND ACCOUNTING FEES. UMB Bank, n.a. (UMB) is the
custodian, transfer agent, and shareholder servicing agent for the
fund's Class A, Class T, Class B, and Institutional Class shares. UMB
has entered into a sub-arrangement with Fidelity Investments
Institutional Operations Company, Inc. (FIIOC) with respect to all
classes of the fund to perform the transfer, dividend disbursing, and
shareholder servicing agent functions. FIIOC, an affiliate of FMR,
receives account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. All fees are paid to FIIOC by UMB, which is
reimbursed by each class for such payments. FIIOC pays for
typesetting, printing and mailing of all shareholder reports. For the
period, each class paid the following transfer agent fees:
AMOUNT % OF
AVERAGE
NET ASSETS
CLASS A $ 3,890 .21
CLASS T 772,501 .18
CLASS B 71,281 .18
INSTITUTIONAL CLASS 2,827 .26
$ 850,499
UMB also has a sub-contract with Fidelity Service Company, Inc. (FSC),
an affiliate of FMR, under which FSC maintains the fund's accounting
records. The fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
49. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses)
above the following annual rates or range of annual rates of average
net assets for each class:
FMR REIMBURSEMENT
EXPENSE
LIMITATIONS
CLASS A .90% $ 23,575
INSTITUTIONAL CLASS .75% 12,852
$ 36,427
5. EXPENSE REDUCTIONS - CONTINUED
In addition, the fund has entered into an arrangement with its each
class' transfer agent whereby credits realized as a result of
uninvested cash balances were used to reduce a portion of expenses.
During the period, Class T expenses were reduced by $2,136 under this
arrangement.
50. DISTRIBUTIONS TO SHAREHOLDERS.
Distributions to shareholders of each class were as follows:
YEARS ENDED OCTOBER 31,
1997 1996 A
CLASS A
FROM NET INVESTMENT INCOME $ 94,032 $ 1,272
IN EXCESS OF NET INTEREST INCOME 40 -
TOTAL $ 94,072 $ 1,272
CLASS T
FROM NET INVESTMENT INCOME $ 22,160,320 $ 29,846,407
IN EXCESS OF NET INTEREST INCOME 79,597 -
TOTAL $ 22,239,917 $ 29,846,407
CLASS B
FROM NET INVESTMENT INCOME $ 1,825,294 $ 1,818,282
IN EXCESS OF NET INTEREST INCOME 6,838 -
TOTAL $ 1,832,132 $ 1,818,282
INSTITUTIONAL CLASS
FROM NET INVESTMENT INCOME $ 60,493 $ 46,808
IN EXCESS OF NET INTEREST INCOME 169 -
TOTAL $ 60,662 $ 46,808
$ 24,226,783 $ 31,712,769
1. DISTRIBUTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
51. SHARE TRANSACTIONS.
Share transactions for each class of shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES DOLLARS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 A 1997 1996 A
CLASS A $ 3,663,457 $ 218,730
SHARES SOLD 307,664 18,733
REINVESTMENT OF DISTRIBUTIONS
3,770 78 45,120 910
SHARES REDEEMED (19,585) (1,632) (234,062) (19,114)
NET INCREASE (DECREASE) 291,849 17,179 $ 3,474,515 $ 200,526
CLASS T $ 26,303,589 $ 77,377,354
SHARES SOLD 2,221,421 6,539,718
REINVESTMENT OF DISTRIBUTIONS
1,143,394 1,597,120 13,582,690 18,850,193
SHARES REDEEMED (11,972,642) (14,847,912) (141,705,601) (174,513,587)
NET INCREASE (DECREASE) (8,607,827) (6,711,074) $ (101,819,322) $ (78,286,040)
CLASS B $ 8,459,000 $ 14,098,773
SHARES SOLD 713,815 1,193,226
REINVESTMENT OF DISTRIBUTIONS
90,487 95,237 1,073,258 1,121,011
SHARES REDEEMED (777,996) (664,327) (9,216,485) (7,798,479)
NET INCREASE (DECREASE) 26,306 624,136 $ 315,773 $ 7,421,305
INSTITUTIONAL CLASS $ 1,278,313 $ 1,653,013
SHARES SOLD 107,503 140,918
REINVESTMENT OF DISTRIBUTIONS
3,746 3,139 44,614 36,744
SHARES REDEEMED (65,730) (77,867) (779,289) (904,149)
NET INCREASE (DECREASE) 45,519 66,190 $ 543,638 $ 785,608
</TABLE>
1. SHARE TRANSACTIONS FOR CLASS A ARE FOR THE PERIOD SEPTEMBER 3, 1996
(COMMENCEMENT OF SALE OF SHARES) TO OCTOBER 31, 1996.
52. REGISTRATION FEES.
For the period, each class paid the following amounts to register its
shares for sale:
REGISTRATION
FEES
CLASS A $ 26,962
CLASS T 19,643
CLASS B 13,308
INSTITUTIONAL CLASS 13,760
$ 73,673
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series V and the Shareholders of
Fidelity Advisor Municipal Income Fund:
We have audited the accompanying statements of assets and liabilities
of Fidelity Advisor Series V: Fidelity Advisor Municipal Income Fund
(formerly Fidelity Advisor High Income Municipal Fund), including the
schedule of portfolio investments, as of October 31, 1997, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the
period then ended and the financial highlights of Class A, Class T,
Class B and Institutional Class for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Fidelity Advisor Series V: Fidelity Advisor
Municipal Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and the financial
highlights of Class A, Class T, Class B and Institutional Class for
each of the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 15, 1997
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
Robert C. Pozen, Senior Vice President
Fred L. Henning, Jr., Vice President
Dwight D. Churchill, Vice President
Arthur S. Loring, Secretary
Richard A. Silver, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
UMB Bank, n.a.
Kansas City, MO
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
CUSTODIAN
UMB Bank, n.a.
Kansas City, MO
FOCUS FUNDS
Fidelity Advisor Consumer
Industries Fund
Fidelity Advisor Cyclical
Industries Fund
Fidelity Advisor Financial
Services Fund
Fidelity Advisor Health Care Fund
Fidelity Advisor Natural
Resources Fund
Fidelity Advisor Technology Fund
Fidelity Advisor Utilities Growth Fund
GROWTH FUNDS
Fidelity Advisor International Capital Appreciation Fund
Fidelity Advisor Overseas Fund
Fidelity Advisor TechnoQuant
Growth Fund
SM
Fidelity Advisor Mid Cap Fund
Fidelity Advisor Equity Growth Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
Fidelity Advisor Large Cap Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Growth & Income Fund
Fidelity Advisor Equity Income Fund
Fidelity Advisor Balanced Fund
TAXABLE INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Mortgage
Securities Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Intermediate Bond Fund
Fidelity Advisor Short Fixed-Income Fund
MUNICIPAL FUNDS
Fidelity Advisor Municipal Income Fund
Fidelity Advisor Intermediate Municipal Income Fund
Fidelity Advisor Short-Intermediate Municipal Income Fund
MONEY MARKET FUNDS
Prime Fund
Treasury Fund
Tax-Exempt Fund
(REGISTERED TRADEMARK)