UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4707
Fidelity Advisor Series II
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | October 31 |
Date of reporting period: | October 31, 2003 |
Item 1. Reports to Stockholders
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Floating Rate High Income
Fund - Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Life of | |
Class A (incl. 3.75% sales charge) | 3.90% | 3.04% | |
Class T (incl. 2.75% sales charge) | 4.90% | 3.26% | |
Class B (incl. contingent deferred sales charge) B | 3.88% | 3.12% | |
Class C (incl. contingent deferred sales charge) C | 6.18% | 3.59% |
A From August 16, 2000.
B Class B shares' contingent deferred sales charges included in the past one year, and life of fund total return figures are 3.5%, and 2%, respectively.
C Class C shares' contingent deferred sales charge included in the past one year, and life of fund total return figures are 1%, and 0%, respectively.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Floating Rate High Income Fund - Class T on August 16, 2000, when the fund started, and the current 2.75% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the CSFB Leveraged Loan Index Plus did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Christine McConnell, Portfolio Manager of Fidelity® Advisor Floating Rate High Income Fund
Leveraged loans produced solid performance during the year that ended October 31, 2003, outperforming Treasuries and other investment-grade offerings, while underperforming high-yield bonds and equities. The CSFB Leveraged Loan Index Plus, a broad measure of this market, returned 13.17% for the past 12 months. The year began with the average price on bank loans trading at 96 cents on the dollar and new-loan yield spreads at LIBOR (London Interbank Offering Rate) +375 basis points with LIBOR floors of 3%. During the year, prices rallied to $100.50 bid and the yield spread narrowed to LIBOR +261 basis points. First-half performance was driven by a rally, or narrowing, in credit yield spreads while market technicals - loan supply and demand - drove second half performance. Market strength led to an unprecedented amount of opportunistic repricing amendments by issuers. The year-to-date total was $28 billion (28% of the S&P® Performing Loan Index) on 65 loans. Additionally, year-to-date loan repayments and refinancings equaled $57 billion.
For the year that ended October 31, 2003, Fidelity Advisor Floating Rate High Income Fund's Class A, Class T, Class B and Class C shares returned 7.95%, 7.87%, 7.38% and 7.18%, respectively. In comparison, the CSFB Leveraged Loan Index Plus returned 13.17%, while the LipperSM Loan Participation Funds Average returned 7.71%. Performance was helped by security selection in cable television provider Adelphia; overweighted positions in some strong performing utilities, such as Centerpoint and AES; and avoiding troubles in Safety Kleen, a waste management company. From a sector standpoint, underweighted positions in consumer cyclical companies - particularly autos, chemicals and asset-light service providers - helped performance, as did overweighting electric utilities. Conversely, a high cash position and being underweighted in the distressed and bankrupt categories detracted from relative performance. An underweighted position in rural cellular providers that were bailed out through high-yield bond refinancings also restrained returns.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
Nextel Finance Co. | 2.9 | 1.3 |
EchoStar DBS Corp. | 2.8 | 0.0 |
Qwest Corp. | 2.1 | 0.0 |
Tyco International Ltd. | 1.9 | 0.0 |
Charter Communications Operating LLC | 1.7 | 1.8 |
11.4 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Telecommunications | 10.2 | 7.2 |
Cable TV | 9.7 | 6.3 |
Healthcare | 7.7 | 7.4 |
Electric Utilities | 7.6 | 9.3 |
Publishing/Printing | 3.7 | 2.9 |
Quality Diversification (% of fund's net assets) as of October 31, 2003 | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
 | AAA,AA,A 0.0% | | AAA,AA,A 0.0% | ||||
 | BBB 3.8% | | BBB 4.3% | ||||
 | BB 43.2% | | BB 47.0% | ||||
 | B 20.4% | | B 20.0% | ||||
 | CCC,CC,C 0.8% | | CCC,CC,C 1.1% | ||||
 | D 0.1% | | D 0.0% | ||||
 | Not Rated 10.7% | | Not Rated 10.0% | ||||
 | Equities 0.0% | | Equities 0.0% | ||||
 | Short-Term | | Short-Term | ||||
We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Floating Rate | | Floating Rate | ||||
| Nonconvertible | | Nonconvertible | ||||
| Other Investments 0.1% | | Other Investments 0.1% | ||||
| Short-Term | | Short-Term | ||||
* Foreign | 4.1% | ** Foreign | 3.2% | ||||
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Floating Rate Loans (e) - 71.4% | ||||
Principal | Value (Note 1) | |||
Aerospace - 0.9% | ||||
DRS Technologies, Inc. term loan: | ||||
3.6957% 11/4/10 (d) | $ 1,150 | $ 1,150 | ||
4.1806% 9/30/08 (d) | 1,524 | 1,547 | ||
Titan Corp. Tranche B term loan 4.4302% 6/30/09 (d) | 2,963 | 2,963 | ||
Transdigm, Inc. term loan 4.13% 7/22/10 (d) | 1,600 | 1,614 | ||
United Defense Industries, Inc. Tranche B term loan 3.12% 8/13/09 (d) | 5,074 | 5,099 | ||
12,373 | ||||
Automotive - 1.4% | ||||
CSK Automotive, Inc. Tranche B term loan 3.87% 6/13/09 (d) | 1,000 | 1,010 | ||
Goodyear Dunlop Tire Europe BV term loan 5.13% 4/30/05 (d) | 2,000 | 1,970 | ||
SPX Corp. Tranche B term loan 3.4375% 9/30/09 (d) | 6,816 | 6,884 | ||
Travelcenters of America, Inc. term loan 4.3795% 11/14/08 (d) | 948 | 951 | ||
TRW Automotive Holdings Corp. Tranche C term loan 4.13% 2/28/11 (d) | 7,000 | 7,105 | ||
United Components, Inc. Tranche B term loan 4.38% 6/30/10 (d) | 3,000 | 3,030 | ||
20,950 | ||||
Broadcasting - 3.5% | ||||
Cumulus Media, Inc. Tranche C term loan 3.625% 3/28/10 (d) | 8,064 | 8,145 | ||
Emmis Communications Corp. Tranche B term loan 3.38% 8/31/09 (d) | 10,056 | 10,157 | ||
Granite Broadcasting Corp. Tranche A term loan 6.5% 4/30/04 (d) | 3,000 | 2,970 | ||
Gray Television, Inc. Tranche C term loan 3.396% 12/31/10 (d) | 4,000 | 4,030 | ||
LIN Television Corp. Tranche B term loan 3.1626% 12/31/07 (d) | 8,910 | 8,999 | ||
Nexstar Finance LLC Tranche B term loan 4.12% 12/31/10 (d) | 2,000 | 2,008 | ||
Paxson Communications Corp. Tranche B term loan 4.4298% 6/30/06 (d) | 4,455 | 4,488 | ||
Sinclair Broadcast Group, Inc.: | ||||
term loan 3.3518% 12/31/09 (d) | 6,900 | 6,969 | ||
Tranche A1 term loan 3.4375% 12/31/09 (d) | 2,284 | 2,307 | ||
50,073 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Building Materials - 0.1% | ||||
National Waterworks, Inc. Tranche B1 term loan 3.88% 11/22/09 (d) | $ 1,980 | $ 1,999 | ||
Cable TV - 6.9% | ||||
Adelphia Communications Corp. Tranche B term loan 4.6344% 6/25/04 (d) | 5,500 | 5,555 | ||
CC VIII Operating LLC Tranche B term loan 3.66% 2/2/08 (d) | 14,925 | 14,477 | ||
Century Cable Holdings LLC Tranche B term loan 6% 12/31/09 (d) | 2,750 | 2,448 | ||
Charter Communication Operating LLC: | ||||
term loan 3.91% 9/18/08 (d) | 4,433 | 4,277 | ||
Tranche B term loan 3.92% 3/18/08 (d) | 20,830 | 20,205 | ||
Comcast Corp. term loan 2.245% 11/20/06 (d) | 13,000 | 13,033 | ||
DIRECTV Holdings LLC Tranche B1 term loan 3.9573% 3/6/10 (d) | 18,300 | 18,437 | ||
Hilton Head Communications LP Tranche B term loan 5.25% 3/31/08 (d) | 3,000 | 2,595 | ||
Insight Midwest Holdings LLC Tranche B term loan: | ||||
3.9375% 12/31/09 (d) | 3,000 | 3,023 | ||
4% 12/31/09 (d) | 1,000 | 1,000 | ||
Mediacom Broadband LLC/Mediacom Broadband Corp. Tranche B term loan 3.62% 9/30/10 (d) | 2,000 | 2,015 | ||
Olympus Cable Holdings LLC Tranche B term loan 6% 9/30/10 (d) | 7,500 | 7,125 | ||
Parnassos LP term loan 6/30/07 (d) | 4,360 | 4,163 | ||
Pegasus Media & Communications, Inc. Tranche B term loan 4.625% 4/30/05 (d) | 536 | 523 | ||
United Pan-Europe Communications NV Tranche C term loan 6.65% 3/31/09 (d) | 1,000 | 970 | ||
99,846 | ||||
Capital Goods - 3.2% | ||||
Dresser, Inc. Tranche B term loan 5.89% 4/10/09 (d) | 3,487 | 3,539 | ||
Flowserve Corp. Tranche C term loan 3.9375% 6/30/09 (d) | 2,607 | 2,623 | ||
Kansas City Southern Railway Co. Tranche B term loan 3.6548% 6/12/08 (d) | 2,180 | 2,191 | ||
Mueller Group, Inc. Tranche E term loan 3.8862% 5/31/08 (d) | 1,975 | 1,985 | ||
Terex Corp. term loan: | ||||
3.1238% 7/3/09 (d) | 6,454 | 6,454 | ||
3.7425% 12/31/09 (d) | 2,448 | 2,454 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Capital Goods - continued | ||||
TriMas Corp. Tranche B term loan 4.4% 12/31/09 (d) | $ 876 | $ 876 | ||
Tyco International Ltd. revolver loan 4.245% 2/6/06 (d) | 27,000 | 26,899 | ||
47,021 | ||||
Chemicals - 1.2% | ||||
CP Kelco: | ||||
Tranche B term loan 5.14% 3/31/08 (d) | 303 | 305 | ||
Tranche C term loan 5.39% 9/30/08 (d) | 101 | 102 | ||
Equistar Chemicals LP/Equistar Funding Corp. term loan 4.62% 8/24/07 (d) | 615 | 618 | ||
Geo Specialty Chemicals, Inc. Tranche B term loan 7.1875% 12/31/07 (d) | 1,149 | 804 | ||
Georgia Gulf Corp. Tranche C term loan 3.37% 5/12/09 (d) | 1,094 | 1,102 | ||
Huntsman ICI Chemicals LLC: | ||||
Tranche B term loan 5.216% 6/30/07 (d) | 4,645 | 4,656 | ||
Tranche C term loan 5.4375% 6/30/08 (d) | 4,645 | 4,656 | ||
Messer Griesheim Holding AG: | ||||
Tranche B2 term loan 3.8963% 4/28/09 (d) | 702 | 705 | ||
Tranche C2 term loan 4.3963% 4/28/10 (d) | 1,010 | 1,015 | ||
Millennium America, Inc. term loan 4.1875% 6/18/06 (d) | 1,313 | 1,316 | ||
Noveon International, Inc. Tranche B term loan 3.9375% 12/31/09 (d) | 2,790 | 2,811 | ||
18,090 | ||||
Consumer Products - 2.5% | ||||
Armkel LLC Tranche B term loan 4.125% 3/28/09 (d) | 816 | 822 | ||
Central Garden & Pet Co. Tranche B term loan 3.87% 5/14/09 (d) | 998 | 1,005 | ||
Church & Dwight Co., Inc. Tranche B term loan 3.38% 9/30/07 (d) | 7,000 | 7,088 | ||
Jostens, Inc. term loan 3.64% 7/29/10 (d) | 5,000 | 5,019 | ||
Playtex Products, Inc. Tranche C term loan 4.6584% 5/31/09 (d) | 2,955 | 2,940 | ||
Revlon Consumer Products Corp. term loan 8.25% 5/30/05 (d) | 989 | 979 | ||
Sealy Mattress Co.: | ||||
Tranche B term loan 3.25% 12/15/04 (d) | 787 | 789 | ||
Tranche C term loan 3.5% 12/15/05 (d) | 1,053 | 1,056 | ||
Tranche D term loan 3.75% 12/15/06 (d) | 1,346 | 1,350 | ||
Tempur Pedic, Inc. Tranche B term loan 4.64% 6/30/09 (d) | 1,995 | 2,005 | ||
The Scotts Co. term loan 3.125% 9/30/10 (d) | 9,000 | 9,113 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Consumer Products - continued | ||||
Weight Watchers International, Inc.: | ||||
Tranche B term loan 3.38% 12/31/09 (d) | $ 3,624 | $ 3,661 | ||
Tranche C term loan 3.44% 12/31/09 (d) | 465 | 467 | ||
36,294 | ||||
Containers - 2.5% | ||||
Ball Corp. Tranche B term loan 3.39% 12/19/09 (d) | 2,944 | 2,944 | ||
Berry Plastics Corp. term loan 4.1294% 6/30/10 (d) | 1,980 | 2,000 | ||
Crown Cork & Seal Americas, Inc. Tranche B term loan 4.14% 9/15/08 (d) | 2,000 | 2,030 | ||
Owens Illinois Group, Inc.: | ||||
Tranche A term loan 4.4% 4/1/07 (d) | 10,000 | 10,025 | ||
Tranche B term loan 4.4% 4/1/08 (d) | 9,200 | 9,246 | ||
Printpack Holdings, Inc. Tranche B term loan 3.875% 3/31/09 (d) | 980 | 983 | ||
Silgan Holdings, Inc. Tranche B term loan 3.4% 11/30/08 (d) | 8,955 | 9,000 | ||
36,228 | ||||
Diversified Media - 1.6% | ||||
Blockbuster, Inc. Tranche B term loan 2.4114% 7/1/04 (d) | 1,400 | 1,398 | ||
CanWest Media, Inc. Tranche D term loan 3.88% 5/15/09 (d) | 2,000 | 2,020 | ||
Cinram International, Inc. Tranche B term loan 6.75% 9/30/09 (d) | 1,000 | 999 | ||
Lamar Media Corp. Tranche B term loan 3.4375% 6/30/10 (d) | 9,500 | 9,595 | ||
Vivendi Universal Entertainment LLC term loan 3.9123% 9/30/08 (d) | 9,000 | 9,079 | ||
23,091 | ||||
Electric Utilities - 7.1% | ||||
AES Corp. term loan 5.2643% 4/30/08 (d) | 18,000 | 18,180 | ||
Allegheny Energy Supply Co. LLC Tranche 1 term loan 7.12% 9/30/04 (d) | 4,235 | 4,266 | ||
Aquila Networks Canada Corp. term loan 6.75% 7/30/04 (d) | 7,000 | 7,000 | ||
Aquila, Inc. term loan 8.75% 5/15/06 (d) | 683 | 696 | ||
Calpine Corp. Tranche B1 term loan 4.6875% 7/15/07 (d) | 2,993 | 3,000 | ||
Centerpoint Energy House Electric LLC term loan 12.75% 11/11/05 (d) | 15,000 | 17,100 | ||
CenterPoint Energy, Inc. term loan 4.6875% 10/7/06 (d) | 3,000 | 3,026 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Electric Utilities - continued | ||||
Michigan Electric Transmission Co. LLC term loan 3.62% 5/1/07 (d) | $ 346 | $ 347 | ||
Northwestern Corp. term loan 8.75% 12/1/06 (d) | 988 | 992 | ||
Pacific Gas & Electric Co. revolver loan 8.75% 3/31/04 (d) | 21,395 | 21,609 | ||
Reliant Resources, Inc. Tranche A term loan 5.27% 3/15/07 (d) | 1,622 | 1,444 | ||
Southern California Edison Co. Tranche B term loan 4.1875% 3/1/05 (d) | 16,782 | 16,950 | ||
Tucson Electric Power Co. Tranche B term loan 6.62% 11/14/06 (d) | 1,700 | 1,709 | ||
Western Resources, Inc. term loan 4.12% 6/6/05 (d) | 6,392 | 6,424 | ||
102,743 | ||||
Energy - 2.0% | ||||
A.T. Massey Coal Co., Inc. term loan 4.62% 1/1/07 (d) | 998 | 998 | ||
Citgo Petroleum Corp. term loan 8.25% 2/27/06 (d) | 1,000 | 1,030 | ||
Parker Drilling Co. term loan 7.25% 10/10/07 (d) | 500 | 503 | ||
PMC (Nova Scotia) Co. term loan 3.37% 5/5/06 (d) | 2,760 | 2,757 | ||
Premcor Refining Group, Inc. term loan 4.34% 2/11/06 (d) | 2,000 | 2,020 | ||
Pride Offshore, Inc. term loan 4.6799% 6/20/07 (d) | 1,182 | 1,185 | ||
Tesoro Petroleum Corp. term loan 6.585% 4/15/08 (d) | 1,990 | 2,040 | ||
WEG Acquisitions LP term loan 5.6101% 6/17/08 (d) | 3,600 | 3,636 | ||
Williams Energy Partners LP Tranche B term loan 3.555% 8/6/08 (d) | 3,900 | 3,920 | ||
Williams Production RMT Co. term loan 4.9% 5/30/07 (d) | 11,721 | 11,867 | ||
29,956 | ||||
Entertainment/Film - 0.7% | ||||
Cinemark USA, Inc. term loan 5.5% 3/31/08 (d) | 4,160 | 4,201 | ||
Regal Cinemas Corp. Tranche D term loan 3.6875% 6/30/09 (d) | 5,884 | 5,943 | ||
10,144 | ||||
Environmental - 1.4% | ||||
Allied Waste Industries, Inc.: | ||||
term loan 4.3926% 1/15/10 (d) | 8,746 | 8,878 | ||
Tranche A term loan 4.37% 1/15/10 (d) | 1,143 | 1,159 | ||
Tranche C term loan 4.14% 1/15/10 (d) | 3,000 | 3,038 | ||
Casella Waste Systems, Inc. Tranche B term loan 3.9063% 1/24/10 (d) | 3,000 | 3,004 | ||
IESI Corp. term loan 4.25% 9/30/10 (d) | 2,000 | 2,020 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Environmental - continued | ||||
Stericycle, Inc. Tranche B term loan 3.37% 9/5/07 (d) | $ 485 | $ 488 | ||
Waste Connections, Inc. term loan 3.1375% 10/22/10 (d) | 2,000 | 2,020 | ||
20,607 | ||||
Food and Drug Retail - 0.7% | ||||
Rite Aid Corp. term loan 4.12% 4/30/08 (d) | 10,000 | 10,175 | ||
Food/Beverage/Tobacco - 2.1% | ||||
B&G Foods, Inc. term loan 4.3701% 8/31/09 (d) | 3,000 | 3,030 | ||
Commonwealth Brands, Inc. term loan 5.1875% 8/28/07 (d) | 748 | 751 | ||
Constellation Brands, Inc. Tranche B term loan 5% 11/30/08 (d) | 3,125 | 3,156 | ||
Del Monte Corp. Tranche B term loan 4.9143% 12/20/10 (d) | 4,963 | 5,037 | ||
Merisant Co. Tranche B term loan 3.89% 1/11/10 (d) | 1,511 | 1,524 | ||
National Dairy Holdings LP Tranche B term loan 3.37% 4/30/09 (d) | 2,733 | 2,737 | ||
NBTY, Inc. Tranche B term loan 3.6875% 7/25/09 (d) | 1,995 | 2,015 | ||
Nellson Nutraceutical, Inc. Tranche B term loan 4.14% 10/4/09 (d) | 994 | 1,005 | ||
Reddy Ice Group, Inc. term loan 4.12% 8/15/09 (d) | 800 | 807 | ||
Suiza Foods Corp. Tranche B1 term loan 3.14% 7/15/08 (d) | 9,992 | 10,080 | ||
30,142 | ||||
Gaming - 1.5% | ||||
Alliance Gaming Corp. term loan 3.96% 9/5/09 (d) | 4,750 | 4,786 | ||
Ameristar Casinos, Inc. Tranche B term loan 3.875% 12/20/06 (d) | 2,657 | 2,677 | ||
Argosy Gaming Co. Tranche B term loan 3.89% 7/31/08 (d) | 2,642 | 2,652 | ||
Boyd Gaming Corp. term loan 3.1395% 6/24/08 (d) | 1,481 | 1,489 | ||
Mandalay Resort Group term loan 2.9375% 8/21/06 (d) | 2,000 | 1,998 | ||
Marina District Finance Co., Inc. Tranche B term loan 5.1373% 12/13/07 (d) | 3,000 | 3,030 | ||
Penn National Gaming, Inc. Tranche B term loan 4.6418% 9/1/07 (d) | 2,985 | 3,007 | ||
Venetian Casino Resort LLC Tranche B term loan 4.14% 6/4/08 (d) | 2,666 | 2,693 | ||
22,332 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - 7.7% | ||||
Accredo Health, Inc. Tranche B term loan 3.88% 3/31/09 (d) | $ 985 | $ 994 | ||
ALARIS Medical Systems, Inc. term loan 3.8701% 6/30/09 (d) | 834 | 846 | ||
Alliance Imaging, Inc. Tranche C term loan 3.5533% 6/10/08 (d) | 838 | 833 | ||
Alpharma, Inc. Tranche B term loan 4.4485% 7/31/08 (d) | 1,669 | 1,671 | ||
AmeriPath, Inc. term loan 5.62% 3/27/10 (d) | 2,985 | 2,978 | ||
AMN Healthcare, Inc. Tranche B term loan 4.16% 10/2/08 (d) | 1,050 | 1,059 | ||
Apria Healthcare Group, Inc. Tranche B term loan 3.14% 7/20/08 (d) | 2,960 | 2,971 | ||
Beverly Enterprises, Inc. term loan 4.4182% 10/22/08 (d) | 2,000 | 2,023 | ||
Caremark Rx, Inc. term loan 3.38% 3/31/06 (d) | 3,940 | 3,950 | ||
Community Health Systems, Inc. term loan: | ||||
3.64% 7/16/10 (d) | 6,049 | 6,109 | ||
3.64% 1/16/11 (d) | 4,500 | 4,545 | ||
Concentra Operating Corp. term loan 4.9204% 6/30/09 (d) | 1,995 | 2,012 | ||
CONMED Corp. Tranche B term loan 3.8776% 12/15/09 (d) | 998 | 1,007 | ||
Connecticare Capital LLC term loan 5.023% 10/29/09 (d) | 2,000 | 2,018 | ||
DaVita, Inc. Tranche B term loan 3.6398% 3/31/09 (d) | 15,957 | 16,077 | ||
Express Scripts, Inc. Tranche B term loan 3.128% 3/31/07 (d) | 2,308 | 2,316 | ||
Fisher Scientific International, Inc.: | ||||
term loan 3.6405% 3/31/10 (d) | 2,130 | 2,154 | ||
Tranche B term loan 3.3896% 3/31/10 (d) | 4,520 | 4,559 | ||
Fresenius Medical Care Holdings, Inc. Tranche C term loan 3.39% 2/21/10 (d) | 6,983 | 7,052 | ||
Genesis Health Ventures, Inc. Tranche B term loan 4.62% 3/31/07 (d) | 1,322 | 1,322 | ||
Hanger Orthopedic Group, Inc. Tranche B term loan 3.87% 9/30/09 (d) | 2,950 | 2,983 | ||
HCA, Inc. term loan 2.12% 4/30/06 (d) | 5,341 | 5,274 | ||
IASIS Healthcare Corp. Tranche B term loan 5.4% 2/7/09 (d) | 1,845 | 1,868 | ||
Kinetic Concepts, Inc. Tranche B term loan 3.89% 8/11/10 (d) | 5,686 | 5,750 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - continued | ||||
Medco Health Solutions, Inc. Tranche B term loan 3.43% 6/30/10 (d) | $ 8,000 | $ 8,080 | ||
Oxford Health Plans, Inc. term loan 4.5656% 4/30/09 (d) | 1,990 | 1,997 | ||
PacifiCare Health Systems, Inc. term loan 4.63% 6/3/08 (d) | 3,990 | 4,030 | ||
Sybron Dental Management, Inc. term loan 3.6357% 6/6/09 (d) | 1,032 | 1,035 | ||
Triad Hospitals, Inc.: | ||||
Tranche A term loan 3.12% 3/31/07 (d) | 720 | 720 | ||
Tranche B term loan 4.12% 9/30/08 (d) | 9,782 | 9,831 | ||
Vanguard Health Systems, Inc. Tanche B term loan 5.4375% 1/3/10 (d) | 1,985 | 1,995 | ||
Ventas Realty LP/Ventas Capital Corp. Tranche B term loan 3.62% 4/17/07 (d) | 988 | 990 | ||
111,049 | ||||
Homebuilding/Real Estate - 0.7% | ||||
AIMCO Properties LP term loan 3.78% 3/11/04 (d) | 1,096 | 1,103 | ||
Apartment Investment & Management Co. term loan 3.89% 5/29/08 (d) | 4,000 | 4,035 | ||
CB Richard Ellis Services, Inc. term loan 4.4145% 12/31/08 (d) | 3,000 | 3,023 | ||
Corrections Corp. of America Tranche C term loan 3.88% 3/31/08 (d) | 1,358 | 1,375 | ||
9,536 | ||||
Hotels - 0.7% | ||||
Extended Stay America, Inc.: | ||||
Tranche A3 term loan 4.12% 7/24/07 (d) | 973 | 975 | ||
Tranche B term loan 4.87% 1/15/08 (d) | 2,323 | 2,349 | ||
Starwood Hotels & Resorts Worldwide, Inc. term loan 2.995% 10/9/06 (d) | 2,000 | 1,998 | ||
Wyndham International, Inc. term loan: | ||||
5.875% 4/1/06 (d) | 3,990 | 3,771 | ||
5.875% 6/30/06 (d) | 1,838 | 1,691 | ||
10,784 | ||||
Insurance - 0.4% | ||||
Conseco, Inc.: | ||||
Tranche A term loan 6.38% 9/10/09 (d) | 3,077 | 3,073 | ||
Tranche B term loan 9.5% 9/10/10 (d) | 923 | 922 | ||
USI Holdings Corp. term loan 4.16% 8/11/09 (d) | 1,995 | 2,005 | ||
6,000 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Leisure - 0.6% | ||||
Six Flags Theme Park, Inc. Tranche B term loan 3.37% 6/30/09 (d) | $ 8,000 | $ 8,010 | ||
Vail Corp. term loan 3.91% 12/10/08 (d) | 995 | 1,006 | ||
9,016 | ||||
Metals/Mining - 0.2% | ||||
Compass Minerals Group, Inc. Tranche B term loan 3.6702% 11/28/09 (d) | 392 | 396 | ||
Peabody Energy Corp. term loan 3.6379% 3/21/10 (d) | 2,985 | 3,015 | ||
3,411 | ||||
Paper - 3.0% | ||||
Georgia-Pacific Corp. term loan 3.345% 11/28/05 (d) | 5,000 | 5,000 | ||
Graphic Packaging International, Inc. Tranche B term loan 3.8936% 8/8/10 (d) | 15,600 | 15,795 | ||
Jefferson Smurfit Corp. Tranche B term loan 4.4375% 3/31/07 (d) | 3,569 | 3,600 | ||
Jefferson Smurfit Corp. U.S.: | ||||
revolver loan 3.9316% 3/31/05 (d) | 527 | 519 | ||
Tranche B term loan 3.9% 9/16/10 (d) | 500 | 503 | ||
Tranche C term loan 4.4% 9/16/11 (d) | 500 | 503 | ||
Stone Container Corp.: | ||||
Tranche B term loan 3.6875% 6/30/09 (d) | 14,293 | 14,418 | ||
Tranche C term loan 3.6875% 6/30/09 (d) | 2,708 | 2,732 | ||
43,070 | ||||
Publishing/Printing - 3.7% | ||||
Advanstar Communications, Inc. Tranche B term loan 5.64% 10/11/07 (d) | 188 | 188 | ||
American Media Operations, Inc. Tranche C1 term loan 3.91% 4/1/07 (d) | 2,729 | 2,749 | ||
CBD Media, Inc. Tranche B term loan 4.38% 12/31/09 (d) | 3,172 | 3,208 | ||
Dex Media East LLC/Dex Media East Finance Co.: | ||||
Tranche A term loan 3.6554% 12/31/08 (d) | 5,000 | 5,025 | ||
Tranche B term loan 5.1293% 11/8/09 (d) | 2,652 | 2,679 | ||
Dex Media West LLC/Dex Media West Finance Co.: | ||||
Tranche A term loan 3.9026% 9/9/09 (d) | 5,897 | 5,948 | ||
Tranche B term loan 3.8951% 9/9/10 (d) | 14,500 | 14,663 | ||
Medianews Group, Inc. Tranche B term loan 3.875% 12/31/06 (d) | 2,000 | 2,005 | ||
Moore Holdings USA, Inc. Tranche B term loan 3.6375% 3/15/10 (d) | 2,993 | 2,996 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Publishing/Printing - continued | ||||
Morris Publishing Group LLC/Morris Publishing Finance Co. Tranche B term loan 3.375% 3/31/11 (d) | $ 3,000 | $ 3,030 | ||
R.H. Donnelly Corp. Tranche B term loan 5.1452% 6/30/10 (d) | 3,226 | 3,282 | ||
Reader's Digest Association, Inc.: | ||||
Tranche A term loan 4.1927% 5/20/07 (d) | 1,000 | 1,001 | ||
Tranche B term loan 4.2375% 5/20/08 (d) | 2,793 | 2,793 | ||
Sun Media Corp. Canada Tranche B term loan 3.66% 2/7/09 (d) | 1,915 | 1,925 | ||
Transwestern Publishing Co. LP/Township Capital Corp. II Tranche B term loan 4.169% 6/27/08 (d) | 1,150 | 1,153 | ||
52,645 | ||||
Restaurants - 0.5% | ||||
AFC Enterprises, Inc. Tranche B term loan 4.1875% 5/23/09 (d) | 1,017 | 1,017 | ||
Buffets, Inc. term loan 4.6047% 6/28/09 (d) | 692 | 694 | ||
Domino's, Inc. term loan 4.125% 6/25/10 (d) | 4,410 | 4,465 | ||
Jack in the Box, Inc. Tranche B term loan 4.3967% 7/22/07 (d) | 1,489 | 1,504 | ||
7,680 | ||||
Services - 1.3% | ||||
Coinmach Corp. Tranche B term loan 3.9249% 7/25/09 (d) | 2,254 | 2,271 | ||
CSG Systems International, Inc. Tranche B term loan 3.9298% 2/28/08 (d) | 3,851 | 3,774 | ||
Iron Mountain, Inc. Tranche B term loan 3.3996% 2/15/08 (d) | 4,980 | 5,030 | ||
JohnsonDiversey, Inc. Tranche B term loan 3.8644% 11/3/09 (d) | 1,590 | 1,610 | ||
United Rentals, Inc. term loan 4.1488% 10/7/07 (d) | 852 | 856 | ||
Wackenhut Corrections Corp. term loan 4.1337% 7/9/09 (d) | 1,975 | 1,995 | ||
Worldspan LP Tranche B term loan 4.8942% 6/30/07 (d) | 3,000 | 2,996 | ||
18,532 | ||||
Steels - 0.2% | ||||
International Steel Group, Inc.: | ||||
Tranche A term loan 4.87% 5/5/05 (d) | 365 | 364 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Steels - continued | ||||
International Steel Group, Inc.: - continued | ||||
Tranche B term loan 5.12% 5/7/07 (d) | $ 599 | $ 596 | ||
Steel Dynamics, Inc. Tranche B term loan 4.1565% 3/26/08 (d) | 1,970 | 1,995 | ||
2,955 | ||||
Super Retail - 0.7% | ||||
Advance Stores Co., Inc. Tranche C term loan 3.8846% 11/30/07 (d) | 2,009 | 2,029 | ||
Hollywood Entertainment Corp. Tranche B term loan 4.62% 3/31/08 (d) | 2,763 | 2,784 | ||
Oriental Trading Co., Inc. Tranche B term loan 3.9375% 8/4/10 (d) | 2,173 | 2,178 | ||
PETCO Animal Supplies, Inc. Tranche D term loan 3.64% 10/2/08 (d) | 1,459 | 1,473 | ||
Rent-A-Center, Inc. term loan 3.3788% 5/28/09 (d) | 1,995 | 2,012 | ||
10,476 | ||||
Technology - 2.6% | ||||
Alliant Techsystems, Inc. Tranche C term loan 3.4927% 4/20/09 (d) | 4,158 | 4,199 | ||
AMI Semiconductor, Inc. term loan 3.62% 9/26/08 (d) | 2,400 | 2,424 | ||
Amphenol Corp. Tranche B term loan 3.6428% 5/6/10 (d) | 6,608 | 6,674 | ||
Fairchild Semiconductor Corp. term loan 3.6875% 6/19/08 (d) | 4,988 | 5,025 | ||
Global Imaging Systems, Inc. term loan 4.1586% 6/25/09 (d) | 998 | 1,007 | ||
Loral Satellite, Inc. term loan 1/7/05 (d) | 708 | 690 | ||
Loral Space & Communications Ltd. term loan 5.25% 1/7/05 (d) | 2,000 | 1,975 | ||
Loral Spacecom Corp. revolver loan 5.25% 1/7/05 (d) | 385 | 380 | ||
Seagate Technology Holdings, Inc. term loan 3.125% 5/13/07 (d) | 1,980 | 1,995 | ||
Semiconductor Components Industries LLC Tranche D term loan 5.1875% 8/4/07 (d) | 3,000 | 3,008 | ||
Xerox Corp. term loan 3.39% 9/30/08 (d) | 10,000 | 10,025 | ||
37,402 | ||||
Telecommunications - 9.7% | ||||
American Tower LP: | ||||
Tranche A term loan 3.3991% 6/30/07 (d) | 14,421 | 14,385 | ||
Tranche B term loan 4.6101% 12/31/07 (d) | 7,648 | 7,705 | ||
Centennial Puerto Rico Operations Corp.: | ||||
Tranche B term loan 4.4355% 5/31/07 (d) | 1,183 | 1,183 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Telecommunications - continued | ||||
Centennial Puerto Rico Operations Corp.: - continued | ||||
Tranche C term loan 4.6892% 11/30/07 (d) | $ 817 | $ 817 | ||
Cincinnati Bell, Inc.: | ||||
Tranche A term loan 4.8814% 11/9/04 (d) | 233 | 234 | ||
Tranche C term loan 4.8702% 6/29/07 (d) | 787 | 791 | ||
Crown Castle International Corp. Tranche A term loan 3.64% 9/15/07 (d) | 650 | 651 | ||
Crown Castle Operating Co. Tranche B term loan 4.65% 9/30/10 (d) | 13,463 | 13,563 | ||
Dobson Cellular Systems, Inc. term loan 6.25% 3/31/10 (d) | 7,000 | 7,079 | ||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (d) | 12,181 | 12,211 | ||
Tranche C term loan 4.8125% 12/31/08 (d) | 12,181 | 12,211 | ||
Tranche D term loan 4.1875% 3/31/09 (d) | 18,060 | 18,150 | ||
Qwest Corp. Tranche A term loan 6.5% 6/30/07 (d) | 29,000 | 29,834 | ||
Qwest Services Corp. Tranche Q revolver loan 4.638% 5/3/05 (d) | 3,125 | 3,094 | ||
Rural Cellular Corp.: | ||||
Tranche B term loan 4.63% 10/3/08 (d) | 2,441 | 2,444 | ||
Tranche C term loan 4.84% 4/3/09 (d) | 2,441 | 2,444 | ||
SpectraSite Communications, Inc. Tranche A term loan 3.4923% 6/30/07 (d) | 6,750 | 6,758 | ||
Western Wireless Corp.: | ||||
Tranche A term loan 3.44% 3/31/08 (d) | 1,950 | 1,911 | ||
Tranche B term loan 4.478% 9/30/08 (d) | 5,073 | 5,073 | ||
140,538 | ||||
Textiles & Apparel - 0.1% | ||||
William Carter Co. Tranche C term loan 5.5% 9/30/08 (d) | 851 | 851 | ||
TOTAL FLOATING RATE LOANS (Cost $1,026,021) | 1,036,009 | |||
Nonconvertible Bonds - 7.5% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Broadcasting - 0.2% | ||||
Radio One, Inc. 8.875% 7/1/11 | $ 2,000 | $ 2,190 | ||
Cable TV - 2.8% | ||||
EchoStar DBS Corp.: | ||||
4.41% 10/1/08 (c)(d) | 38,000 | 38,940 | ||
10.375% 10/1/07 | 1,965 | 2,169 | ||
41,109 | ||||
Capital Goods - 0.2% | ||||
Tyco International Group SA yankee 6.375% 2/15/06 | 3,000 | 3,176 | ||
Chemicals - 0.3% | ||||
Huntsman Advanced Materials LLC 10% 7/15/08 (c)(d) | 1,310 | 1,349 | ||
Methanex Corp. yankee 7.75% 8/15/05 | 3,000 | 3,158 | ||
4,507 | ||||
Containers - 0.1% | ||||
Owens-Brockway Glass Container, Inc. 8.875% 2/15/09 | 2,000 | 2,160 | ||
Diversified Media - 0.7% | ||||
Liberty Media Corp. 2.64% 9/17/06 (d) | 10,000 | 10,006 | ||
Electric Utilities - 0.5% | ||||
Allegheny Energy, Inc. 7.75% 8/1/05 | 1,000 | 1,015 | ||
Pacific Gas & Electric Co.: | ||||
6.75% 10/1/23 | 285 | 291 | ||
7.05% 3/1/24 | 1,000 | 1,020 | ||
Power Contract Financing LLC 5.2% 2/1/06 (c) | 1,100 | 1,097 | ||
Southern California Edison Co.: | ||||
5.875% 9/1/04 | 1,250 | 1,281 | ||
8% 2/15/07 | 2,000 | 2,240 | ||
6,944 | ||||
Energy - 1.6% | ||||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 2,000 | 2,145 | ||
Chesapeake Energy Corp. 7.875% 3/15/04 | 4,000 | 4,190 | ||
Dynegy Holdings, Inc. 7.7% 7/15/08 (c)(d) | 2,000 | 2,100 | ||
Pemex Project Funding Master Trust: | ||||
2.65% 1/7/05 (c)(d) | 2,000 | 2,011 | ||
2.95% 10/15/09 (c)(d) | 3,000 | 3,008 | ||
Pride International, Inc. 10% 6/1/09 | 3,000 | 3,210 | ||
Pride Petroleum Services, Inc. 9.375% 5/1/07 | 538 | 565 | ||
Southern Natural Gas Co. 8.875% 3/15/10 | 840 | 918 | ||
The Coastal Corp. 6.2% 5/15/04 | 2,000 | 1,995 | ||
Nonconvertible Bonds - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Energy - continued | ||||
Transcontinental Gas Pipe Line Corp. 8.875% 7/15/12 | $ 2,000 | $ 2,343 | ||
Williams Companies, Inc. 9.25% 3/15/04 | 400 | 409 | ||
22,894 | ||||
Hotels - 0.1% | ||||
ITT Corp. 6.75% 11/15/03 | 2,000 | 2,008 | ||
Publishing/Printing - 0.0% | ||||
CBD Media LLC/ CBD Finance, Inc. 8.625% 6/1/11 (c) | 430 | 461 | ||
Shipping - 0.4% | ||||
General Maritime Corp. 10% 3/15/13 | 3,000 | 3,360 | ||
Teekay Shipping Corp. yankee 8.32% 2/1/08 | 2,000 | 2,160 | ||
5,520 | ||||
Technology - 0.1% | ||||
IOS Capital LLC 7.25% 6/30/08 | 1,000 | 995 | ||
Telecommunications - 0.5% | ||||
British Telecommunications PLC 2.445% 12/15/03 (d) | 3,000 | 3,004 | ||
Mobile Telesystems Finance SA 5.1413% 8/5/04 (c)(d) | 1,000 | 998 | ||
U.S. West Communications 7.2% 11/1/04 | 3,000 | 3,075 | ||
7,077 | ||||
TOTAL NONCONVERTIBLE BONDS (Cost $106,268) | 109,047 | |||
Commercial Mortgage Securities - 0.1% | ||||
CS First Boston Mortgage Securities Corp. Series 2000-FL1A Class F, 4.1174% 12/15/09 (c)(d) | 679 | 636 | ||
Common Stocks - 0.0% | |||
Shares | |||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 45 | 0 | |
Electric Utilities - 0.0% | |||
Reliant Resources, Inc.: | |||
warrants 5/16/10 (a) | 1,823 | 0 | |
warrants 5/15/11 (a) | 1,458 | 0 | |
TOTAL COMMON STOCKS (Cost $0) | 0 | |||
Money Market Funds - 24.0% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 1.07% (b) | 224,077,719 | $ 224,078 | |
Fidelity Money Market Central Fund, 1.16% (b) | 123,954,080 | 123,954 | |
TOTAL MONEY MARKET FUNDS (Cost $348,032) | 348,032 | ||
Cash Equivalents - 0.3% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.01%, dated 10/31/03 due 11/3/03) | $ 4,402 | 4,402 | |
TOTAL INVESTMENT PORTFOLIO - 103.3% (Cost $1,485,380) | 1,498,126 | ||
NET OTHER ASSETS - (3.3)% | (47,213) | ||
NET ASSETS - 100% | $ 1,450,913 | ||
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $50,601,000 or 3.5% of net assets. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Remaining maturities of floating rate loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,031,695,000 and $360,130,000, respectively. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $11,146,000 of which $5,000, $818,000, $8,246,000 and $2,077,000 will expire on October 31, 2008, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $4,402) (cost $1,485,380) - See accompanying schedule | $ 1,498,126 | |
Cash | 515 | |
Receivable for investments sold | 2,255 | |
Receivable for fund shares sold | 11,200 | |
Interest receivable | 5,345 | |
Redemption fees receivable | 3 | |
Prepaid expenses | 5 | |
Total assets | 1,517,449 | |
Liabilities | ||
Payable for investments purchased | $ 59,878 | |
Payable for fund shares redeemed | 4,714 | |
Distributions payable | 606 | |
Accrued management fee | 778 | |
Distribution fees payable | 285 | |
Other payables and accrued expenses | 275 | |
Total liabilities | 66,536 | |
Net Assets | $ 1,450,913 | |
Net Assets consist of: | ||
Paid in capital | $ 1,446,078 | |
Undistributed net investment income | 3,419 | |
Accumulated undistributed net realized gain (loss) on investments | (11,330) | |
Net unrealized appreciation (depreciation) on investments | 12,746 | |
Net Assets | $ 1,450,913 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Calculation of Maximum Offering Price | $ 9.88 | |
Maximum offering price per share (100/96.25 of $9.88) | $ 10.26 | |
Class T: | $ 9.87 | |
Maximum offering price per share (100/97.25 of $9.87) | $ 10.15 | |
Class B: | $ 9.87 | |
Class C: | $ 9.87 | |
Fidelity Floating Rate High Income Fund: | $ 9.87 | |
Institutional Class: | $ 9.86 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended October 31, 2003 | |
Investment Income | ||
Interest | $ 33,595 | |
Expenses | ||
Management fee | $ 5,513 | |
Transfer agent fees | 1,103 | |
Distribution fees | 2,962 | |
Accounting fees and expenses | 315 | |
Non-interested trustees' compensation | 3 | |
Custodian fees and expenses | 48 | |
Registration fees | 205 | |
Audit | 60 | |
Legal | 74 | |
Miscellaneous | 11 | |
Total expenses before reductions | 10,294 | |
Expense reductions | (30) | 10,264 |
Net investment income (loss) | 23,331 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 279 | |
Change in net unrealized appreciation (depreciation) on investment securities | 31,433 | |
Net gain (loss) | 31,712 | |
Net increase (decrease) in net assets resulting from operations | $ 55,043 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 23,331 | $ 17,114 |
Net realized gain (loss) | 279 | (8,480) |
Change in net unrealized appreciation (depreciation) | 31,433 | (7,489) |
Net increase (decrease) in net assets resulting | 55,043 | 1,145 |
Distributions to shareholders from net investment income | (23,105) | (16,398) |
Share transactions - net increase (decrease) | 917,582 | (9,652) |
Redemption fees | 181 | 60 |
Total increase (decrease) in net assets | 949,701 | (24,845) |
Net Assets | ||
Beginning of period | 501,212 | 526,057 |
End of period (including undistributed net investment income of $3,419 and undistributed net investment income of $855, respectively) | $ 1,450,913 | $ 501,212 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .292 | .352 | .580 | .136 |
Net realized and unrealized gain (loss) | .447 | (.264) | (.185) | (.047) |
Total from investment operations | .739 | 088 | .395 | .089 |
Distributions from net investment income | (.311) | (.339) | (.638) | (.150) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.88 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.95% | .90% | 4.08% | .90% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.10% | 1.12% | 1.14% | 1.75% A |
Expenses net of voluntary waivers, if any | 1.10% | 1.10% | .99% | .78% A |
Expenses net of all reductions | 1.09% | 1.09% | .98% | .78% A |
Net investment income (loss) | 3.04% | 3.64% | 5.93% | 7.21% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 88 | $ 37 | $ 41 | $ 9 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .285 | .342 | .573 | .131 |
Net realized and unrealized gain (loss) | .446 | (.263) | (.195) | (.045) |
Total from investment operations | .731 | .079 | .378 | .086 |
Distributions from net investment income | (.303) | (.330) | (.631) | (.147) |
Redemption fees added to paid in capitalE | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.87% | .80% | 3.90% | .88% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.18% | 1.20% | 1.22% | 1.81% A |
Expenses net of voluntary waivers, if any | 1.18% | 1.19% | 1.06% | .93% A |
Expenses net of all reductions | 1.18% | 1.19% | 1.06% | .93% A |
Net investment income (loss) | 2.96% | 3.54% | 5.86% | 7.06% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 113 | $ 75 | $ 76 | $ 25 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .243 | .298 | .525 | .134 |
Net realized and unrealized gain (loss) | .444 | (.263) | (.194) | (.056) |
Total from investment operations | .687 | .035 | .331 | .078 |
Distributions from net investment income | (.259) | (.286) | (.584) | (.139) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.38% | .35% | 3.42% | .79% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.64% | 1.65% | 1.66% | 2.74% A |
Expenses net of voluntary waivers, if any | 1.63% | 1.64% | 1.54% | 1.23% A |
Expenses net of all reductions | 1.63% | 1.64% | 1.54% | 1.23% A |
Net investment income (loss) | 2.50% | 3.09% | 5.38% | 6.75% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 134 | $ 118 | $ 125 | $ 24 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .235 | .290 | .516 | .125 |
Net realized and unrealized gain (loss) | .434 | (.263) | (.184) | (.051) |
Total from investment operations | .669 | .027 | .332 | .074 |
Distributions from net investment income | (.251) | (.278) | (.575) | (.135) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.18% | .26% | 3.42% | .76% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.72% | 1.73% | 1.75% | 2.41% A |
Expenses net of voluntary waivers, if any | 1.71% | 1.73% | 1.64% | 1.44% A |
Expenses net of all reductions | 1.71% | 1.73% | 1.63% | 1.44% A |
Net investment income (loss) | 2.42% | 3.00% | 5.28% | 6.55% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 269 | $ 235 | $ 278 | $ 48 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Floating Rate High Income Fund
Years ended October 31, | 2003 | 2002 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 9.44 | $ 9.52 |
Income from Investment Operations | ||
Net investment income (loss) D | .311 | .040 |
Net realized and unrealized gain (loss) | .450 | (.084) |
Total from investment operations | .761 | (.044) |
Distributions from net investment income | (.333) | (.037) |
Redemption fees added to paid in capital D | .002 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 |
Total Return B, C | 8.20% | (.45)% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .86% | 1.15% A |
Expenses net of voluntary waivers, if any | .86% | .95% A |
Expenses net of all reductions | .86% | .94% A |
Net investment income (loss) | 3.27% | 3.99% A |
Supplemental Data | ||
Net assets, end of period (in millions) | $ 811 | $ 18 |
Portfolio turnover rate | 55% | 77% |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 E |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) D | .312 | .365 | .590 | .151 |
Net realized and unrealized gain (loss) | .436 | (.262) | (.193) | (.058) |
Total from investment operations | .748 | .103 | .397 | .093 |
Distributions from net investment income | (.330) | (.354) | (.650) | (.154) |
Redemption fees added to paid in capital D | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.86 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C | 8.06% | 1.06% | 4.11% | .94% |
Ratios to Average Net Assets F | ||||
Expenses before expense reductions | .90% | .94% | 1.02% | 2.32% A |
Expenses net of voluntary waivers, if any | .89% | .94% | .87% | .49% A |
Expenses net of all reductions | .89% | .93% | .87% | .49% A |
Net investment income (loss) | 3.24% | 3.79% | 6.05% | 7.50% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 36 | $ 18 | $ 7 | $ 1 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period August 16, 2000 (commencement of operations) to October 31, 2000.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Floating Rate High Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Floating Rate High Income Fund and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Security Valuation - continued
maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. The Fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, consent fees and prepayment fees. These fees are recorded as Income in the accompanying financial statements.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 14,777 | | |
Unrealized depreciation | (1,613) | |
Net unrealized appreciation (depreciation) | 13,164 | |
Undistributed ordinary income | 5,891 | |
Capital loss carryforward | (11,146) | |
Cost for federal income tax purposes | $ 1,484,962 |
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 23,105 | $ 16,398 |
Short-Term Trading (Redemption) Fees. Shares held in the fund less than 60 days are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Mangement & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. At the end of the period, the fund had unfunded loan commitments of $1,987.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
3. Purchases and Sales of Investments.
Purchases and sales of securities (including principal repayments of floating rate loans), is included under the caption "Other Information" at the end of the fund's schedule of investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .55% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .68% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees based on an annual percentage of each class' average net assets. In addition FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 68 | $ - |
Class T | 0% | .25% | 197 | - |
Class B | .55% | .15% | 841 | 660 |
Class C | .55% | .25% | 1,856 | 578 |
$ 2,962 | $ 1,238 |
Sales Load. FDC receives a front-end sales charge of up to 3.75% for selling Class A shares, and 2.75% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3.50% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||
Class A | $ 67 | |
Class T | 31 | |
Class B* | 425 | |
Class C* | 114 | |
$ 637 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Floating Rate High Income Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for the Fidelity Floating Rate High Income fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 83 | .18 |
Class T | 133 | .17 |
Class B | 203 | .17 |
Class C | 350 | .15 |
Fidelity Floating Rate High Income Fund | 305 | .10 |
Institutional Class | 29 | .13 |
$ 1,103 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,218 for the period.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR voluntarily agreed to reimburse a portion of Advisor Floating Rate High Income Fund's Class A, Class T, Class B, Class C and Institutional Class operating expenses. During the period, this reimbursement reduced expenses as follows:
Reimbursement | ||
Class A | $ 2 | |
Class T | 3 | |
Class B | 4 | |
Class C | 9 | |
Institutional Class | 1 |
In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $11.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | 2003 | 2002 |
From net investment income | ||
Class A | $ 1,379 | $ 1,416 |
Class T | 2,412 | 2,733 |
Class B | 3,198 | 3,729 |
Class C | 5,977 | 7,917 |
Fidelity Floating Rate High Income Fund | 9,407 | 27 |
Institutional Class | 732 | 576 |
Total | $ 23,105 | $ 16,398 |
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | 2003 | 2002A | 2003 | 2002A |
Class A | ||||
Shares sold | 6,904 | 2,013 | $ 67,614 | $ 19,548 |
Reinvestment of distributions | 98 | 107 | 956 | 1,036 |
Shares redeemed | (1,953) | (2,421) | (18,942) | (23,409) |
Net increase (decrease) | 5,049 | (301) | $ 49,628 | $ (2,825) |
Class T | ||||
Shares sold | 7,102 | 5,346 | $ 69,392 | $ 51,902 |
Reinvestment of distributions | 214 | 241 | 2,081 | 2,322 |
Shares redeemed | (3,806) | (5,466) | (36,871) | (52,625) |
Net increase (decrease) | 3,510 | 121 | $ 34,602 | $ 1,599 |
Class B | ||||
Shares sold | 3,767 | 3,679 | $ 36,736 | $ 35,647 |
Reinvestment of distributions | 231 | 261 | 2,235 | 2,519 |
Shares redeemed | (2,978) | (4,252) | (28,855) | (40,950) |
Net increase (decrease) | 1,020 | (312) | $ 10,116 | $ (2,784) |
Class C | ||||
Shares sold | 10,474 | 9,641 | $ 102,347 | $ 93,674 |
Reinvestment of distributions | 411 | 561 | 3,982 | 5,425 |
Shares redeemed | (8,522) | (13,892) | (82,608) | (133,841) |
Net increase (decrease) | 2,363 | (3,690) | $ 23,721 | $ (34,742) |
Floating Rate High Income Fund | ||||
Shares sold | 91,211 | 1,925 | $ 889,648 | $ 18,242 |
Reinvestment of distributions | 840 | 3 | 8,216 | 25 |
Shares redeemed | (11,804) | (6) | (115,507) | (58) |
Net increase (decrease) | 80,247 | 1,922 | $ 782,357 | $ 18,209 |
Institutional Class | ||||
Shares sold | 2,601 | 2,636 | $ 25,410 | $ 25,595 |
Reinvestment of distributions | 31 | 21 | 305 | 202 |
Shares redeemed | (880) | (1,550) | (8,557) | (14,906) |
Net increase (decrease) | 1,752 | 1,107 | $ 17,158 | $ 10,891 |
A Share transactions for Fidelity Floating Rate High Income Fund are for the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Floating Rate High Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Floating Rate High Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the three years in the period then ended and for the period from August 16, 2000 to October 31, 2000. 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 auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian, brokers and agent banks; where replies were not received from brokers and agent banks, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Floating Rate High Income Fund as of October 31, 2003, 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 its financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 17, 2003
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, Call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Fidelity Advisor Floating Rate High Income Fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing) and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, and defense technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Fidelity Advisor Floating Rate High Income Fund. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Christine G. McConnell (45) | |
Year of Election or Appointment: 2003 Vice President of Fidelity Advisor Floating Rate High Income Fund. Prior to assuming her current responsibilities, Ms. McConnell worked as a research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 2000 Secretary of Fidelity Advisor Floating Rate High Income Fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Fidelity Advisor Floating Rate High Income Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Fidelity Advisor Floating Rate High Income Fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002) and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 1.78% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International
Investment Advisors
Fidelity Investments Japan Limited
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AFR-UANN-1203
1.784741.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Floating Rate High Income
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Life of |
Institutional Class | 8.06% | 4.38% |
A From August 16, 2000.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Floating Rate High Income Fund - Institutional Class on August 16, 2000, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the CSFB Leveraged Loan Index Plus did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Christine McConnell, Portfolio Manager of Fidelity® Advisor Floating Rate High Income Fund
Leveraged loans produced solid performance during the year that ended October 31, 2003, outperforming Treasuries and other investment-grade offerings, while underperforming high-yield bonds and equities. The CSFB Leveraged Loan Index Plus, a broad measure of this market, returned 13.17% for the past 12 months. The year began with the average price on bank loans trading at 96 cents on the dollar and new-loan yield spreads at LIBOR (London Interbank Offering Rate) +375 basis points with LIBOR floors of 3%. During the year, prices rallied to $100.50 bid and the yield spread narrowed to LIBOR +261 basis points. First half performance was driven by a rally, or narrowing, in credit yield spreads while market technicals - loan supply and demand - drove second half performance. Market strength led to an unprecedented amount of opportunistic repricing amendments by issuers. The year-to-date total was $28 billion (28% of the S&P® Performing Loan Index) on 65 loans. Additionally, year-to-date loan repayments and refinancings equaled $57 billion.
For the year that ended October 31, 2003, Fidelity Advisor Floating Rate High Income Fund's Institutional Class shares returned 8.06%. In comparison, the CSFB Leveraged Loan Index Plus returned 13.17%, while the LipperSM Loan Participation Funds Average returned 7.71%. Performance was helped by security selection in cable television provider Adelphia; overweighted positions in some strong performing utilities, such as Centerpoint and AES; and avoiding troubles in Safety Kleen, a waste management company. From a sector standpoint, underweighted positions in consumer cyclical companies - particularly autos, chemicals and asset-light service providers - helped performance, as did overweighting electric utilities. Conversely, a high cash position and being underweighted in the distressed and bankrupt categories detracted from relative performance. An underweighted position in rural cellular providers that were bailed out through high-yield bond refinancings also restrained returns.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
Nextel Finance Co. | 2.9 | 1.3 |
EchoStar DBS Corp. | 2.8 | 0.0 |
Qwest Corp. | 2.1 | 0.0 |
Tyco International Ltd. | 1.9 | 0.0 |
Charter Communications Operating LLC | 1.7 | 1.8 |
11.4 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Telecommunications | 10.2 | 7.2 |
Cable TV | 9.7 | 6.3 |
Healthcare | 7.7 | 7.4 |
Electric Utilities | 7.6 | 9.3 |
Publishing/Printing | 3.7 | 2.9 |
Quality Diversification (% of fund's net assets) as of October 31, 2003 | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| AAA,AA,A 0.0% | | AAA,AA,A 0.0% | ||||
| BBB 3.8% | | BBB 4.3% | ||||
| BB 43.2% | | BB 47.0% | ||||
| B 20.4% | | B 20.0% | ||||
| CCC,CC,C 0.8% | | CCC,CC,C 1.1% | ||||
| D 0.1% | | D 0.0% | ||||
| Not Rated 10.7% | | Not Rated 10.0% | ||||
| Equities 0.0% | | Equities 0.0% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Floating Rate | | Floating Rate | ||||
| Nonconvertible | | Nonconvertible | ||||
| Other Investments 0.1% | | Other Investments 0.1% | ||||
| Short-Term | | Short-Term | ||||
* Foreign | 4.1% | ** Foreign | 3.2% | ||||
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Floating Rate Loans (e) - 71.4% | ||||
Principal | Value (Note 1) | |||
Aerospace - 0.9% | ||||
DRS Technologies, Inc. term loan: | ||||
3.6957% 11/4/10 (d) | $ 1,150 | $ 1,150 | ||
4.1806% 9/30/08 (d) | 1,524 | 1,547 | ||
Titan Corp. Tranche B term loan 4.4302% 6/30/09 (d) | 2,963 | 2,963 | ||
Transdigm, Inc. term loan 4.13% 7/22/10 (d) | 1,600 | 1,614 | ||
United Defense Industries, Inc. Tranche B term loan 3.12% 8/13/09 (d) | 5,074 | 5,099 | ||
12,373 | ||||
Automotive - 1.4% | ||||
CSK Automotive, Inc. Tranche B term loan 3.87% 6/13/09 (d) | 1,000 | 1,010 | ||
Goodyear Dunlop Tire Europe BV term loan 5.13% 4/30/05 (d) | 2,000 | 1,970 | ||
SPX Corp. Tranche B term loan 3.4375% 9/30/09 (d) | 6,816 | 6,884 | ||
Travelcenters of America, Inc. term loan 4.3795% 11/14/08 (d) | 948 | 951 | ||
TRW Automotive Holdings Corp. Tranche C term loan 4.13% 2/28/11 (d) | 7,000 | 7,105 | ||
United Components, Inc. Tranche B term loan 4.38% 6/30/10 (d) | 3,000 | 3,030 | ||
20,950 | ||||
Broadcasting - 3.5% | ||||
Cumulus Media, Inc. Tranche C term loan 3.625% 3/28/10 (d) | 8,064 | 8,145 | ||
Emmis Communications Corp. Tranche B term loan 3.38% 8/31/09 (d) | 10,056 | 10,157 | ||
Granite Broadcasting Corp. Tranche A term loan 6.5% 4/30/04 (d) | 3,000 | 2,970 | ||
Gray Television, Inc. Tranche C term loan 3.396% 12/31/10 (d) | 4,000 | 4,030 | ||
LIN Television Corp. Tranche B term loan 3.1626% 12/31/07 (d) | 8,910 | 8,999 | ||
Nexstar Finance LLC Tranche B term loan 4.12% 12/31/10 (d) | 2,000 | 2,008 | ||
Paxson Communications Corp. Tranche B term loan 4.4298% 6/30/06 (d) | 4,455 | 4,488 | ||
Sinclair Broadcast Group, Inc.: | ||||
term loan 3.3518% 12/31/09 (d) | 6,900 | 6,969 | ||
Tranche A1 term loan 3.4375% 12/31/09 (d) | 2,284 | 2,307 | ||
50,073 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Building Materials - 0.1% | ||||
National Waterworks, Inc. Tranche B1 term loan 3.88% 11/22/09 (d) | $ 1,980 | $ 1,999 | ||
Cable TV - 6.9% | ||||
Adelphia Communications Corp. Tranche B term loan 4.6344% 6/25/04 (d) | 5,500 | 5,555 | ||
CC VIII Operating LLC Tranche B term loan 3.66% 2/2/08 (d) | 14,925 | 14,477 | ||
Century Cable Holdings LLC Tranche B term loan 6% 12/31/09 (d) | 2,750 | 2,448 | ||
Charter Communication Operating LLC: | ||||
term loan 3.91% 9/18/08 (d) | 4,433 | 4,277 | ||
Tranche B term loan 3.92% 3/18/08 (d) | 20,830 | 20,205 | ||
Comcast Corp. term loan 2.245% 11/20/06 (d) | 13,000 | 13,033 | ||
DIRECTV Holdings LLC Tranche B1 term loan 3.9573% 3/6/10 (d) | 18,300 | 18,437 | ||
Hilton Head Communications LP Tranche B term loan 5.25% 3/31/08 (d) | 3,000 | 2,595 | ||
Insight Midwest Holdings LLC Tranche B term loan: | ||||
3.9375% 12/31/09 (d) | 3,000 | 3,023 | ||
4% 12/31/09 (d) | 1,000 | 1,000 | ||
Mediacom Broadband LLC/Mediacom Broadband Corp. Tranche B term loan 3.62% 9/30/10 (d) | 2,000 | 2,015 | ||
Olympus Cable Holdings LLC Tranche B term loan 6% 9/30/10 (d) | 7,500 | 7,125 | ||
Parnassos LP term loan 6/30/07 (d) | 4,360 | 4,163 | ||
Pegasus Media & Communications, Inc. Tranche B term loan 4.625% 4/30/05 (d) | 536 | 523 | ||
United Pan-Europe Communications NV Tranche C term loan 6.65% 3/31/09 (d) | 1,000 | 970 | ||
99,846 | ||||
Capital Goods - 3.2% | ||||
Dresser, Inc. Tranche B term loan 5.89% 4/10/09 (d) | 3,487 | 3,539 | ||
Flowserve Corp. Tranche C term loan 3.9375% 6/30/09 (d) | 2,607 | 2,623 | ||
Kansas City Southern Railway Co. Tranche B term loan 3.6548% 6/12/08 (d) | 2,180 | 2,191 | ||
Mueller Group, Inc. Tranche E term loan 3.8862% 5/31/08 (d) | 1,975 | 1,985 | ||
Terex Corp. term loan: | ||||
3.1238% 7/3/09 (d) | 6,454 | 6,454 | ||
3.7425% 12/31/09 (d) | 2,448 | 2,454 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Capital Goods - continued | ||||
TriMas Corp. Tranche B term loan 4.4% 12/31/09 (d) | $ 876 | $ 876 | ||
Tyco International Ltd. revolver loan 4.245% 2/6/06 (d) | 27,000 | 26,899 | ||
47,021 | ||||
Chemicals - 1.2% | ||||
CP Kelco: | ||||
Tranche B term loan 5.14% 3/31/08 (d) | 303 | 305 | ||
Tranche C term loan 5.39% 9/30/08 (d) | 101 | 102 | ||
Equistar Chemicals LP/Equistar Funding Corp. term loan 4.62% 8/24/07 (d) | 615 | 618 | ||
Geo Specialty Chemicals, Inc. Tranche B term loan 7.1875% 12/31/07 (d) | 1,149 | 804 | ||
Georgia Gulf Corp. Tranche C term loan 3.37% 5/12/09 (d) | 1,094 | 1,102 | ||
Huntsman ICI Chemicals LLC: | ||||
Tranche B term loan 5.216% 6/30/07 (d) | 4,645 | 4,656 | ||
Tranche C term loan 5.4375% 6/30/08 (d) | 4,645 | 4,656 | ||
Messer Griesheim Holding AG: | ||||
Tranche B2 term loan 3.8963% 4/28/09 (d) | 702 | 705 | ||
Tranche C2 term loan 4.3963% 4/28/10 (d) | 1,010 | 1,015 | ||
Millennium America, Inc. term loan 4.1875% 6/18/06 (d) | 1,313 | 1,316 | ||
Noveon International, Inc. Tranche B term loan 3.9375% 12/31/09 (d) | 2,790 | 2,811 | ||
18,090 | ||||
Consumer Products - 2.5% | ||||
Armkel LLC Tranche B term loan 4.125% 3/28/09 (d) | 816 | 822 | ||
Central Garden & Pet Co. Tranche B term loan 3.87% 5/14/09 (d) | 998 | 1,005 | ||
Church & Dwight Co., Inc. Tranche B term loan 3.38% 9/30/07 (d) | 7,000 | 7,088 | ||
Jostens, Inc. term loan 3.64% 7/29/10 (d) | 5,000 | 5,019 | ||
Playtex Products, Inc. Tranche C term loan 4.6584% 5/31/09 (d) | 2,955 | 2,940 | ||
Revlon Consumer Products Corp. term loan 8.25% 5/30/05 (d) | 989 | 979 | ||
Sealy Mattress Co.: | ||||
Tranche B term loan 3.25% 12/15/04 (d) | 787 | 789 | ||
Tranche C term loan 3.5% 12/15/05 (d) | 1,053 | 1,056 | ||
Tranche D term loan 3.75% 12/15/06 (d) | 1,346 | 1,350 | ||
Tempur Pedic, Inc. Tranche B term loan 4.64% 6/30/09 (d) | 1,995 | 2,005 | ||
The Scotts Co. term loan 3.125% 9/30/10 (d) | 9,000 | 9,113 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Consumer Products - continued | ||||
Weight Watchers International, Inc.: | ||||
Tranche B term loan 3.38% 12/31/09 (d) | $ 3,624 | $ 3,661 | ||
Tranche C term loan 3.44% 12/31/09 (d) | 465 | 467 | ||
36,294 | ||||
Containers - 2.5% | ||||
Ball Corp. Tranche B term loan 3.39% 12/19/09 (d) | 2,944 | 2,944 | ||
Berry Plastics Corp. term loan 4.1294% 6/30/10 (d) | 1,980 | 2,000 | ||
Crown Cork & Seal Americas, Inc. Tranche B term loan 4.14% 9/15/08 (d) | 2,000 | 2,030 | ||
Owens Illinois Group, Inc.: | ||||
Tranche A term loan 4.4% 4/1/07 (d) | 10,000 | 10,025 | ||
Tranche B term loan 4.4% 4/1/08 (d) | 9,200 | 9,246 | ||
Printpack Holdings, Inc. Tranche B term loan 3.875% 3/31/09 (d) | 980 | 983 | ||
Silgan Holdings, Inc. Tranche B term loan 3.4% 11/30/08 (d) | 8,955 | 9,000 | ||
36,228 | ||||
Diversified Media - 1.6% | ||||
Blockbuster, Inc. Tranche B term loan 2.4114% 7/1/04 (d) | 1,400 | 1,398 | ||
CanWest Media, Inc. Tranche D term loan 3.88% 5/15/09 (d) | 2,000 | 2,020 | ||
Cinram International, Inc. Tranche B term loan 6.75% 9/30/09 (d) | 1,000 | 999 | ||
Lamar Media Corp. Tranche B term loan 3.4375% 6/30/10 (d) | 9,500 | 9,595 | ||
Vivendi Universal Entertainment LLC term loan 3.9123% 9/30/08 (d) | 9,000 | 9,079 | ||
23,091 | ||||
Electric Utilities - 7.1% | ||||
AES Corp. term loan 5.2643% 4/30/08 (d) | 18,000 | 18,180 | ||
Allegheny Energy Supply Co. LLC Tranche 1 term loan 7.12% 9/30/04 (d) | 4,235 | 4,266 | ||
Aquila Networks Canada Corp. term loan 6.75% 7/30/04 (d) | 7,000 | 7,000 | ||
Aquila, Inc. term loan 8.75% 5/15/06 (d) | 683 | 696 | ||
Calpine Corp. Tranche B1 term loan 4.6875% 7/15/07 (d) | 2,993 | 3,000 | ||
Centerpoint Energy House Electric LLC term loan 12.75% 11/11/05 (d) | 15,000 | 17,100 | ||
CenterPoint Energy, Inc. term loan 4.6875% 10/7/06 (d) | 3,000 | 3,026 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Electric Utilities - continued | ||||
Michigan Electric Transmission Co. LLC term loan 3.62% 5/1/07 (d) | $ 346 | $ 347 | ||
Northwestern Corp. term loan 8.75% 12/1/06 (d) | 988 | 992 | ||
Pacific Gas & Electric Co. revolver loan 8.75% 3/31/04 (d) | 21,395 | 21,609 | ||
Reliant Resources, Inc. Tranche A term loan 5.27% 3/15/07 (d) | 1,622 | 1,444 | ||
Southern California Edison Co. Tranche B term loan 4.1875% 3/1/05 (d) | 16,782 | 16,950 | ||
Tucson Electric Power Co. Tranche B term loan 6.62% 11/14/06 (d) | 1,700 | 1,709 | ||
Western Resources, Inc. term loan 4.12% 6/6/05 (d) | 6,392 | 6,424 | ||
102,743 | ||||
Energy - 2.0% | ||||
A.T. Massey Coal Co., Inc. term loan 4.62% 1/1/07 (d) | 998 | 998 | ||
Citgo Petroleum Corp. term loan 8.25% 2/27/06 (d) | 1,000 | 1,030 | ||
Parker Drilling Co. term loan 7.25% 10/10/07 (d) | 500 | 503 | ||
PMC (Nova Scotia) Co. term loan 3.37% 5/5/06 (d) | 2,760 | 2,757 | ||
Premcor Refining Group, Inc. term loan 4.34% 2/11/06 (d) | 2,000 | 2,020 | ||
Pride Offshore, Inc. term loan 4.6799% 6/20/07 (d) | 1,182 | 1,185 | ||
Tesoro Petroleum Corp. term loan 6.585% 4/15/08 (d) | 1,990 | 2,040 | ||
WEG Acquisitions LP term loan 5.6101% 6/17/08 (d) | 3,600 | 3,636 | ||
Williams Energy Partners LP Tranche B term loan 3.555% 8/6/08 (d) | 3,900 | 3,920 | ||
Williams Production RMT Co. term loan 4.9% 5/30/07 (d) | 11,721 | 11,867 | ||
29,956 | ||||
Entertainment/Film - 0.7% | ||||
Cinemark USA, Inc. term loan 5.5% 3/31/08 (d) | 4,160 | 4,201 | ||
Regal Cinemas Corp. Tranche D term loan 3.6875% 6/30/09 (d) | 5,884 | 5,943 | ||
10,144 | ||||
Environmental - 1.4% | ||||
Allied Waste Industries, Inc.: | ||||
term loan 4.3926% 1/15/10 (d) | 8,746 | 8,878 | ||
Tranche A term loan 4.37% 1/15/10 (d) | 1,143 | 1,159 | ||
Tranche C term loan 4.14% 1/15/10 (d) | 3,000 | 3,038 | ||
Casella Waste Systems, Inc. Tranche B term loan 3.9063% 1/24/10 (d) | 3,000 | 3,004 | ||
IESI Corp. term loan 4.25% 9/30/10 (d) | 2,000 | 2,020 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Environmental - continued | ||||
Stericycle, Inc. Tranche B term loan 3.37% 9/5/07 (d) | $ 485 | $ 488 | ||
Waste Connections, Inc. term loan 3.1375% 10/22/10 (d) | 2,000 | 2,020 | ||
20,607 | ||||
Food and Drug Retail - 0.7% | ||||
Rite Aid Corp. term loan 4.12% 4/30/08 (d) | 10,000 | 10,175 | ||
Food/Beverage/Tobacco - 2.1% | ||||
B&G Foods, Inc. term loan 4.3701% 8/31/09 (d) | 3,000 | 3,030 | ||
Commonwealth Brands, Inc. term loan 5.1875% 8/28/07 (d) | 748 | 751 | ||
Constellation Brands, Inc. Tranche B term loan 5% 11/30/08 (d) | 3,125 | 3,156 | ||
Del Monte Corp. Tranche B term loan 4.9143% 12/20/10 (d) | 4,963 | 5,037 | ||
Merisant Co. Tranche B term loan 3.89% 1/11/10 (d) | 1,511 | 1,524 | ||
National Dairy Holdings LP Tranche B term loan 3.37% 4/30/09 (d) | 2,733 | 2,737 | ||
NBTY, Inc. Tranche B term loan 3.6875% 7/25/09 (d) | 1,995 | 2,015 | ||
Nellson Nutraceutical, Inc. Tranche B term loan 4.14% 10/4/09 (d) | 994 | 1,005 | ||
Reddy Ice Group, Inc. term loan 4.12% 8/15/09 (d) | 800 | 807 | ||
Suiza Foods Corp. Tranche B1 term loan 3.14% 7/15/08 (d) | 9,992 | 10,080 | ||
30,142 | ||||
Gaming - 1.5% | ||||
Alliance Gaming Corp. term loan 3.96% 9/5/09 (d) | 4,750 | 4,786 | ||
Ameristar Casinos, Inc. Tranche B term loan 3.875% 12/20/06 (d) | 2,657 | 2,677 | ||
Argosy Gaming Co. Tranche B term loan 3.89% 7/31/08 (d) | 2,642 | 2,652 | ||
Boyd Gaming Corp. term loan 3.1395% 6/24/08 (d) | 1,481 | 1,489 | ||
Mandalay Resort Group term loan 2.9375% 8/21/06 (d) | 2,000 | 1,998 | ||
Marina District Finance Co., Inc. Tranche B term loan 5.1373% 12/13/07 (d) | 3,000 | 3,030 | ||
Penn National Gaming, Inc. Tranche B term loan 4.6418% 9/1/07 (d) | 2,985 | 3,007 | ||
Venetian Casino Resort LLC Tranche B term loan 4.14% 6/4/08 (d) | 2,666 | 2,693 | ||
22,332 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - 7.7% | ||||
Accredo Health, Inc. Tranche B term loan 3.88% 3/31/09 (d) | $ 985 | $ 994 | ||
ALARIS Medical Systems, Inc. term loan 3.8701% 6/30/09 (d) | 834 | 846 | ||
Alliance Imaging, Inc. Tranche C term loan 3.5533% 6/10/08 (d) | 838 | 833 | ||
Alpharma, Inc. Tranche B term loan 4.4485% 7/31/08 (d) | 1,669 | 1,671 | ||
AmeriPath, Inc. term loan 5.62% 3/27/10 (d) | 2,985 | 2,978 | ||
AMN Healthcare, Inc. Tranche B term loan 4.16% 10/2/08 (d) | 1,050 | 1,059 | ||
Apria Healthcare Group, Inc. Tranche B term loan 3.14% 7/20/08 (d) | 2,960 | 2,971 | ||
Beverly Enterprises, Inc. term loan 4.4182% 10/22/08 (d) | 2,000 | 2,023 | ||
Caremark Rx, Inc. term loan 3.38% 3/31/06 (d) | 3,940 | 3,950 | ||
Community Health Systems, Inc. term loan: | ||||
3.64% 7/16/10 (d) | 6,049 | 6,109 | ||
3.64% 1/16/11 (d) | 4,500 | 4,545 | ||
Concentra Operating Corp. term loan 4.9204% 6/30/09 (d) | 1,995 | 2,012 | ||
CONMED Corp. Tranche B term loan 3.8776% 12/15/09 (d) | 998 | 1,007 | ||
Connecticare Capital LLC term loan 5.023% 10/29/09 (d) | 2,000 | 2,018 | ||
DaVita, Inc. Tranche B term loan 3.6398% 3/31/09 (d) | 15,957 | 16,077 | ||
Express Scripts, Inc. Tranche B term loan 3.128% 3/31/07 (d) | 2,308 | 2,316 | ||
Fisher Scientific International, Inc.: | ||||
term loan 3.6405% 3/31/10 (d) | 2,130 | 2,154 | ||
Tranche B term loan 3.3896% 3/31/10 (d) | 4,520 | 4,559 | ||
Fresenius Medical Care Holdings, Inc. Tranche C term loan 3.39% 2/21/10 (d) | 6,983 | 7,052 | ||
Genesis Health Ventures, Inc. Tranche B term loan 4.62% 3/31/07 (d) | 1,322 | 1,322 | ||
Hanger Orthopedic Group, Inc. Tranche B term loan 3.87% 9/30/09 (d) | 2,950 | 2,983 | ||
HCA, Inc. term loan 2.12% 4/30/06 (d) | 5,341 | 5,274 | ||
IASIS Healthcare Corp. Tranche B term loan 5.4% 2/7/09 (d) | 1,845 | 1,868 | ||
Kinetic Concepts, Inc. Tranche B term loan 3.89% 8/11/10 (d) | 5,686 | 5,750 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - continued | ||||
Medco Health Solutions, Inc. Tranche B term loan 3.43% 6/30/10 (d) | $ 8,000 | $ 8,080 | ||
Oxford Health Plans, Inc. term loan 4.5656% 4/30/09 (d) | 1,990 | 1,997 | ||
PacifiCare Health Systems, Inc. term loan 4.63% 6/3/08 (d) | 3,990 | 4,030 | ||
Sybron Dental Management, Inc. term loan 3.6357% 6/6/09 (d) | 1,032 | 1,035 | ||
Triad Hospitals, Inc.: | ||||
Tranche A term loan 3.12% 3/31/07 (d) | 720 | 720 | ||
Tranche B term loan 4.12% 9/30/08 (d) | 9,782 | 9,831 | ||
Vanguard Health Systems, Inc. Tanche B term loan 5.4375% 1/3/10 (d) | 1,985 | 1,995 | ||
Ventas Realty LP/Ventas Capital Corp. Tranche B term loan 3.62% 4/17/07 (d) | 988 | 990 | ||
111,049 | ||||
Homebuilding/Real Estate - 0.7% | ||||
AIMCO Properties LP term loan 3.78% 3/11/04 (d) | 1,096 | 1,103 | ||
Apartment Investment & Management Co. term loan 3.89% 5/29/08 (d) | 4,000 | 4,035 | ||
CB Richard Ellis Services, Inc. term loan 4.4145% 12/31/08 (d) | 3,000 | 3,023 | ||
Corrections Corp. of America Tranche C term loan 3.88% 3/31/08 (d) | 1,358 | 1,375 | ||
9,536 | ||||
Hotels - 0.7% | ||||
Extended Stay America, Inc.: | ||||
Tranche A3 term loan 4.12% 7/24/07 (d) | 973 | 975 | ||
Tranche B term loan 4.87% 1/15/08 (d) | 2,323 | 2,349 | ||
Starwood Hotels & Resorts Worldwide, Inc. term loan 2.995% 10/9/06 (d) | 2,000 | 1,998 | ||
Wyndham International, Inc. term loan: | ||||
5.875% 4/1/06 (d) | 3,990 | 3,771 | ||
5.875% 6/30/06 (d) | 1,838 | 1,691 | ||
10,784 | ||||
Insurance - 0.4% | ||||
Conseco, Inc.: | ||||
Tranche A term loan 6.38% 9/10/09 (d) | 3,077 | 3,073 | ||
Tranche B term loan 9.5% 9/10/10 (d) | 923 | 922 | ||
USI Holdings Corp. term loan 4.16% 8/11/09 (d) | 1,995 | 2,005 | ||
6,000 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Leisure - 0.6% | ||||
Six Flags Theme Park, Inc. Tranche B term loan 3.37% 6/30/09 (d) | $ 8,000 | $ 8,010 | ||
Vail Corp. term loan 3.91% 12/10/08 (d) | 995 | 1,006 | ||
9,016 | ||||
Metals/Mining - 0.2% | ||||
Compass Minerals Group, Inc. Tranche B term loan 3.6702% 11/28/09 (d) | 392 | 396 | ||
Peabody Energy Corp. term loan 3.6379% 3/21/10 (d) | 2,985 | 3,015 | ||
3,411 | ||||
Paper - 3.0% | ||||
Georgia-Pacific Corp. term loan 3.345% 11/28/05 (d) | 5,000 | 5,000 | ||
Graphic Packaging International, Inc. Tranche B term loan 3.8936% 8/8/10 (d) | 15,600 | 15,795 | ||
Jefferson Smurfit Corp. Tranche B term loan 4.4375% 3/31/07 (d) | 3,569 | 3,600 | ||
Jefferson Smurfit Corp. U.S.: | ||||
revolver loan 3.9316% 3/31/05 (d) | 527 | 519 | ||
Tranche B term loan 3.9% 9/16/10 (d) | 500 | 503 | ||
Tranche C term loan 4.4% 9/16/11 (d) | 500 | 503 | ||
Stone Container Corp.: | ||||
Tranche B term loan 3.6875% 6/30/09 (d) | 14,293 | 14,418 | ||
Tranche C term loan 3.6875% 6/30/09 (d) | 2,708 | 2,732 | ||
43,070 | ||||
Publishing/Printing - 3.7% | ||||
Advanstar Communications, Inc. Tranche B term loan 5.64% 10/11/07 (d) | 188 | 188 | ||
American Media Operations, Inc. Tranche C1 term loan 3.91% 4/1/07 (d) | 2,729 | 2,749 | ||
CBD Media, Inc. Tranche B term loan 4.38% 12/31/09 (d) | 3,172 | 3,208 | ||
Dex Media East LLC/Dex Media East Finance Co.: | ||||
Tranche A term loan 3.6554% 12/31/08 (d) | 5,000 | 5,025 | ||
Tranche B term loan 5.1293% 11/8/09 (d) | 2,652 | 2,679 | ||
Dex Media West LLC/Dex Media West Finance Co.: | ||||
Tranche A term loan 3.9026% 9/9/09 (d) | 5,897 | 5,948 | ||
Tranche B term loan 3.8951% 9/9/10 (d) | 14,500 | 14,663 | ||
Medianews Group, Inc. Tranche B term loan 3.875% 12/31/06 (d) | 2,000 | 2,005 | ||
Moore Holdings USA, Inc. Tranche B term loan 3.6375% 3/15/10 (d) | 2,993 | 2,996 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Publishing/Printing - continued | ||||
Morris Publishing Group LLC/Morris Publishing Finance Co. Tranche B term loan 3.375% 3/31/11 (d) | $ 3,000 | $ 3,030 | ||
R.H. Donnelly Corp. Tranche B term loan 5.1452% 6/30/10 (d) | 3,226 | 3,282 | ||
Reader's Digest Association, Inc.: | ||||
Tranche A term loan 4.1927% 5/20/07 (d) | 1,000 | 1,001 | ||
Tranche B term loan 4.2375% 5/20/08 (d) | 2,793 | 2,793 | ||
Sun Media Corp. Canada Tranche B term loan 3.66% 2/7/09 (d) | 1,915 | 1,925 | ||
Transwestern Publishing Co. LP/Township Capital Corp. II Tranche B term loan 4.169% 6/27/08 (d) | 1,150 | 1,153 | ||
52,645 | ||||
Restaurants - 0.5% | ||||
AFC Enterprises, Inc. Tranche B term loan 4.1875% 5/23/09 (d) | 1,017 | 1,017 | ||
Buffets, Inc. term loan 4.6047% 6/28/09 (d) | 692 | 694 | ||
Domino's, Inc. term loan 4.125% 6/25/10 (d) | 4,410 | 4,465 | ||
Jack in the Box, Inc. Tranche B term loan 4.3967% 7/22/07 (d) | 1,489 | 1,504 | ||
7,680 | ||||
Services - 1.3% | ||||
Coinmach Corp. Tranche B term loan 3.9249% 7/25/09 (d) | 2,254 | 2,271 | ||
CSG Systems International, Inc. Tranche B term loan 3.9298% 2/28/08 (d) | 3,851 | 3,774 | ||
Iron Mountain, Inc. Tranche B term loan 3.3996% 2/15/08 (d) | 4,980 | 5,030 | ||
JohnsonDiversey, Inc. Tranche B term loan 3.8644% 11/3/09 (d) | 1,590 | 1,610 | ||
United Rentals, Inc. term loan 4.1488% 10/7/07 (d) | 852 | 856 | ||
Wackenhut Corrections Corp. term loan 4.1337% 7/9/09 (d) | 1,975 | 1,995 | ||
Worldspan LP Tranche B term loan 4.8942% 6/30/07 (d) | 3,000 | 2,996 | ||
18,532 | ||||
Steels - 0.2% | ||||
International Steel Group, Inc.: | ||||
Tranche A term loan 4.87% 5/5/05 (d) | 365 | 364 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Steels - continued | ||||
International Steel Group, Inc.: - continued | ||||
Tranche B term loan 5.12% 5/7/07 (d) | $ 599 | $ 596 | ||
Steel Dynamics, Inc. Tranche B term loan 4.1565% 3/26/08 (d) | 1,970 | 1,995 | ||
2,955 | ||||
Super Retail - 0.7% | ||||
Advance Stores Co., Inc. Tranche C term loan 3.8846% 11/30/07 (d) | 2,009 | 2,029 | ||
Hollywood Entertainment Corp. Tranche B term loan 4.62% 3/31/08 (d) | 2,763 | 2,784 | ||
Oriental Trading Co., Inc. Tranche B term loan 3.9375% 8/4/10 (d) | 2,173 | 2,178 | ||
PETCO Animal Supplies, Inc. Tranche D term loan 3.64% 10/2/08 (d) | 1,459 | 1,473 | ||
Rent-A-Center, Inc. term loan 3.3788% 5/28/09 (d) | 1,995 | 2,012 | ||
10,476 | ||||
Technology - 2.6% | ||||
Alliant Techsystems, Inc. Tranche C term loan 3.4927% 4/20/09 (d) | 4,158 | 4,199 | ||
AMI Semiconductor, Inc. term loan 3.62% 9/26/08 (d) | 2,400 | 2,424 | ||
Amphenol Corp. Tranche B term loan 3.6428% 5/6/10 (d) | 6,608 | 6,674 | ||
Fairchild Semiconductor Corp. term loan 3.6875% 6/19/08 (d) | 4,988 | 5,025 | ||
Global Imaging Systems, Inc. term loan 4.1586% 6/25/09 (d) | 998 | 1,007 | ||
Loral Satellite, Inc. term loan 1/7/05 (d) | 708 | 690 | ||
Loral Space & Communications Ltd. term loan 5.25% 1/7/05 (d) | 2,000 | 1,975 | ||
Loral Spacecom Corp. revolver loan 5.25% 1/7/05 (d) | 385 | 380 | ||
Seagate Technology Holdings, Inc. term loan 3.125% 5/13/07 (d) | 1,980 | 1,995 | ||
Semiconductor Components Industries LLC Tranche D term loan 5.1875% 8/4/07 (d) | 3,000 | 3,008 | ||
Xerox Corp. term loan 3.39% 9/30/08 (d) | 10,000 | 10,025 | ||
37,402 | ||||
Telecommunications - 9.7% | ||||
American Tower LP: | ||||
Tranche A term loan 3.3991% 6/30/07 (d) | 14,421 | 14,385 | ||
Tranche B term loan 4.6101% 12/31/07 (d) | 7,648 | 7,705 | ||
Centennial Puerto Rico Operations Corp.: | ||||
Tranche B term loan 4.4355% 5/31/07 (d) | 1,183 | 1,183 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Telecommunications - continued | ||||
Centennial Puerto Rico Operations Corp.: - continued | ||||
Tranche C term loan 4.6892% 11/30/07 (d) | $ 817 | $ 817 | ||
Cincinnati Bell, Inc.: | ||||
Tranche A term loan 4.8814% 11/9/04 (d) | 233 | 234 | ||
Tranche C term loan 4.8702% 6/29/07 (d) | 787 | 791 | ||
Crown Castle International Corp. Tranche A term loan 3.64% 9/15/07 (d) | 650 | 651 | ||
Crown Castle Operating Co. Tranche B term loan 4.65% 9/30/10 (d) | 13,463 | 13,563 | ||
Dobson Cellular Systems, Inc. term loan 6.25% 3/31/10 (d) | 7,000 | 7,079 | ||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (d) | 12,181 | 12,211 | ||
Tranche C term loan 4.8125% 12/31/08 (d) | 12,181 | 12,211 | ||
Tranche D term loan 4.1875% 3/31/09 (d) | 18,060 | 18,150 | ||
Qwest Corp. Tranche A term loan 6.5% 6/30/07 (d) | 29,000 | 29,834 | ||
Qwest Services Corp. Tranche Q revolver loan 4.638% 5/3/05 (d) | 3,125 | 3,094 | ||
Rural Cellular Corp.: | ||||
Tranche B term loan 4.63% 10/3/08 (d) | 2,441 | 2,444 | ||
Tranche C term loan 4.84% 4/3/09 (d) | 2,441 | 2,444 | ||
SpectraSite Communications, Inc. Tranche A term loan 3.4923% 6/30/07 (d) | 6,750 | 6,758 | ||
Western Wireless Corp.: | ||||
Tranche A term loan 3.44% 3/31/08 (d) | 1,950 | 1,911 | ||
Tranche B term loan 4.478% 9/30/08 (d) | 5,073 | 5,073 | ||
140,538 | ||||
Textiles & Apparel - 0.1% | ||||
William Carter Co. Tranche C term loan 5.5% 9/30/08 (d) | 851 | 851 | ||
TOTAL FLOATING RATE LOANS (Cost $1,026,021) | 1,036,009 | |||
Nonconvertible Bonds - 7.5% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Broadcasting - 0.2% | ||||
Radio One, Inc. 8.875% 7/1/11 | $ 2,000 | $ 2,190 | ||
Cable TV - 2.8% | ||||
EchoStar DBS Corp.: | ||||
4.41% 10/1/08 (c)(d) | 38,000 | 38,940 | ||
10.375% 10/1/07 | 1,965 | 2,169 | ||
41,109 | ||||
Capital Goods - 0.2% | ||||
Tyco International Group SA yankee 6.375% 2/15/06 | 3,000 | 3,176 | ||
Chemicals - 0.3% | ||||
Huntsman Advanced Materials LLC 10% 7/15/08 (c)(d) | 1,310 | 1,349 | ||
Methanex Corp. yankee 7.75% 8/15/05 | 3,000 | 3,158 | ||
4,507 | ||||
Containers - 0.1% | ||||
Owens-Brockway Glass Container, Inc. 8.875% 2/15/09 | 2,000 | 2,160 | ||
Diversified Media - 0.7% | ||||
Liberty Media Corp. 2.64% 9/17/06 (d) | 10,000 | 10,006 | ||
Electric Utilities - 0.5% | ||||
Allegheny Energy, Inc. 7.75% 8/1/05 | 1,000 | 1,015 | ||
Pacific Gas & Electric Co.: | ||||
6.75% 10/1/23 | 285 | 291 | ||
7.05% 3/1/24 | 1,000 | 1,020 | ||
Power Contract Financing LLC 5.2% 2/1/06 (c) | 1,100 | 1,097 | ||
Southern California Edison Co.: | ||||
5.875% 9/1/04 | 1,250 | 1,281 | ||
8% 2/15/07 | 2,000 | 2,240 | ||
6,944 | ||||
Energy - 1.6% | ||||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 2,000 | 2,145 | ||
Chesapeake Energy Corp. 7.875% 3/15/04 | 4,000 | 4,190 | ||
Dynegy Holdings, Inc. 7.7% 7/15/08 (c)(d) | 2,000 | 2,100 | ||
Pemex Project Funding Master Trust: | ||||
2.65% 1/7/05 (c)(d) | 2,000 | 2,011 | ||
2.95% 10/15/09 (c)(d) | 3,000 | 3,008 | ||
Pride International, Inc. 10% 6/1/09 | 3,000 | 3,210 | ||
Pride Petroleum Services, Inc. 9.375% 5/1/07 | 538 | 565 | ||
Southern Natural Gas Co. 8.875% 3/15/10 | 840 | 918 | ||
The Coastal Corp. 6.2% 5/15/04 | 2,000 | 1,995 | ||
Nonconvertible Bonds - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Energy - continued | ||||
Transcontinental Gas Pipe Line Corp. 8.875% 7/15/12 | $ 2,000 | $ 2,343 | ||
Williams Companies, Inc. 9.25% 3/15/04 | 400 | 409 | ||
22,894 | ||||
Hotels - 0.1% | ||||
ITT Corp. 6.75% 11/15/03 | 2,000 | 2,008 | ||
Publishing/Printing - 0.0% | ||||
CBD Media LLC/ CBD Finance, Inc. 8.625% 6/1/11 (c) | 430 | 461 | ||
Shipping - 0.4% | ||||
General Maritime Corp. 10% 3/15/13 | 3,000 | 3,360 | ||
Teekay Shipping Corp. yankee 8.32% 2/1/08 | 2,000 | 2,160 | ||
5,520 | ||||
Technology - 0.1% | ||||
IOS Capital LLC 7.25% 6/30/08 | 1,000 | 995 | ||
Telecommunications - 0.5% | ||||
British Telecommunications PLC 2.445% 12/15/03 (d) | 3,000 | 3,004 | ||
Mobile Telesystems Finance SA 5.1413% 8/5/04 (c)(d) | 1,000 | 998 | ||
U.S. West Communications 7.2% 11/1/04 | 3,000 | 3,075 | ||
7,077 | ||||
TOTAL NONCONVERTIBLE BONDS (Cost $106,268) | 109,047 | |||
Commercial Mortgage Securities - 0.1% | ||||
CS First Boston Mortgage Securities Corp. Series 2000-FL1A Class F, 4.1174% 12/15/09 (c)(d) | 679 | 636 | ||
Common Stocks - 0.0% | |||
Shares | |||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 45 | 0 | |
Electric Utilities - 0.0% | |||
Reliant Resources, Inc.: | |||
warrants 5/16/10 (a) | 1,823 | 0 | |
warrants 5/15/11 (a) | 1,458 | 0 | |
TOTAL COMMON STOCKS (Cost $0) | 0 | |||
Money Market Funds - 24.0% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 1.07% (b) | 224,077,719 | $ 224,078 | |
Fidelity Money Market Central Fund, 1.16% (b) | 123,954,080 | 123,954 | |
TOTAL MONEY MARKET FUNDS (Cost $348,032) | 348,032 | ||
Cash Equivalents - 0.3% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.01%, dated 10/31/03 due 11/3/03) | $ 4,402 | 4,402 | |
TOTAL INVESTMENT PORTFOLIO - 103.3% (Cost $1,485,380) | 1,498,126 | ||
NET OTHER ASSETS - (3.3)% | (47,213) | ||
NET ASSETS - 100% | $ 1,450,913 | ||
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $50,601,000 or 3.5% of net assets. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Remaining maturities of floating rate loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,031,695,000 and $360,130,000, respectively. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $11,146,000 of which $5,000, $818,000, $8,246,000 and $2,077,000 will expire on October 31, 2008, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $4,402) (cost $1,485,380) - See accompanying schedule | $ 1,498,126 | |
Cash | 515 | |
Receivable for investments sold | 2,255 | |
Receivable for fund shares sold | 11,200 | |
Interest receivable | 5,345 | |
Redemption fees receivable | 3 | |
Prepaid expenses | 5 | |
Total assets | 1,517,449 | |
Liabilities | ||
Payable for investments purchased | $ 59,878 | |
Payable for fund shares redeemed | 4,714 | |
Distributions payable | 606 | |
Accrued management fee | 778 | |
Distribution fees payable | 285 | |
Other payables and accrued expenses | 275 | |
Total liabilities | 66,536 | |
Net Assets | $ 1,450,913 | |
Net Assets consist of: | ||
Paid in capital | $ 1,446,078 | |
Undistributed net investment income | 3,419 | |
Accumulated undistributed net realized gain (loss) on investments | (11,330) | |
Net unrealized appreciation (depreciation) on investments | 12,746 | |
Net Assets | $ 1,450,913 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Calculation of Maximum Offering Price | $ 9.88 | |
Maximum offering price per share (100/96.25 of $9.88) | $ 10.26 | |
Class T: | $ 9.87 | |
Maximum offering price per share (100/97.25 of $9.87) | $ 10.15 | |
Class B: | $ 9.87 | |
Class C: | $ 9.87 | |
Fidelity Floating Rate High Income Fund: | $ 9.87 | |
Institutional Class: | $ 9.86 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended October 31, 2003 | |
Investment Income | ||
Interest | $ 33,595 | |
Expenses | ||
Management fee | $ 5,513 | |
Transfer agent fees | 1,103 | |
Distribution fees | 2,962 | |
Accounting fees and expenses | 315 | |
Non-interested trustees' compensation | 3 | |
Custodian fees and expenses | 48 | |
Registration fees | 205 | |
Audit | 60 | |
Legal | 74 | |
Miscellaneous | 11 | |
Total expenses before reductions | 10,294 | |
Expense reductions | (30) | 10,264 |
Net investment income (loss) | 23,331 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 279 | |
Change in net unrealized appreciation (depreciation) on investment securities | 31,433 | |
Net gain (loss) | 31,712 | |
Net increase (decrease) in net assets resulting from operations | $ 55,043 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 23,331 | $ 17,114 |
Net realized gain (loss) | 279 | (8,480) |
Change in net unrealized appreciation (depreciation) | 31,433 | (7,489) |
Net increase (decrease) in net assets resulting | 55,043 | 1,145 |
Distributions to shareholders from net investment income | (23,105) | (16,398) |
Share transactions - net increase (decrease) | 917,582 | (9,652) |
Redemption fees | 181 | 60 |
Total increase (decrease) in net assets | 949,701 | (24,845) |
Net Assets | ||
Beginning of period | 501,212 | 526,057 |
End of period (including undistributed net investment income of $3,419 and undistributed net investment income of $855, respectively) | $ 1,450,913 | $ 501,212 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .292 | .352 | .580 | .136 |
Net realized and unrealized gain (loss) | .447 | (.264) | (.185) | (.047) |
Total from investment operations | .739 | 088 | .395 | .089 |
Distributions from net investment income | (.311) | (.339) | (.638) | (.150) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.88 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.95% | .90% | 4.08% | .90% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.10% | 1.12% | 1.14% | 1.75% A |
Expenses net of voluntary waivers, if any | 1.10% | 1.10% | .99% | .78% A |
Expenses net of all reductions | 1.09% | 1.09% | .98% | .78% A |
Net investment income (loss) | 3.04% | 3.64% | 5.93% | 7.21% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 88 | $ 37 | $ 41 | $ 9 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .285 | .342 | .573 | .131 |
Net realized and unrealized gain (loss) | .446 | (.263) | (.195) | (.045) |
Total from investment operations | .731 | .079 | .378 | .086 |
Distributions from net investment income | (.303) | (.330) | (.631) | (.147) |
Redemption fees added to paid in capitalE | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.87% | .80% | 3.90% | .88% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.18% | 1.20% | 1.22% | 1.81% A |
Expenses net of voluntary waivers, if any | 1.18% | 1.19% | 1.06% | .93% A |
Expenses net of all reductions | 1.18% | 1.19% | 1.06% | .93% A |
Net investment income (loss) | 2.96% | 3.54% | 5.86% | 7.06% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 113 | $ 75 | $ 76 | $ 25 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .243 | .298 | .525 | .134 |
Net realized and unrealized gain (loss) | .444 | (.263) | (.194) | (.056) |
Total from investment operations | .687 | .035 | .331 | .078 |
Distributions from net investment income | (.259) | (.286) | (.584) | (.139) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.38% | .35% | 3.42% | .79% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.64% | 1.65% | 1.66% | 2.74% A |
Expenses net of voluntary waivers, if any | 1.63% | 1.64% | 1.54% | 1.23% A |
Expenses net of all reductions | 1.63% | 1.64% | 1.54% | 1.23% A |
Net investment income (loss) | 2.50% | 3.09% | 5.38% | 6.75% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 134 | $ 118 | $ 125 | $ 24 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .235 | .290 | .516 | .125 |
Net realized and unrealized gain (loss) | .434 | (.263) | (.184) | (.051) |
Total from investment operations | .669 | .027 | .332 | .074 |
Distributions from net investment income | (.251) | (.278) | (.575) | (.135) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.18% | .26% | 3.42% | .76% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.72% | 1.73% | 1.75% | 2.41% A |
Expenses net of voluntary waivers, if any | 1.71% | 1.73% | 1.64% | 1.44% A |
Expenses net of all reductions | 1.71% | 1.73% | 1.63% | 1.44% A |
Net investment income (loss) | 2.42% | 3.00% | 5.28% | 6.55% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 269 | $ 235 | $ 278 | $ 48 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Floating Rate High Income Fund
Years ended October 31, | 2003 | 2002 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 9.44 | $ 9.52 |
Income from Investment Operations | ||
Net investment income (loss) D | .311 | .040 |
Net realized and unrealized gain (loss) | .450 | (.084) |
Total from investment operations | .761 | (.044) |
Distributions from net investment income | (.333) | (.037) |
Redemption fees added to paid in capital D | .002 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 |
Total Return B, C | 8.20% | (.45)% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .86% | 1.15% A |
Expenses net of voluntary waivers, if any | .86% | .95% A |
Expenses net of all reductions | .86% | .94% A |
Net investment income (loss) | 3.27% | 3.99% A |
Supplemental Data | ||
Net assets, end of period (in millions) | $ 811 | $ 18 |
Portfolio turnover rate | 55% | 77% |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 E |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) D | .312 | .365 | .590 | .151 |
Net realized and unrealized gain (loss) | .436 | (.262) | (.193) | (.058) |
Total from investment operations | .748 | .103 | .397 | .093 |
Distributions from net investment income | (.330) | (.354) | (.650) | (.154) |
Redemption fees added to paid in capital D | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.86 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C | 8.06% | 1.06% | 4.11% | .94% |
Ratios to Average Net Assets F | ||||
Expenses before expense reductions | .90% | .94% | 1.02% | 2.32% A |
Expenses net of voluntary waivers, if any | .89% | .94% | .87% | .49% A |
Expenses net of all reductions | .89% | .93% | .87% | .49% A |
Net investment income (loss) | 3.24% | 3.79% | 6.05% | 7.50% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 36 | $ 18 | $ 7 | $ 1 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period August 16, 2000 (commencement of operations) to October 31, 2000.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Floating Rate High Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Floating Rate High Income Fund and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Security Valuation - continued
maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. The Fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, consent fees and prepayment fees. These fees are recorded as Income in the accompanying financial statements.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 14,777 | | |
Unrealized depreciation | (1,613) | |
Net unrealized appreciation (depreciation) | 13,164 | |
Undistributed ordinary income | 5,891 | |
Capital loss carryforward | (11,146) | |
Cost for federal income tax purposes | $ 1,484,962 |
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 23,105 | $ 16,398 |
Short-Term Trading (Redemption) Fees. Shares held in the fund less than 60 days are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Mangement & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. At the end of the period, the fund had unfunded loan commitments of $1,987.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
3. Purchases and Sales of Investments.
Purchases and sales of securities (including principal repayments of floating rate loans), is included under the caption "Other Information" at the end of the fund's schedule of investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .55% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .68% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees based on an annual percentage of each class' average net assets. In addition FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 68 | $ - |
Class T | 0% | .25% | 197 | - |
Class B | .55% | .15% | 841 | 660 |
Class C | .55% | .25% | 1,856 | 578 |
$ 2,962 | $ 1,238 |
Sales Load. FDC receives a front-end sales charge of up to 3.75% for selling Class A shares, and 2.75% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3.50% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||
Class A | $ 67 | |
Class T | 31 | |
Class B* | 425 | |
Class C* | 114 | |
$ 637 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Floating Rate High Income Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for the Fidelity Floating Rate High Income fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 83 | .18 |
Class T | 133 | .17 |
Class B | 203 | .17 |
Class C | 350 | .15 |
Fidelity Floating Rate High Income Fund | 305 | .10 |
Institutional Class | 29 | .13 |
$ 1,103 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,218 for the period.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR voluntarily agreed to reimburse a portion of Advisor Floating Rate High Income Fund's Class A, Class T, Class B, Class C and Institutional Class operating expenses. During the period, this reimbursement reduced expenses as follows:
Reimbursement | ||
Class A | $ 2 | |
Class T | 3 | |
Class B | 4 | |
Class C | 9 | |
Institutional Class | 1 |
In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $11.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | 2003 | 2002 |
From net investment income | ||
Class A | $ 1,379 | $ 1,416 |
Class T | 2,412 | 2,733 |
Class B | 3,198 | 3,729 |
Class C | 5,977 | 7,917 |
Fidelity Floating Rate High Income Fund | 9,407 | 27 |
Institutional Class | 732 | 576 |
Total | $ 23,105 | $ 16,398 |
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | 2003 | 2002A | 2003 | 2002A |
Class A | ||||
Shares sold | 6,904 | 2,013 | $ 67,614 | $ 19,548 |
Reinvestment of distributions | 98 | 107 | 956 | 1,036 |
Shares redeemed | (1,953) | (2,421) | (18,942) | (23,409) |
Net increase (decrease) | 5,049 | (301) | $ 49,628 | $ (2,825) |
Class T | ||||
Shares sold | 7,102 | 5,346 | $ 69,392 | $ 51,902 |
Reinvestment of distributions | 214 | 241 | 2,081 | 2,322 |
Shares redeemed | (3,806) | (5,466) | (36,871) | (52,625) |
Net increase (decrease) | 3,510 | 121 | $ 34,602 | $ 1,599 |
Class B | ||||
Shares sold | 3,767 | 3,679 | $ 36,736 | $ 35,647 |
Reinvestment of distributions | 231 | 261 | 2,235 | 2,519 |
Shares redeemed | (2,978) | (4,252) | (28,855) | (40,950) |
Net increase (decrease) | 1,020 | (312) | $ 10,116 | $ (2,784) |
Class C | ||||
Shares sold | 10,474 | 9,641 | $ 102,347 | $ 93,674 |
Reinvestment of distributions | 411 | 561 | 3,982 | 5,425 |
Shares redeemed | (8,522) | (13,892) | (82,608) | (133,841) |
Net increase (decrease) | 2,363 | (3,690) | $ 23,721 | $ (34,742) |
Floating Rate High Income Fund | ||||
Shares sold | 91,211 | 1,925 | $ 889,648 | $ 18,242 |
Reinvestment of distributions | 840 | 3 | 8,216 | 25 |
Shares redeemed | (11,804) | (6) | (115,507) | (58) |
Net increase (decrease) | 80,247 | 1,922 | $ 782,357 | $ 18,209 |
Institutional Class | ||||
Shares sold | 2,601 | 2,636 | $ 25,410 | $ 25,595 |
Reinvestment of distributions | 31 | 21 | 305 | 202 |
Shares redeemed | (880) | (1,550) | (8,557) | (14,906) |
Net increase (decrease) | 1,752 | 1,107 | $ 17,158 | $ 10,891 |
A Share transactions for Fidelity Floating Rate High Income Fund are for the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Floating Rate High Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Floating Rate High Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the three years in the period then ended and for the period from August 16, 2000 to October 31, 2000. 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 auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian, brokers and agent banks; where replies were not received from brokers and agent banks, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Floating Rate High Income Fund as of October 31, 2003, 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 its financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 17, 2003
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, Call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Fidelity Advisor Floating Rate High Income Fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing) and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, and defense technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Fidelity Advisor Floating Rate High Income Fund. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Christine G. McConnell (45) | |
Year of Election or Appointment: 2003 Vice President of Fidelity Advisor Floating Rate High Income Fund. Prior to assuming her current responsibilities, Ms. McConnell worked as a research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 2000 Secretary of Fidelity Advisor Floating Rate High Income Fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Fidelity Advisor Floating Rate High Income Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Fidelity Advisor Floating Rate High Income Fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002) and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 1.78% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International
Investment Advisors
Fidelity Investments Japan Limited
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AFRI-UANN-1203
1.784742.100
(Fidelity Investment logo)(registered trademark)
Fidelity
Floating Rate High Income
Fund
(A Class of Fidelity® Advisor
Floating Rate High Income Fund)
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines visit www.fidelity.com/goto/proxyguidelines, call 1-800-544-8544, or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Life of |
Fidelity Floating Rate High Income FundB | 8.20% | 4.43% |
A From August 16, 2000.
B The initial offering of retail shares took place on September 19, 2002. Returns prior to September 19, 2002 are those of the Institutional class of Fidelity Advisor Floating Rate High Income Fund, one of the original classes of the fund.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Floating Rate High Income Fund on August 16, 2000, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the CSFB Leveraged Loan Index Plus did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Christine McConnell, Portfolio Manager of Fidelity® Floating Rate High Income Fund
Leveraged loans produced solid performance during the year that ended October 31, 2003, outperforming Treasuries and other investment-grade offerings, while underperforming high-yield bonds and equities. The CSFB Leveraged Loan Index Plus, a broad measure of this market, returned 13.17% for the past 12 months. The year began with the average price on bank loans trading at 96 cents on the dollar and new-loan yield spreads at LIBOR (London Interbank Offering Rate) +375 basis points with LIBOR floors of 3%. During the year, prices rallied to $100.50 bid and the yield spread narrowed to LIBOR +261 basis points. First-half performance was driven by a rally, or narrowing, in credit yield spreads while market technicals - loan supply and demand - drove second half performance. Market strength led to an unprecedented amount of opportunistic repricing amendments by issuers. The year-to-date total was $28 billion (28% of the S&P® Performing Loan Index) on 65 loans. Additionally, year-to-date loan repayments and refinancings equaled $57 billion.
For the year that ended October 31, 2003, Fidelity Floating Rate High Income Fund returned 8.20%. This result underperformed the CSFB Leveraged Loan Index Plus return of 13.17%, but beat the LipperSM Loan Participation Funds Average return of 7.71%. Performance was helped by security selection in cable television provider Adelphia; overweighted positions in some strong-performing utilities, such as Centerpoint and AES; and avoiding troubles in Safety Kleen, a waste management company. From a sector standpoint, underweighted positions in consumer cyclical companies - particularly autos, chemicals and asset-light service providers - helped performance, as did overweighting electric utilities. Conversely, a high cash position and being underweighted in the distressed and bankrupt categories detracted from relative performance. An underweighted position in rural cellular providers that were bailed out through high-yield bond refinancings also restrained returns.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
Nextel Finance Co. | 2.9 | 1.3 |
EchoStar DBS Corp. | 2.8 | 0.0 |
Qwest Corp. | 2.1 | 0.0 |
Tyco International Ltd. | 1.9 | 0.0 |
Charter Communications Operating LLC | 1.7 | 1.8 |
11.4 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Telecommunications | 10.2 | 7.2 |
Cable TV | 9.7 | 6.3 |
Healthcare | 7.7 | 7.4 |
Electric Utilities | 7.6 | 9.3 |
Publishing/Printing | 3.7 | 2.9 |
Quality Diversification (% of fund's net assets) as of October 31, 2003 | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| AAA,AA,A 0.0% | | AAA,AA,A 0.0% | ||||
| BBB 3.8% | | BBB 4.3% | ||||
| BB 43.2% | | BB 47.0% | ||||
| B 20.4% | | B 20.0% | ||||
| CCC,CC,C 0.8% | | CCC,CC,C 1.1% | ||||
| D 0.1% | | D 0.0% | ||||
| Not Rated 10.7% | | Not Rated 10.0% | ||||
| Equities 0.0% | | Equities 0.0% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Floating Rate | | Floating Rate | ||||
| Nonconvertible | | Nonconvertible | ||||
| Other Investments 0.1% | | Other Investments 0.1% | ||||
| Short-Term | | Short-Term | ||||
* Foreign | 4.1% | ** Foreign | 3.2% | ||||
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Floating Rate Loans (e) - 71.4% | ||||
Principal | Value (Note 1) | |||
Aerospace - 0.9% | ||||
DRS Technologies, Inc. term loan: | ||||
3.6957% 11/4/10 (d) | $ 1,150 | $ 1,150 | ||
4.1806% 9/30/08 (d) | 1,524 | 1,547 | ||
Titan Corp. Tranche B term loan 4.4302% 6/30/09 (d) | 2,963 | 2,963 | ||
Transdigm, Inc. term loan 4.13% 7/22/10 (d) | 1,600 | 1,614 | ||
United Defense Industries, Inc. Tranche B term loan 3.12% 8/13/09 (d) | 5,074 | 5,099 | ||
12,373 | ||||
Automotive - 1.4% | ||||
CSK Automotive, Inc. Tranche B term loan 3.87% 6/13/09 (d) | 1,000 | 1,010 | ||
Goodyear Dunlop Tire Europe BV term loan 5.13% 4/30/05 (d) | 2,000 | 1,970 | ||
SPX Corp. Tranche B term loan 3.4375% 9/30/09 (d) | 6,816 | 6,884 | ||
Travelcenters of America, Inc. term loan 4.3795% 11/14/08 (d) | 948 | 951 | ||
TRW Automotive Holdings Corp. Tranche C term loan 4.13% 2/28/11 (d) | 7,000 | 7,105 | ||
United Components, Inc. Tranche B term loan 4.38% 6/30/10 (d) | 3,000 | 3,030 | ||
20,950 | ||||
Broadcasting - 3.5% | ||||
Cumulus Media, Inc. Tranche C term loan 3.625% 3/28/10 (d) | 8,064 | 8,145 | ||
Emmis Communications Corp. Tranche B term loan 3.38% 8/31/09 (d) | 10,056 | 10,157 | ||
Granite Broadcasting Corp. Tranche A term loan 6.5% 4/30/04 (d) | 3,000 | 2,970 | ||
Gray Television, Inc. Tranche C term loan 3.396% 12/31/10 (d) | 4,000 | 4,030 | ||
LIN Television Corp. Tranche B term loan 3.1626% 12/31/07 (d) | 8,910 | 8,999 | ||
Nexstar Finance LLC Tranche B term loan 4.12% 12/31/10 (d) | 2,000 | 2,008 | ||
Paxson Communications Corp. Tranche B term loan 4.4298% 6/30/06 (d) | 4,455 | 4,488 | ||
Sinclair Broadcast Group, Inc.: | ||||
term loan 3.3518% 12/31/09 (d) | 6,900 | 6,969 | ||
Tranche A1 term loan 3.4375% 12/31/09 (d) | 2,284 | 2,307 | ||
50,073 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Building Materials - 0.1% | ||||
National Waterworks, Inc. Tranche B1 term loan 3.88% 11/22/09 (d) | $ 1,980 | $ 1,999 | ||
Cable TV - 6.9% | ||||
Adelphia Communications Corp. Tranche B term loan 4.6344% 6/25/04 (d) | 5,500 | 5,555 | ||
CC VIII Operating LLC Tranche B term loan 3.66% 2/2/08 (d) | 14,925 | 14,477 | ||
Century Cable Holdings LLC Tranche B term loan 6% 12/31/09 (d) | 2,750 | 2,448 | ||
Charter Communication Operating LLC: | ||||
term loan 3.91% 9/18/08 (d) | 4,433 | 4,277 | ||
Tranche B term loan 3.92% 3/18/08 (d) | 20,830 | 20,205 | ||
Comcast Corp. term loan 2.245% 11/20/06 (d) | 13,000 | 13,033 | ||
DIRECTV Holdings LLC Tranche B1 term loan 3.9573% 3/6/10 (d) | 18,300 | 18,437 | ||
Hilton Head Communications LP Tranche B term loan 5.25% 3/31/08 (d) | 3,000 | 2,595 | ||
Insight Midwest Holdings LLC Tranche B term loan: | ||||
3.9375% 12/31/09 (d) | 3,000 | 3,023 | ||
4% 12/31/09 (d) | 1,000 | 1,000 | ||
Mediacom Broadband LLC/Mediacom Broadband Corp. Tranche B term loan 3.62% 9/30/10 (d) | 2,000 | 2,015 | ||
Olympus Cable Holdings LLC Tranche B term loan 6% 9/30/10 (d) | 7,500 | 7,125 | ||
Parnassos LP term loan 6/30/07 (d) | 4,360 | 4,163 | ||
Pegasus Media & Communications, Inc. Tranche B term loan 4.625% 4/30/05 (d) | 536 | 523 | ||
United Pan-Europe Communications NV Tranche C term loan 6.65% 3/31/09 (d) | 1,000 | 970 | ||
99,846 | ||||
Capital Goods - 3.2% | ||||
Dresser, Inc. Tranche B term loan 5.89% 4/10/09 (d) | 3,487 | 3,539 | ||
Flowserve Corp. Tranche C term loan 3.9375% 6/30/09 (d) | 2,607 | 2,623 | ||
Kansas City Southern Railway Co. Tranche B term loan 3.6548% 6/12/08 (d) | 2,180 | 2,191 | ||
Mueller Group, Inc. Tranche E term loan 3.8862% 5/31/08 (d) | 1,975 | 1,985 | ||
Terex Corp. term loan: | ||||
3.1238% 7/3/09 (d) | 6,454 | 6,454 | ||
3.7425% 12/31/09 (d) | 2,448 | 2,454 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Capital Goods - continued | ||||
TriMas Corp. Tranche B term loan 4.4% 12/31/09 (d) | $ 876 | $ 876 | ||
Tyco International Ltd. revolver loan 4.245% 2/6/06 (d) | 27,000 | 26,899 | ||
47,021 | ||||
Chemicals - 1.2% | ||||
CP Kelco: | ||||
Tranche B term loan 5.14% 3/31/08 (d) | 303 | 305 | ||
Tranche C term loan 5.39% 9/30/08 (d) | 101 | 102 | ||
Equistar Chemicals LP/Equistar Funding Corp. term loan 4.62% 8/24/07 (d) | 615 | 618 | ||
Geo Specialty Chemicals, Inc. Tranche B term loan 7.1875% 12/31/07 (d) | 1,149 | 804 | ||
Georgia Gulf Corp. Tranche C term loan 3.37% 5/12/09 (d) | 1,094 | 1,102 | ||
Huntsman ICI Chemicals LLC: | ||||
Tranche B term loan 5.216% 6/30/07 (d) | 4,645 | 4,656 | ||
Tranche C term loan 5.4375% 6/30/08 (d) | 4,645 | 4,656 | ||
Messer Griesheim Holding AG: | ||||
Tranche B2 term loan 3.8963% 4/28/09 (d) | 702 | 705 | ||
Tranche C2 term loan 4.3963% 4/28/10 (d) | 1,010 | 1,015 | ||
Millennium America, Inc. term loan 4.1875% 6/18/06 (d) | 1,313 | 1,316 | ||
Noveon International, Inc. Tranche B term loan 3.9375% 12/31/09 (d) | 2,790 | 2,811 | ||
18,090 | ||||
Consumer Products - 2.5% | ||||
Armkel LLC Tranche B term loan 4.125% 3/28/09 (d) | 816 | 822 | ||
Central Garden & Pet Co. Tranche B term loan 3.87% 5/14/09 (d) | 998 | 1,005 | ||
Church & Dwight Co., Inc. Tranche B term loan 3.38% 9/30/07 (d) | 7,000 | 7,088 | ||
Jostens, Inc. term loan 3.64% 7/29/10 (d) | 5,000 | 5,019 | ||
Playtex Products, Inc. Tranche C term loan 4.6584% 5/31/09 (d) | 2,955 | 2,940 | ||
Revlon Consumer Products Corp. term loan 8.25% 5/30/05 (d) | 989 | 979 | ||
Sealy Mattress Co.: | ||||
Tranche B term loan 3.25% 12/15/04 (d) | 787 | 789 | ||
Tranche C term loan 3.5% 12/15/05 (d) | 1,053 | 1,056 | ||
Tranche D term loan 3.75% 12/15/06 (d) | 1,346 | 1,350 | ||
Tempur Pedic, Inc. Tranche B term loan 4.64% 6/30/09 (d) | 1,995 | 2,005 | ||
The Scotts Co. term loan 3.125% 9/30/10 (d) | 9,000 | 9,113 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Consumer Products - continued | ||||
Weight Watchers International, Inc.: | ||||
Tranche B term loan 3.38% 12/31/09 (d) | $ 3,624 | $ 3,661 | ||
Tranche C term loan 3.44% 12/31/09 (d) | 465 | 467 | ||
36,294 | ||||
Containers - 2.5% | ||||
Ball Corp. Tranche B term loan 3.39% 12/19/09 (d) | 2,944 | 2,944 | ||
Berry Plastics Corp. term loan 4.1294% 6/30/10 (d) | 1,980 | 2,000 | ||
Crown Cork & Seal Americas, Inc. Tranche B term loan 4.14% 9/15/08 (d) | 2,000 | 2,030 | ||
Owens Illinois Group, Inc.: | ||||
Tranche A term loan 4.4% 4/1/07 (d) | 10,000 | 10,025 | ||
Tranche B term loan 4.4% 4/1/08 (d) | 9,200 | 9,246 | ||
Printpack Holdings, Inc. Tranche B term loan 3.875% 3/31/09 (d) | 980 | 983 | ||
Silgan Holdings, Inc. Tranche B term loan 3.4% 11/30/08 (d) | 8,955 | 9,000 | ||
36,228 | ||||
Diversified Media - 1.6% | ||||
Blockbuster, Inc. Tranche B term loan 2.4114% 7/1/04 (d) | 1,400 | 1,398 | ||
CanWest Media, Inc. Tranche D term loan 3.88% 5/15/09 (d) | 2,000 | 2,020 | ||
Cinram International, Inc. Tranche B term loan 6.75% 9/30/09 (d) | 1,000 | 999 | ||
Lamar Media Corp. Tranche B term loan 3.4375% 6/30/10 (d) | 9,500 | 9,595 | ||
Vivendi Universal Entertainment LLC term loan 3.9123% 9/30/08 (d) | 9,000 | 9,079 | ||
23,091 | ||||
Electric Utilities - 7.1% | ||||
AES Corp. term loan 5.2643% 4/30/08 (d) | 18,000 | 18,180 | ||
Allegheny Energy Supply Co. LLC Tranche 1 term loan 7.12% 9/30/04 (d) | 4,235 | 4,266 | ||
Aquila Networks Canada Corp. term loan 6.75% 7/30/04 (d) | 7,000 | 7,000 | ||
Aquila, Inc. term loan 8.75% 5/15/06 (d) | 683 | 696 | ||
Calpine Corp. Tranche B1 term loan 4.6875% 7/15/07 (d) | 2,993 | 3,000 | ||
Centerpoint Energy House Electric LLC term loan 12.75% 11/11/05 (d) | 15,000 | 17,100 | ||
CenterPoint Energy, Inc. term loan 4.6875% 10/7/06 (d) | 3,000 | 3,026 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Electric Utilities - continued | ||||
Michigan Electric Transmission Co. LLC term loan 3.62% 5/1/07 (d) | $ 346 | $ 347 | ||
Northwestern Corp. term loan 8.75% 12/1/06 (d) | 988 | 992 | ||
Pacific Gas & Electric Co. revolver loan 8.75% 3/31/04 (d) | 21,395 | 21,609 | ||
Reliant Resources, Inc. Tranche A term loan 5.27% 3/15/07 (d) | 1,622 | 1,444 | ||
Southern California Edison Co. Tranche B term loan 4.1875% 3/1/05 (d) | 16,782 | 16,950 | ||
Tucson Electric Power Co. Tranche B term loan 6.62% 11/14/06 (d) | 1,700 | 1,709 | ||
Western Resources, Inc. term loan 4.12% 6/6/05 (d) | 6,392 | 6,424 | ||
102,743 | ||||
Energy - 2.0% | ||||
A.T. Massey Coal Co., Inc. term loan 4.62% 1/1/07 (d) | 998 | 998 | ||
Citgo Petroleum Corp. term loan 8.25% 2/27/06 (d) | 1,000 | 1,030 | ||
Parker Drilling Co. term loan 7.25% 10/10/07 (d) | 500 | 503 | ||
PMC (Nova Scotia) Co. term loan 3.37% 5/5/06 (d) | 2,760 | 2,757 | ||
Premcor Refining Group, Inc. term loan 4.34% 2/11/06 (d) | 2,000 | 2,020 | ||
Pride Offshore, Inc. term loan 4.6799% 6/20/07 (d) | 1,182 | 1,185 | ||
Tesoro Petroleum Corp. term loan 6.585% 4/15/08 (d) | 1,990 | 2,040 | ||
WEG Acquisitions LP term loan 5.6101% 6/17/08 (d) | 3,600 | 3,636 | ||
Williams Energy Partners LP Tranche B term loan 3.555% 8/6/08 (d) | 3,900 | 3,920 | ||
Williams Production RMT Co. term loan 4.9% 5/30/07 (d) | 11,721 | 11,867 | ||
29,956 | ||||
Entertainment/Film - 0.7% | ||||
Cinemark USA, Inc. term loan 5.5% 3/31/08 (d) | 4,160 | 4,201 | ||
Regal Cinemas Corp. Tranche D term loan 3.6875% 6/30/09 (d) | 5,884 | 5,943 | ||
10,144 | ||||
Environmental - 1.4% | ||||
Allied Waste Industries, Inc.: | ||||
term loan 4.3926% 1/15/10 (d) | 8,746 | 8,878 | ||
Tranche A term loan 4.37% 1/15/10 (d) | 1,143 | 1,159 | ||
Tranche C term loan 4.14% 1/15/10 (d) | 3,000 | 3,038 | ||
Casella Waste Systems, Inc. Tranche B term loan 3.9063% 1/24/10 (d) | 3,000 | 3,004 | ||
IESI Corp. term loan 4.25% 9/30/10 (d) | 2,000 | 2,020 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Environmental - continued | ||||
Stericycle, Inc. Tranche B term loan 3.37% 9/5/07 (d) | $ 485 | $ 488 | ||
Waste Connections, Inc. term loan 3.1375% 10/22/10 (d) | 2,000 | 2,020 | ||
20,607 | ||||
Food and Drug Retail - 0.7% | ||||
Rite Aid Corp. term loan 4.12% 4/30/08 (d) | 10,000 | 10,175 | ||
Food/Beverage/Tobacco - 2.1% | ||||
B&G Foods, Inc. term loan 4.3701% 8/31/09 (d) | 3,000 | 3,030 | ||
Commonwealth Brands, Inc. term loan 5.1875% 8/28/07 (d) | 748 | 751 | ||
Constellation Brands, Inc. Tranche B term loan 5% 11/30/08 (d) | 3,125 | 3,156 | ||
Del Monte Corp. Tranche B term loan 4.9143% 12/20/10 (d) | 4,963 | 5,037 | ||
Merisant Co. Tranche B term loan 3.89% 1/11/10 (d) | 1,511 | 1,524 | ||
National Dairy Holdings LP Tranche B term loan 3.37% 4/30/09 (d) | 2,733 | 2,737 | ||
NBTY, Inc. Tranche B term loan 3.6875% 7/25/09 (d) | 1,995 | 2,015 | ||
Nellson Nutraceutical, Inc. Tranche B term loan 4.14% 10/4/09 (d) | 994 | 1,005 | ||
Reddy Ice Group, Inc. term loan 4.12% 8/15/09 (d) | 800 | 807 | ||
Suiza Foods Corp. Tranche B1 term loan 3.14% 7/15/08 (d) | 9,992 | 10,080 | ||
30,142 | ||||
Gaming - 1.5% | ||||
Alliance Gaming Corp. term loan 3.96% 9/5/09 (d) | 4,750 | 4,786 | ||
Ameristar Casinos, Inc. Tranche B term loan 3.875% 12/20/06 (d) | 2,657 | 2,677 | ||
Argosy Gaming Co. Tranche B term loan 3.89% 7/31/08 (d) | 2,642 | 2,652 | ||
Boyd Gaming Corp. term loan 3.1395% 6/24/08 (d) | 1,481 | 1,489 | ||
Mandalay Resort Group term loan 2.9375% 8/21/06 (d) | 2,000 | 1,998 | ||
Marina District Finance Co., Inc. Tranche B term loan 5.1373% 12/13/07 (d) | 3,000 | 3,030 | ||
Penn National Gaming, Inc. Tranche B term loan 4.6418% 9/1/07 (d) | 2,985 | 3,007 | ||
Venetian Casino Resort LLC Tranche B term loan 4.14% 6/4/08 (d) | 2,666 | 2,693 | ||
22,332 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - 7.7% | ||||
Accredo Health, Inc. Tranche B term loan 3.88% 3/31/09 (d) | $ 985 | $ 994 | ||
ALARIS Medical Systems, Inc. term loan 3.8701% 6/30/09 (d) | 834 | 846 | ||
Alliance Imaging, Inc. Tranche C term loan 3.5533% 6/10/08 (d) | 838 | 833 | ||
Alpharma, Inc. Tranche B term loan 4.4485% 7/31/08 (d) | 1,669 | 1,671 | ||
AmeriPath, Inc. term loan 5.62% 3/27/10 (d) | 2,985 | 2,978 | ||
AMN Healthcare, Inc. Tranche B term loan 4.16% 10/2/08 (d) | 1,050 | 1,059 | ||
Apria Healthcare Group, Inc. Tranche B term loan 3.14% 7/20/08 (d) | 2,960 | 2,971 | ||
Beverly Enterprises, Inc. term loan 4.4182% 10/22/08 (d) | 2,000 | 2,023 | ||
Caremark Rx, Inc. term loan 3.38% 3/31/06 (d) | 3,940 | 3,950 | ||
Community Health Systems, Inc. term loan: | ||||
3.64% 7/16/10 (d) | 6,049 | 6,109 | ||
3.64% 1/16/11 (d) | 4,500 | 4,545 | ||
Concentra Operating Corp. term loan 4.9204% 6/30/09 (d) | 1,995 | 2,012 | ||
CONMED Corp. Tranche B term loan 3.8776% 12/15/09 (d) | 998 | 1,007 | ||
Connecticare Capital LLC term loan 5.023% 10/29/09 (d) | 2,000 | 2,018 | ||
DaVita, Inc. Tranche B term loan 3.6398% 3/31/09 (d) | 15,957 | 16,077 | ||
Express Scripts, Inc. Tranche B term loan 3.128% 3/31/07 (d) | 2,308 | 2,316 | ||
Fisher Scientific International, Inc.: | ||||
term loan 3.6405% 3/31/10 (d) | 2,130 | 2,154 | ||
Tranche B term loan 3.3896% 3/31/10 (d) | 4,520 | 4,559 | ||
Fresenius Medical Care Holdings, Inc. Tranche C term loan 3.39% 2/21/10 (d) | 6,983 | 7,052 | ||
Genesis Health Ventures, Inc. Tranche B term loan 4.62% 3/31/07 (d) | 1,322 | 1,322 | ||
Hanger Orthopedic Group, Inc. Tranche B term loan 3.87% 9/30/09 (d) | 2,950 | 2,983 | ||
HCA, Inc. term loan 2.12% 4/30/06 (d) | 5,341 | 5,274 | ||
IASIS Healthcare Corp. Tranche B term loan 5.4% 2/7/09 (d) | 1,845 | 1,868 | ||
Kinetic Concepts, Inc. Tranche B term loan 3.89% 8/11/10 (d) | 5,686 | 5,750 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Healthcare - continued | ||||
Medco Health Solutions, Inc. Tranche B term loan 3.43% 6/30/10 (d) | $ 8,000 | $ 8,080 | ||
Oxford Health Plans, Inc. term loan 4.5656% 4/30/09 (d) | 1,990 | 1,997 | ||
PacifiCare Health Systems, Inc. term loan 4.63% 6/3/08 (d) | 3,990 | 4,030 | ||
Sybron Dental Management, Inc. term loan 3.6357% 6/6/09 (d) | 1,032 | 1,035 | ||
Triad Hospitals, Inc.: | ||||
Tranche A term loan 3.12% 3/31/07 (d) | 720 | 720 | ||
Tranche B term loan 4.12% 9/30/08 (d) | 9,782 | 9,831 | ||
Vanguard Health Systems, Inc. Tanche B term loan 5.4375% 1/3/10 (d) | 1,985 | 1,995 | ||
Ventas Realty LP/Ventas Capital Corp. Tranche B term loan 3.62% 4/17/07 (d) | 988 | 990 | ||
111,049 | ||||
Homebuilding/Real Estate - 0.7% | ||||
AIMCO Properties LP term loan 3.78% 3/11/04 (d) | 1,096 | 1,103 | ||
Apartment Investment & Management Co. term loan 3.89% 5/29/08 (d) | 4,000 | 4,035 | ||
CB Richard Ellis Services, Inc. term loan 4.4145% 12/31/08 (d) | 3,000 | 3,023 | ||
Corrections Corp. of America Tranche C term loan 3.88% 3/31/08 (d) | 1,358 | 1,375 | ||
9,536 | ||||
Hotels - 0.7% | ||||
Extended Stay America, Inc.: | ||||
Tranche A3 term loan 4.12% 7/24/07 (d) | 973 | 975 | ||
Tranche B term loan 4.87% 1/15/08 (d) | 2,323 | 2,349 | ||
Starwood Hotels & Resorts Worldwide, Inc. term loan 2.995% 10/9/06 (d) | 2,000 | 1,998 | ||
Wyndham International, Inc. term loan: | ||||
5.875% 4/1/06 (d) | 3,990 | 3,771 | ||
5.875% 6/30/06 (d) | 1,838 | 1,691 | ||
10,784 | ||||
Insurance - 0.4% | ||||
Conseco, Inc.: | ||||
Tranche A term loan 6.38% 9/10/09 (d) | 3,077 | 3,073 | ||
Tranche B term loan 9.5% 9/10/10 (d) | 923 | 922 | ||
USI Holdings Corp. term loan 4.16% 8/11/09 (d) | 1,995 | 2,005 | ||
6,000 | ||||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Leisure - 0.6% | ||||
Six Flags Theme Park, Inc. Tranche B term loan 3.37% 6/30/09 (d) | $ 8,000 | $ 8,010 | ||
Vail Corp. term loan 3.91% 12/10/08 (d) | 995 | 1,006 | ||
9,016 | ||||
Metals/Mining - 0.2% | ||||
Compass Minerals Group, Inc. Tranche B term loan 3.6702% 11/28/09 (d) | 392 | 396 | ||
Peabody Energy Corp. term loan 3.6379% 3/21/10 (d) | 2,985 | 3,015 | ||
3,411 | ||||
Paper - 3.0% | ||||
Georgia-Pacific Corp. term loan 3.345% 11/28/05 (d) | 5,000 | 5,000 | ||
Graphic Packaging International, Inc. Tranche B term loan 3.8936% 8/8/10 (d) | 15,600 | 15,795 | ||
Jefferson Smurfit Corp. Tranche B term loan 4.4375% 3/31/07 (d) | 3,569 | 3,600 | ||
Jefferson Smurfit Corp. U.S.: | ||||
revolver loan 3.9316% 3/31/05 (d) | 527 | 519 | ||
Tranche B term loan 3.9% 9/16/10 (d) | 500 | 503 | ||
Tranche C term loan 4.4% 9/16/11 (d) | 500 | 503 | ||
Stone Container Corp.: | ||||
Tranche B term loan 3.6875% 6/30/09 (d) | 14,293 | 14,418 | ||
Tranche C term loan 3.6875% 6/30/09 (d) | 2,708 | 2,732 | ||
43,070 | ||||
Publishing/Printing - 3.7% | ||||
Advanstar Communications, Inc. Tranche B term loan 5.64% 10/11/07 (d) | 188 | 188 | ||
American Media Operations, Inc. Tranche C1 term loan 3.91% 4/1/07 (d) | 2,729 | 2,749 | ||
CBD Media, Inc. Tranche B term loan 4.38% 12/31/09 (d) | 3,172 | 3,208 | ||
Dex Media East LLC/Dex Media East Finance Co.: | ||||
Tranche A term loan 3.6554% 12/31/08 (d) | 5,000 | 5,025 | ||
Tranche B term loan 5.1293% 11/8/09 (d) | 2,652 | 2,679 | ||
Dex Media West LLC/Dex Media West Finance Co.: | ||||
Tranche A term loan 3.9026% 9/9/09 (d) | 5,897 | 5,948 | ||
Tranche B term loan 3.8951% 9/9/10 (d) | 14,500 | 14,663 | ||
Medianews Group, Inc. Tranche B term loan 3.875% 12/31/06 (d) | 2,000 | 2,005 | ||
Moore Holdings USA, Inc. Tranche B term loan 3.6375% 3/15/10 (d) | 2,993 | 2,996 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Publishing/Printing - continued | ||||
Morris Publishing Group LLC/Morris Publishing Finance Co. Tranche B term loan 3.375% 3/31/11 (d) | $ 3,000 | $ 3,030 | ||
R.H. Donnelly Corp. Tranche B term loan 5.1452% 6/30/10 (d) | 3,226 | 3,282 | ||
Reader's Digest Association, Inc.: | ||||
Tranche A term loan 4.1927% 5/20/07 (d) | 1,000 | 1,001 | ||
Tranche B term loan 4.2375% 5/20/08 (d) | 2,793 | 2,793 | ||
Sun Media Corp. Canada Tranche B term loan 3.66% 2/7/09 (d) | 1,915 | 1,925 | ||
Transwestern Publishing Co. LP/Township Capital Corp. II Tranche B term loan 4.169% 6/27/08 (d) | 1,150 | 1,153 | ||
52,645 | ||||
Restaurants - 0.5% | ||||
AFC Enterprises, Inc. Tranche B term loan 4.1875% 5/23/09 (d) | 1,017 | 1,017 | ||
Buffets, Inc. term loan 4.6047% 6/28/09 (d) | 692 | 694 | ||
Domino's, Inc. term loan 4.125% 6/25/10 (d) | 4,410 | 4,465 | ||
Jack in the Box, Inc. Tranche B term loan 4.3967% 7/22/07 (d) | 1,489 | 1,504 | ||
7,680 | ||||
Services - 1.3% | ||||
Coinmach Corp. Tranche B term loan 3.9249% 7/25/09 (d) | 2,254 | 2,271 | ||
CSG Systems International, Inc. Tranche B term loan 3.9298% 2/28/08 (d) | 3,851 | 3,774 | ||
Iron Mountain, Inc. Tranche B term loan 3.3996% 2/15/08 (d) | 4,980 | 5,030 | ||
JohnsonDiversey, Inc. Tranche B term loan 3.8644% 11/3/09 (d) | 1,590 | 1,610 | ||
United Rentals, Inc. term loan 4.1488% 10/7/07 (d) | 852 | 856 | ||
Wackenhut Corrections Corp. term loan 4.1337% 7/9/09 (d) | 1,975 | 1,995 | ||
Worldspan LP Tranche B term loan 4.8942% 6/30/07 (d) | 3,000 | 2,996 | ||
18,532 | ||||
Steels - 0.2% | ||||
International Steel Group, Inc.: | ||||
Tranche A term loan 4.87% 5/5/05 (d) | 365 | 364 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Steels - continued | ||||
International Steel Group, Inc.: - continued | ||||
Tranche B term loan 5.12% 5/7/07 (d) | $ 599 | $ 596 | ||
Steel Dynamics, Inc. Tranche B term loan 4.1565% 3/26/08 (d) | 1,970 | 1,995 | ||
2,955 | ||||
Super Retail - 0.7% | ||||
Advance Stores Co., Inc. Tranche C term loan 3.8846% 11/30/07 (d) | 2,009 | 2,029 | ||
Hollywood Entertainment Corp. Tranche B term loan 4.62% 3/31/08 (d) | 2,763 | 2,784 | ||
Oriental Trading Co., Inc. Tranche B term loan 3.9375% 8/4/10 (d) | 2,173 | 2,178 | ||
PETCO Animal Supplies, Inc. Tranche D term loan 3.64% 10/2/08 (d) | 1,459 | 1,473 | ||
Rent-A-Center, Inc. term loan 3.3788% 5/28/09 (d) | 1,995 | 2,012 | ||
10,476 | ||||
Technology - 2.6% | ||||
Alliant Techsystems, Inc. Tranche C term loan 3.4927% 4/20/09 (d) | 4,158 | 4,199 | ||
AMI Semiconductor, Inc. term loan 3.62% 9/26/08 (d) | 2,400 | 2,424 | ||
Amphenol Corp. Tranche B term loan 3.6428% 5/6/10 (d) | 6,608 | 6,674 | ||
Fairchild Semiconductor Corp. term loan 3.6875% 6/19/08 (d) | 4,988 | 5,025 | ||
Global Imaging Systems, Inc. term loan 4.1586% 6/25/09 (d) | 998 | 1,007 | ||
Loral Satellite, Inc. term loan 1/7/05 (d) | 708 | 690 | ||
Loral Space & Communications Ltd. term loan 5.25% 1/7/05 (d) | 2,000 | 1,975 | ||
Loral Spacecom Corp. revolver loan 5.25% 1/7/05 (d) | 385 | 380 | ||
Seagate Technology Holdings, Inc. term loan 3.125% 5/13/07 (d) | 1,980 | 1,995 | ||
Semiconductor Components Industries LLC Tranche D term loan 5.1875% 8/4/07 (d) | 3,000 | 3,008 | ||
Xerox Corp. term loan 3.39% 9/30/08 (d) | 10,000 | 10,025 | ||
37,402 | ||||
Telecommunications - 9.7% | ||||
American Tower LP: | ||||
Tranche A term loan 3.3991% 6/30/07 (d) | 14,421 | 14,385 | ||
Tranche B term loan 4.6101% 12/31/07 (d) | 7,648 | 7,705 | ||
Centennial Puerto Rico Operations Corp.: | ||||
Tranche B term loan 4.4355% 5/31/07 (d) | 1,183 | 1,183 | ||
Floating Rate Loans (e) - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Telecommunications - continued | ||||
Centennial Puerto Rico Operations Corp.: - continued | ||||
Tranche C term loan 4.6892% 11/30/07 (d) | $ 817 | $ 817 | ||
Cincinnati Bell, Inc.: | ||||
Tranche A term loan 4.8814% 11/9/04 (d) | 233 | 234 | ||
Tranche C term loan 4.8702% 6/29/07 (d) | 787 | 791 | ||
Crown Castle International Corp. Tranche A term loan 3.64% 9/15/07 (d) | 650 | 651 | ||
Crown Castle Operating Co. Tranche B term loan 4.65% 9/30/10 (d) | 13,463 | 13,563 | ||
Dobson Cellular Systems, Inc. term loan 6.25% 3/31/10 (d) | 7,000 | 7,079 | ||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (d) | 12,181 | 12,211 | ||
Tranche C term loan 4.8125% 12/31/08 (d) | 12,181 | 12,211 | ||
Tranche D term loan 4.1875% 3/31/09 (d) | 18,060 | 18,150 | ||
Qwest Corp. Tranche A term loan 6.5% 6/30/07 (d) | 29,000 | 29,834 | ||
Qwest Services Corp. Tranche Q revolver loan 4.638% 5/3/05 (d) | 3,125 | 3,094 | ||
Rural Cellular Corp.: | ||||
Tranche B term loan 4.63% 10/3/08 (d) | 2,441 | 2,444 | ||
Tranche C term loan 4.84% 4/3/09 (d) | 2,441 | 2,444 | ||
SpectraSite Communications, Inc. Tranche A term loan 3.4923% 6/30/07 (d) | 6,750 | 6,758 | ||
Western Wireless Corp.: | ||||
Tranche A term loan 3.44% 3/31/08 (d) | 1,950 | 1,911 | ||
Tranche B term loan 4.478% 9/30/08 (d) | 5,073 | 5,073 | ||
140,538 | ||||
Textiles & Apparel - 0.1% | ||||
William Carter Co. Tranche C term loan 5.5% 9/30/08 (d) | 851 | 851 | ||
TOTAL FLOATING RATE LOANS (Cost $1,026,021) | 1,036,009 | |||
Nonconvertible Bonds - 7.5% | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Broadcasting - 0.2% | ||||
Radio One, Inc. 8.875% 7/1/11 | $ 2,000 | $ 2,190 | ||
Cable TV - 2.8% | ||||
EchoStar DBS Corp.: | ||||
4.41% 10/1/08 (c)(d) | 38,000 | 38,940 | ||
10.375% 10/1/07 | 1,965 | 2,169 | ||
41,109 | ||||
Capital Goods - 0.2% | ||||
Tyco International Group SA yankee 6.375% 2/15/06 | 3,000 | 3,176 | ||
Chemicals - 0.3% | ||||
Huntsman Advanced Materials LLC 10% 7/15/08 (c)(d) | 1,310 | 1,349 | ||
Methanex Corp. yankee 7.75% 8/15/05 | 3,000 | 3,158 | ||
4,507 | ||||
Containers - 0.1% | ||||
Owens-Brockway Glass Container, Inc. 8.875% 2/15/09 | 2,000 | 2,160 | ||
Diversified Media - 0.7% | ||||
Liberty Media Corp. 2.64% 9/17/06 (d) | 10,000 | 10,006 | ||
Electric Utilities - 0.5% | ||||
Allegheny Energy, Inc. 7.75% 8/1/05 | 1,000 | 1,015 | ||
Pacific Gas & Electric Co.: | ||||
6.75% 10/1/23 | 285 | 291 | ||
7.05% 3/1/24 | 1,000 | 1,020 | ||
Power Contract Financing LLC 5.2% 2/1/06 (c) | 1,100 | 1,097 | ||
Southern California Edison Co.: | ||||
5.875% 9/1/04 | 1,250 | 1,281 | ||
8% 2/15/07 | 2,000 | 2,240 | ||
6,944 | ||||
Energy - 1.6% | ||||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 2,000 | 2,145 | ||
Chesapeake Energy Corp. 7.875% 3/15/04 | 4,000 | 4,190 | ||
Dynegy Holdings, Inc. 7.7% 7/15/08 (c)(d) | 2,000 | 2,100 | ||
Pemex Project Funding Master Trust: | ||||
2.65% 1/7/05 (c)(d) | 2,000 | 2,011 | ||
2.95% 10/15/09 (c)(d) | 3,000 | 3,008 | ||
Pride International, Inc. 10% 6/1/09 | 3,000 | 3,210 | ||
Pride Petroleum Services, Inc. 9.375% 5/1/07 | 538 | 565 | ||
Southern Natural Gas Co. 8.875% 3/15/10 | 840 | 918 | ||
The Coastal Corp. 6.2% 5/15/04 | 2,000 | 1,995 | ||
Nonconvertible Bonds - continued | ||||
Principal Amount (000s) | Value (Note 1) (000s) | |||
Energy - continued | ||||
Transcontinental Gas Pipe Line Corp. 8.875% 7/15/12 | $ 2,000 | $ 2,343 | ||
Williams Companies, Inc. 9.25% 3/15/04 | 400 | 409 | ||
22,894 | ||||
Hotels - 0.1% | ||||
ITT Corp. 6.75% 11/15/03 | 2,000 | 2,008 | ||
Publishing/Printing - 0.0% | ||||
CBD Media LLC/ CBD Finance, Inc. 8.625% 6/1/11 (c) | 430 | 461 | ||
Shipping - 0.4% | ||||
General Maritime Corp. 10% 3/15/13 | 3,000 | 3,360 | ||
Teekay Shipping Corp. yankee 8.32% 2/1/08 | 2,000 | 2,160 | ||
5,520 | ||||
Technology - 0.1% | ||||
IOS Capital LLC 7.25% 6/30/08 | 1,000 | 995 | ||
Telecommunications - 0.5% | ||||
British Telecommunications PLC 2.445% 12/15/03 (d) | 3,000 | 3,004 | ||
Mobile Telesystems Finance SA 5.1413% 8/5/04 (c)(d) | 1,000 | 998 | ||
U.S. West Communications 7.2% 11/1/04 | 3,000 | 3,075 | ||
7,077 | ||||
TOTAL NONCONVERTIBLE BONDS (Cost $106,268) | 109,047 | |||
Commercial Mortgage Securities - 0.1% | ||||
CS First Boston Mortgage Securities Corp. Series 2000-FL1A Class F, 4.1174% 12/15/09 (c)(d) | 679 | 636 | ||
Common Stocks - 0.0% | |||
Shares | |||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 45 | 0 | |
Electric Utilities - 0.0% | |||
Reliant Resources, Inc.: | |||
warrants 5/16/10 (a) | 1,823 | 0 | |
warrants 5/15/11 (a) | 1,458 | 0 | |
TOTAL COMMON STOCKS (Cost $0) | 0 | |||
Money Market Funds - 24.0% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 1.07% (b) | 224,077,719 | $ 224,078 | |
Fidelity Money Market Central Fund, 1.16% (b) | 123,954,080 | 123,954 | |
TOTAL MONEY MARKET FUNDS (Cost $348,032) | 348,032 | ||
Cash Equivalents - 0.3% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.01%, dated 10/31/03 due 11/3/03) | $ 4,402 | 4,402 | |
TOTAL INVESTMENT PORTFOLIO - 103.3% (Cost $1,485,380) | 1,498,126 | ||
NET OTHER ASSETS - (3.3)% | (47,213) | ||
NET ASSETS - 100% | $ 1,450,913 | ||
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $50,601,000 or 3.5% of net assets. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) Remaining maturities of floating rate loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,031,695,000 and $360,130,000, respectively. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $11,146,000 of which $5,000, $818,000, $8,246,000 and $2,077,000 will expire on October 31, 2008, 2009, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Assets | ||
Investment in securities, at value (including repurchase agreements of $4,402) (cost $1,485,380) - See accompanying schedule | $ 1,498,126 | |
Cash | 515 | |
Receivable for investments sold | 2,255 | |
Receivable for fund shares sold | 11,200 | |
Interest receivable | 5,345 | |
Redemption fees receivable | 3 | |
Prepaid expenses | 5 | |
Total assets | 1,517,449 | |
Liabilities | ||
Payable for investments purchased | $ 59,878 | |
Payable for fund shares redeemed | 4,714 | |
Distributions payable | 606 | |
Accrued management fee | 778 | |
Distribution fees payable | 285 | |
Other payables and accrued expenses | 275 | |
Total liabilities | 66,536 | |
Net Assets | $ 1,450,913 | |
Net Assets consist of: | ||
Paid in capital | $ 1,446,078 | |
Undistributed net investment income | 3,419 | |
Accumulated undistributed net realized gain (loss) on investments | (11,330) | |
Net unrealized appreciation (depreciation) on investments | 12,746 | |
Net Assets | $ 1,450,913 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Calculation of Maximum Offering Price | $ 9.88 | |
Maximum offering price per share (100/96.25 of $9.88) | $ 10.26 | |
Class T: | $ 9.87 | |
Maximum offering price per share (100/97.25 of $9.87) | $ 10.15 | |
Class B: | $ 9.87 | |
Class C: | $ 9.87 | |
Fidelity Floating Rate High Income Fund: | $ 9.87 | |
Institutional Class: | $ 9.86 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended October 31, 2003 | |
Investment Income | ||
Interest | $ 33,595 | |
Expenses | ||
Management fee | $ 5,513 | |
Transfer agent fees | 1,103 | |
Distribution fees | 2,962 | |
Accounting fees and expenses | 315 | |
Non-interested trustees' compensation | 3 | |
Custodian fees and expenses | 48 | |
Registration fees | 205 | |
Audit | 60 | |
Legal | 74 | |
Miscellaneous | 11 | |
Total expenses before reductions | 10,294 | |
Expense reductions | (30) | 10,264 |
Net investment income (loss) | 23,331 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 279 | |
Change in net unrealized appreciation (depreciation) on investment securities | 31,433 | |
Net gain (loss) | 31,712 | |
Net increase (decrease) in net assets resulting from operations | $ 55,043 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 23,331 | $ 17,114 |
Net realized gain (loss) | 279 | (8,480) |
Change in net unrealized appreciation (depreciation) | 31,433 | (7,489) |
Net increase (decrease) in net assets resulting | 55,043 | 1,145 |
Distributions to shareholders from net investment income | (23,105) | (16,398) |
Share transactions - net increase (decrease) | 917,582 | (9,652) |
Redemption fees | 181 | 60 |
Total increase (decrease) in net assets | 949,701 | (24,845) |
Net Assets | ||
Beginning of period | 501,212 | 526,057 |
End of period (including undistributed net investment income of $3,419 and undistributed net investment income of $855, respectively) | $ 1,450,913 | $ 501,212 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .292 | .352 | .580 | .136 |
Net realized and unrealized gain (loss) | .447 | (.264) | (.185) | (.047) |
Total from investment operations | .739 | 088 | .395 | .089 |
Distributions from net investment income | (.311) | (.339) | (.638) | (.150) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.88 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.95% | .90% | 4.08% | .90% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.10% | 1.12% | 1.14% | 1.75% A |
Expenses net of voluntary waivers, if any | 1.10% | 1.10% | .99% | .78% A |
Expenses net of all reductions | 1.09% | 1.09% | .98% | .78% A |
Net investment income (loss) | 3.04% | 3.64% | 5.93% | 7.21% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 88 | $ 37 | $ 41 | $ 9 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .285 | .342 | .573 | .131 |
Net realized and unrealized gain (loss) | .446 | (.263) | (.195) | (.045) |
Total from investment operations | .731 | .079 | .378 | .086 |
Distributions from net investment income | (.303) | (.330) | (.631) | (.147) |
Redemption fees added to paid in capitalE | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.87% | .80% | 3.90% | .88% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.18% | 1.20% | 1.22% | 1.81% A |
Expenses net of voluntary waivers, if any | 1.18% | 1.19% | 1.06% | .93% A |
Expenses net of all reductions | 1.18% | 1.19% | 1.06% | .93% A |
Net investment income (loss) | 2.96% | 3.54% | 5.86% | 7.06% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 113 | $ 75 | $ 76 | $ 25 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .243 | .298 | .525 | .134 |
Net realized and unrealized gain (loss) | .444 | (.263) | (.194) | (.056) |
Total from investment operations | .687 | .035 | .331 | .078 |
Distributions from net investment income | (.259) | (.286) | (.584) | (.139) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C, D | 7.38% | .35% | 3.42% | .79% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.64% | 1.65% | 1.66% | 2.74% A |
Expenses net of voluntary waivers, if any | 1.63% | 1.64% | 1.54% | 1.23% A |
Expenses net of all reductions | 1.63% | 1.64% | 1.54% | 1.23% A |
Net investment income (loss) | 2.50% | 3.09% | 5.38% | 6.75% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 134 | $ 118 | $ 125 | $ 24 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.45 | $ 9.70 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .235 | .290 | .516 | .125 |
Net realized and unrealized gain (loss) | .434 | (.263) | (.184) | (.051) |
Total from investment operations | .669 | .027 | .332 | .074 |
Distributions from net investment income | (.251) | (.278) | (.575) | (.135) |
Redemption fees added to paid in capital E | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.45 | $ 9.70 | $ 9.94 |
Total Return B, C, D | 7.18% | .26% | 3.42% | .76% |
Ratios to Average Net Assets G | ||||
Expenses before expense reductions | 1.72% | 1.73% | 1.75% | 2.41% A |
Expenses net of voluntary waivers, if any | 1.71% | 1.73% | 1.64% | 1.44% A |
Expenses net of all reductions | 1.71% | 1.73% | 1.63% | 1.44% A |
Net investment income (loss) | 2.42% | 3.00% | 5.28% | 6.55% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 269 | $ 235 | $ 278 | $ 48 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2000 (commencement of operations) to October 31, 2000.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Floating Rate High Income Fund
Years ended October 31, | 2003 | 2002 E |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 9.44 | $ 9.52 |
Income from Investment Operations | ||
Net investment income (loss) D | .311 | .040 |
Net realized and unrealized gain (loss) | .450 | (.084) |
Total from investment operations | .761 | (.044) |
Distributions from net investment income | (.333) | (.037) |
Redemption fees added to paid in capital D | .002 | .001 |
Net asset value, end of period | $ 9.87 | $ 9.44 |
Total Return B, C | 8.20% | (.45)% |
Ratios to Average Net Assets F | ||
Expenses before expense reductions | .86% | 1.15% A |
Expenses net of voluntary waivers, if any | .86% | .95% A |
Expenses net of all reductions | .86% | .94% A |
Net investment income (loss) | 3.27% | 3.99% A |
Supplemental Data | ||
Net assets, end of period (in millions) | $ 811 | $ 18 |
Portfolio turnover rate | 55% | 77% |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 E |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 9.44 | $ 9.69 | $ 9.94 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) D | .312 | .365 | .590 | .151 |
Net realized and unrealized gain (loss) | .436 | (.262) | (.193) | (.058) |
Total from investment operations | .748 | .103 | .397 | .093 |
Distributions from net investment income | (.330) | (.354) | (.650) | (.154) |
Redemption fees added to paid in capital D | .002 | .001 | .003 | .001 |
Net asset value, end of period | $ 9.86 | $ 9.44 | $ 9.69 | $ 9.94 |
Total Return B, C | 8.06% | 1.06% | 4.11% | .94% |
Ratios to Average Net Assets F | ||||
Expenses before expense reductions | .90% | .94% | 1.02% | 2.32% A |
Expenses net of voluntary waivers, if any | .89% | .94% | .87% | .49% A |
Expenses net of all reductions | .89% | .93% | .87% | .49% A |
Net investment income (loss) | 3.24% | 3.79% | 6.05% | 7.50% A |
Supplemental Data | ||||
Net assets, end of period (in millions) | $ 36 | $ 18 | $ 7 | $ 1 |
Portfolio turnover rate | 55% | 77% | 55% | 12% A |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period August 16, 2000 (commencement of operations) to October 31, 2000.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Floating Rate High Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Floating Rate High Income Fund and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Security Valuation - continued
maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. The Fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, consent fees and prepayment fees. These fees are recorded as Income in the accompanying financial statements.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 14,777 | | |
Unrealized depreciation | (1,613) | |
Net unrealized appreciation (depreciation) | 13,164 | |
Undistributed ordinary income | 5,891 | |
Capital loss carryforward | (11,146) | |
Cost for federal income tax purposes | $ 1,484,962 |
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 23,105 | $ 16,398 |
Short-Term Trading (Redemption) Fees. Shares held in the fund less than 60 days are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which is retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Mangement & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments, including revolving credit facilities, that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. The fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. At the end of the period, the fund had unfunded loan commitments of $1,987.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
3. Purchases and Sales of Investments.
Purchases and sales of securities (including principal repayments of floating rate loans), is included under the caption "Other Information" at the end of the fund's schedule of investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .55% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .68% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees based on an annual percentage of each class' average net assets. In addition FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 68 | $ - |
Class T | 0% | .25% | 197 | - |
Class B | .55% | .15% | 841 | 660 |
Class C | .55% | .25% | 1,856 | 578 |
$ 2,962 | $ 1,238 |
Sales Load. FDC receives a front-end sales charge of up to 3.75% for selling Class A shares, and 2.75% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3.50% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||
Class A | $ 67 | |
Class T | 31 | |
Class B* | 425 | |
Class C* | 114 | |
$ 637 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Floating Rate High Income Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for the Fidelity Floating Rate High Income fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 83 | .18 |
Class T | 133 | .17 |
Class B | 203 | .17 |
Class C | 350 | .15 |
Fidelity Floating Rate High Income Fund | 305 | .10 |
Institutional Class | 29 | .13 |
$ 1,103 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,218 for the period.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR voluntarily agreed to reimburse a portion of Advisor Floating Rate High Income Fund's Class A, Class T, Class B, Class C and Institutional Class operating expenses. During the period, this reimbursement reduced expenses as follows:
Reimbursement | ||
Class A | $ 2 | |
Class T | 3 | |
Class B | 4 | |
Class C | 9 | |
Institutional Class | 1 |
In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $11.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | 2003 | 2002 |
From net investment income | ||
Class A | $ 1,379 | $ 1,416 |
Class T | 2,412 | 2,733 |
Class B | 3,198 | 3,729 |
Class C | 5,977 | 7,917 |
Fidelity Floating Rate High Income Fund | 9,407 | 27 |
Institutional Class | 732 | 576 |
Total | $ 23,105 | $ 16,398 |
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | 2003 | 2002A | 2003 | 2002A |
Class A | ||||
Shares sold | 6,904 | 2,013 | $ 67,614 | $ 19,548 |
Reinvestment of distributions | 98 | 107 | 956 | 1,036 |
Shares redeemed | (1,953) | (2,421) | (18,942) | (23,409) |
Net increase (decrease) | 5,049 | (301) | $ 49,628 | $ (2,825) |
Class T | ||||
Shares sold | 7,102 | 5,346 | $ 69,392 | $ 51,902 |
Reinvestment of distributions | 214 | 241 | 2,081 | 2,322 |
Shares redeemed | (3,806) | (5,466) | (36,871) | (52,625) |
Net increase (decrease) | 3,510 | 121 | $ 34,602 | $ 1,599 |
Class B | ||||
Shares sold | 3,767 | 3,679 | $ 36,736 | $ 35,647 |
Reinvestment of distributions | 231 | 261 | 2,235 | 2,519 |
Shares redeemed | (2,978) | (4,252) | (28,855) | (40,950) |
Net increase (decrease) | 1,020 | (312) | $ 10,116 | $ (2,784) |
Class C | ||||
Shares sold | 10,474 | 9,641 | $ 102,347 | $ 93,674 |
Reinvestment of distributions | 411 | 561 | 3,982 | 5,425 |
Shares redeemed | (8,522) | (13,892) | (82,608) | (133,841) |
Net increase (decrease) | 2,363 | (3,690) | $ 23,721 | $ (34,742) |
Floating Rate High Income Fund | ||||
Shares sold | 91,211 | 1,925 | $ 889,648 | $ 18,242 |
Reinvestment of distributions | 840 | 3 | 8,216 | 25 |
Shares redeemed | (11,804) | (6) | (115,507) | (58) |
Net increase (decrease) | 80,247 | 1,922 | $ 782,357 | $ 18,209 |
Institutional Class | ||||
Shares sold | 2,601 | 2,636 | $ 25,410 | $ 25,595 |
Reinvestment of distributions | 31 | 21 | 305 | 202 |
Shares redeemed | (880) | (1,550) | (8,557) | (14,906) |
Net increase (decrease) | 1,752 | 1,107 | $ 17,158 | $ 10,891 |
A Share transactions for Fidelity Floating Rate High Income Fund are for the period September 19, 2002 (commencement of sale of shares) to October 31, 2002.
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Floating Rate High Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Floating Rate High Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the three years in the period then ended and for the period from August 16, 2000 to October 31, 2000. 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 auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian, brokers and agent banks; where replies were not received from brokers and agent banks, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Floating Rate High Income Fund as of October 31, 2003, 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 its financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 17, 2003
Annual Report
Trustees and Officers
The Trustees and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, Call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Fidelity Advisor Floating Rate High Income Fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000), and The Dow Chemical Company (2000). He is a Member of the Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing) and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, and defense technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial, 1997) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Fidelity Advisor Floating Rate High Income Fund. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Christine G. McConnell (45) | |
Year of Election or Appointment: 2003 Vice President of Fidelity Advisor Floating Rate High Income Fund. Prior to assuming her current responsibilities, Ms. McConnell worked as a research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 2000 Secretary of Fidelity Advisor Floating Rate High Income Fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Fidelity Advisor Floating Rate High Income Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Fidelity Advisor Floating Rate High Income Fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002) and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Fidelity Advisor Floating Rate High Income Fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 1.78% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Fidelity's Taxable Bond Funds
Capital & Income
Floating Rate High Income
Ginnie Mae
Government Income
High Income
Inflation-Protected Bond
Intermediate Bond
Intermediate Government Income
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Total Bond
Ultra-Short Bond
U.S. Bond Index
The Fidelity Telephone Connection
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and Account Assistance 1-800-544-6666
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82 Devonshire St., Boston, MA 02109
www.fidelity.com
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Government Investment
Fund - Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
<R>Class A (incl. 4.75% | -2.74% | 4.52% | 5.34%</R> | |
<R>Class T (incl. 3.50% | -1.56% | 4.67% | 5.38%</R> | |
Class B (incl. contingent deferred sales charge) B | -3.56% | 4.42% | 5.28% | |
Class C (incl. contingent deferred sales charge) C | 0.29% | 4.67% | 5.04% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on September 3, 1996. Returns prior to September 3, 1996 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
B Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996). The initial offering of Class B shares took place on June 30, 1994. Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class B's 12b-1 fee been reflected, returns prior to June 30, 1994 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five year and past 10 year total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between June 30, 1994 and November 3, 1997 are those of Class B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns between November 3, 1997 and January 1, 1996 and prior to June 30, 1994 would have been lower. Class C shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Government Investment Fund - Class T on October 31, 1993, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Government Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Tom Silvia, Portfolio Manager of Fidelity® Advisor Government Investment Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Government Investment Fund's Class A, Class T, Class B and Class C shares returned 2.11%, 2.01%, 1.34% and 1.27%, respectively, compared to the 1.70% return for the fund's peer group, the LipperSM General U.S. Government Funds Average. Additionally, the fund's benchmark - the Lehman Brothers Government Bond Index - returned 2.90%. Timely moves in and out of the mortgage sector boosted the fund's returns. Security selection within this group, including a focus on prepayment-resistant mortgage securities, also worked in the fund's favor. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Securities that helped cushion prepayment risk included those made up of mortgages originated in geographic areas with slower prepayment rates and collateralized mortgage obligations. The fund also benefited from its comparatively small stake in Treasury securities, which underperformed agency securities during the year. Detracting from performance was my decision not to invest in Treasury Inflation-Protected Securities (TIPS), which performed quite well during the year.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of October 31, 2003 | ||
% of fund's | % of fund's investments | |
Less than 4% | 4.7 | 5.7 |
4 - 4.99% | 5.6 | 1.2 |
5 - 5.99% | 10.5 | 9.9 |
6 - 6.99% | 47.1 | 44.1 |
7 - 7.99% | 13.0 | 7.3 |
8 - 8.99% | 5.7 | 6.8 |
9 - 9.99% | 0.2 | 0.3 |
10 - 10.99% | 1.9 | 2.0 |
11 - 11.99% | 1.2 | 10.4 |
12 - 12.99% | 1.8 | 0.0 |
13 - 13.99% | 4.0 | 3.7 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 8.1 | 8.2 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 5.3 | 5.0 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Mortgage Securities 9.9% | | Mortgage Securities 5.8% | ||||
| CMOs and | | CMOs and | ||||
| U.S. Treasury | | U.S. Treasury | ||||
 | U.S. Government | | U.S. Government | ||||
 | Short-Term |  | Short-Term | ||||
* Futures and Swaps | 0.00% | ** Futures and Swaps | 6.8% | ||||
A Short-Term Investments and Net Other Assets are not included in the pie chart.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 63.5% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 32.7% | ||||
Fannie Mae: | ||||
6% 5/15/08 | $ 6,158,000 | $ 6,818,519 | ||
6.125% 3/15/12 | 8,050,000 | 8,923,803 | ||
6.25% 2/1/11 | 4,660,000 | 5,096,908 | ||
6.625% 9/15/09 | 1,620,000 | 1,848,823 | ||
6.625% 11/15/30 | 18,000,000 | 20,281,248 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 710,000 | 787,028 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 35,351,000 | 35,464,512 | ||
4.5% 7/15/13 | 25,000,000 | 24,452,450 | ||
5.875% 3/21/11 | 8,310,000 | 8,886,556 | ||
7% 3/15/10 | 48,000,000 | 55,822,323 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 450,596 | 493,141 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1993-C, 5.2% 10/15/04 | 42,489 | 43,743 | ||
Series 1993-D, 5.23% 5/15/05 | 72,978 | 74,545 | ||
Series 1994-A, 7.12% 4/15/06 | 4,620,903 | 4,931,150 | ||
Series 1994-F, 8.187% 12/15/04 | 566,122 | 576,403 | ||
Series 1995-A, 6.28% 6/15/04 | 412,941 | 420,940 | ||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1994-A, 7.39% 6/26/06 | 2,250,000 | 2,416,927 | ||
Series 1994-B, 7.5% 1/26/06 | 83,161 | 89,472 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates: | ||||
Series 1996-A1, 6.726% 9/15/10 | 1,217,391 | 1,340,031 | ||
Series 2000-016, 6.07% 12/15/14 | 4,200,000 | 4,562,250 | ||
6.77% 11/15/13 | 1,340,385 | 1,482,800 | ||
6.99% 5/21/16 | 4,462,500 | 5,064,670 | ||
Private Export Funding Corp. secured: | ||||
5.34% 3/15/06 | 4,640,000 | 4,963,181 | ||
5.66% 9/15/11 (a) | 2,610,000 | 2,799,225 | ||
6.67% 9/15/09 | 880,000 | 1,003,634 | ||
6.86% 4/30/04 | 100,750 | 103,420 | ||
Small Business Administration guaranteed development participation certificates Series 2002-20K Class 1, 5.08% 11/1/22 | 5,882,423 | 5,926,503 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency Obligations - continued | ||||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.89% 8/15/05 | $ 8,560,000 | $ 9,066,059 | ||
6.6% 2/15/08 | 13,100,000 | 14,195,448 | ||
6.8% 2/15/12 | 5,000,000 | 5,574,420 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 2,100,000 | 2,279,775 | ||
5.96% 8/1/09 | 1,800,000 | 1,920,258 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 210,000 | 231,218 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 237,941,383 | |||
U.S. Treasury Obligations - 30.8% | ||||
U.S. Treasury Bonds: | ||||
6% 2/15/26 | 4,500,000 | 4,943,322 | ||
6.125% 8/15/29 | 33,229,000 | 37,306,032 | ||
6.25% 8/15/23 | 30,000,000 | 33,857,820 | ||
8% 11/15/21 | 29,994,000 | 40,197,809 | ||
10% 5/15/10 | 11,170,000 | 12,564,943 | ||
11.25% 2/15/15 | 5,506,000 | 8,791,105 | ||
12% 8/15/13 | 10,000,000 | 13,877,730 | ||
13.25% 5/15/14 | 20,500,000 | 30,660,313 | ||
U.S. Treasury Notes: | ||||
5% 8/15/11 | 36,000,000 | 38,414,520 | ||
6% 8/15/09 | 3,000,000 | 3,392,109 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 224,005,703 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $457,981,497) | 461,947,086 | |||
U.S. Government Agency - Mortgage Securities - 9.9% | ||||
Fannie Mae - 9.1% | ||||
4% 11/1/18 (b) | 9,953,845 | 9,664,561 | ||
6% 9/1/17 | 9,140,964 | 9,507,486 | ||
6.5% 2/1/10 to 8/1/32 | 5,986,737 | 6,227,373 | ||
6.5% 11/1/33 (b) | 30,000,000 | 31,162,500 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Fannie Mae - continued | ||||
7% 4/1/26 to 7/1/32 | $ 7,593,556 | $ 8,001,505 | ||
7.5% 3/1/28 to 4/1/29 | 81,774 | 87,351 | ||
8.5% 9/1/16 to 1/1/17 | 27,487 | 30,072 | ||
9% 11/1/11 to 5/1/14 | 629,299 | 693,336 | ||
9.5% 11/1/06 to 5/1/20 | 406,138 | 444,902 | ||
11.5% 6/15/19 | 98,276 | 111,632 | ||
12.5% 8/1/15 | 3,714 | 4,257 | ||
65,934,975 | ||||
Freddie Mac - 0.5% | ||||
6.775% 11/15/03 | 1,383,854 | 1,381,808 | ||
7.5% 3/1/15 to 3/1/16 | 1,633,655 | 1,739,411 | ||
8.5% 8/1/09 to 2/1/10 | 68,132 | 73,711 | ||
9% 10/1/08 to 10/1/20 | 169,106 | 185,304 | ||
9.5% 5/1/21 to 7/1/21 | 123,719 | 137,946 | ||
11% 7/1/13 to 5/1/14 | 150,758 | 169,186 | ||
12.5% 2/1/10 to 6/1/19 | 66,752 | 75,761 | ||
3,763,127 | ||||
Government National Mortgage Association - 0.3% | ||||
6.5% 6/20/32 | 330,307 | 344,827 | ||
7.5% 9/15/06 to 8/15/29 | 398,351 | 420,080 | ||
8% 12/15/23 | 1,080,894 | 1,178,979 | ||
9% 9/15/05 to 12/15/09 | 4,477 | 4,548 | ||
10.5% 11/15/17 to 1/20/18 | 109,472 | 123,447 | ||
13.5% 7/15/11 | 12,986 | 15,132 | ||
2,087,013 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $71,074,523) | 71,785,115 | |||
Collateralized Mortgage Obligations - 26.8% | ||||
U.S. Government Agency - 26.8% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1992-168 Class KB, 7% 10/25/22 | 6,161,044 | 6,629,713 | ||
Series 1993-160 Class PK, 6.5% 11/25/22 | 3,344,376 | 3,421,197 | ||
Series 1994-27 Class PJ, 6.5% 6/25/23 | 2,000,000 | 2,110,786 | ||
Series 1993-187 Class L, 6.5% 7/25/23 | 1,700,000 | 1,815,506 | ||
Series 2003-28 Class KQ, 5% 4/25/23 | 1,913,709 | 1,924,821 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class: | ||||
Series 2001-30 Class PL, 7% 2/25/31 | $ 6,079,537 | $ 6,317,725 | ||
Series 2001-53 Class OH, 6.5% 6/25/30 | 314,598 | 321,140 | ||
Series 2001-56 Class KD, 6.5% 7/25/30 | 9,847,922 | 10,078,800 | ||
Series 2002-55 Class QB, 5.5% 8/25/12 | 519,843 | 526,070 | ||
Series 2003-77 Class WZ, 4.5% 8/25/18 | 6,599,023 | 6,401,052 | ||
Series 2003-88 Class WZ, 4.5% 9/25/18 | 535,470 | 536,579 | ||
Freddie Mac sequential pay: | ||||
Series 2343 Class VD, 7% 8/15/16 | 5,164,000 | 5,536,353 | ||
Series 2355 Class AE, 6% 9/15/31 | 11,855,897 | 12,261,926 | ||
Series 2361 Class KB, 6.25% 1/15/28 | 17,600,000 | 18,033,859 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed: | ||||
planned amortization class Series 1681 Class PJ, 7% 12/15/23 | 4,000,000 | 4,307,488 | ||
sequential pay Series 2333 Class KA, 6.5% 7/15/31 | 11,921,000 | 12,706,463 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 1141 Class G, 9% 9/15/21 | 341,436 | 346,567 | ||
Series 1671 Class G, 6.5% 8/15/23 | 12,922,605 | 13,408,375 | ||
Series 1727 Class H, 6.5% 8/15/23 | 2,600,000 | 2,745,408 | ||
Series 2206 Class PA, 7.5% 11/15/21 | 505,217 | 508,425 | ||
Series 2275 Class PM, 6.5% 10/15/29 | 3,832,913 | 3,922,430 | ||
Series 2322 Class HC, 6.5% 3/15/30 | 187,969 | 191,632 | ||
Series 2368 Class PQ, 6.5% 8/15/30 | 2,750,000 | 2,808,619 | ||
sequential pay: | ||||
Series 2278 Class VB, 6.5% 3/15/14 | 5,035,000 | 5,165,128 | ||
Series 2285 Class VB, 6.5% 10/15/16 | 4,000,000 | 4,110,579 | ||
Series 2303 Class VT, 6% 2/15/12 | 1,374,108 | 1,392,314 | ||
Series 2448 Class VH, 6.5% 5/15/18 | 4,835,000 | 5,115,114 | ||
Series 1624 Class KC, 6% 6/15/08 | 5,857,482 | 5,932,647 | ||
Series 2410 Class MK, 6.5% 6/15/29 | 5,000,000 | 5,063,388 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 890,000 | 902,673 | ||
Series 2568 Class SA, 10.528% 9/15/28 (c) | 1,410,747 | 1,452,098 | ||
Series 2628 Class AZ, 4.5% 6/15/18 | 1,664,611 | 1,664,611 | ||
Series 2663 Class ZM, 5% 8/15/18 | 424,603 | 424,342 | ||
Series 2664 Class EZ, 5.5% 8/15/33 | 1,855,475 | 1,849,382 | ||
target amortization class Series 2156 Class TC, 6.25% 5/15/29 | 10,000,000 | 10,390,798 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class Series 2002-19 Class PE, 6% 10/20/30 | $ 25,000,000 | $ 26,025,550 | ||
sequential pay Series 2000-12 Class B, 7.5% 12/16/28 | 2,092,334 | 2,129,233 | ||
Series 1998-1 Class PE, 6.35% 1/20/28 | 5,000,000 | 5,316,525 | ||
Series 2001-53 Class TA, 6% 12/20/30 | 1,097,057 | 1,122,129 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $196,546,204) | 194,917,445 | |||
Cash Equivalents - 4.3% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 31,582,816 | 31,580,000 | |
TOTAL INVESTMENT PORTFOLIO - 104.5% (Cost $757,182,224) | 760,229,646 | ||
NET OTHER ASSETS - (4.5)% | (32,870,330) | |
NET ASSETS - 100% | $ 727,359,316 |
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,799,225 or 0.4% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Other Information |
Purchases and sales of long-term U.S. government and government agency obligations aggregated $2,072,597,748 and $2,121,563,547, respectively. |
Income Tax Information |
The fund hereby designates approximately $6,275,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $31,580,000) (cost $757,182,224) - See accompanying schedule | $ 760,229,646 | |
Cash | 186 | |
Receivable for investments sold | 2,346,611 | |
Receivable for fund shares sold | 1,204,864 | |
Interest receivable | 8,565,159 | |
Prepaid expenses | 4,322 | |
Total assets | 772,350,788 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 40,901,531 | |
Payable for fund shares redeemed | 3,092,431 | |
Distributions payable | 269,661 | |
Accrued management fee | 263,603 | |
Distribution fees payable | 277,386 | |
Other payables and accrued expenses | 186,860 | |
Total liabilities | 44,991,472 | |
Net Assets | $ 727,359,316 | |
Net Assets consist of: | ||
Paid in capital | $ 713,430,180 | |
Undistributed net investment income | 66,943 | |
Accumulated undistributed net realized gain (loss) on investments | 10,814,771 | |
Net unrealized appreciation (depreciation) on investments | 3,047,422 | |
Net Assets | $ 727,359,316 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 10.12 | |
Maximum offering price per share (100/95.25 of $10.12) | $ 10.62 | |
Class T: | $ 10.11 | |
Maximum offering price per share (100/96.50 of $10.11) | $ 10.48 | |
Class B: | $ 10.10 | |
Class C: | $ 10.11 | |
Institutional Class: | $ 10.07 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 35,493,647 | |
Security lending | 37,007 | |
Total income | 35,530,654 | |
Expenses | ||
Management fee | $ 3,534,766 | |
Transfer agent fees | 1,635,739 | |
Distribution fees | 3,969,246 | |
Accounting and security lending fees | 204,893 | |
Non-interested trustees' compensation | 3,492 | |
Custodian fees and expenses | 29,697 | |
Registration fees | 141,516 | |
Audit | 31,090 | |
Legal | 7,365 | |
Miscellaneous | 5,866 | |
Total expenses before reductions | 9,563,670 | |
Expense reductions | (1,996) | 9,561,674 |
Net investment income (loss) | 25,968,980 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 12,571,429 | |
Swap agreements | (587,702) | |
Total net realized gain (loss) | 11,983,727 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (23,491,452) | |
Swap agreements | 109,924 | |
Total change in net unrealized appreciation (depreciation) | (23,381,528) | |
Net gain (loss) | (11,397,801) | |
Net increase (decrease) in net assets resulting from operations | $ 14,571,179 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 25,968,980 | $ 24,322,158 |
Net realized gain (loss) | 11,983,727 | 16,893,164 |
Change in net unrealized appreciation (depreciation) | (23,381,528) | (1,624,808) |
Net increase (decrease) in net assets resulting | 14,571,179 | 39,590,514 |
Distributions to shareholders from net investment income | (25,752,285) | (25,095,039) |
Distributions to shareholders from net realized gain | (5,552,244) | - |
Total distributions | (31,304,529) | (25,095,039) |
Share transactions - net increase (decrease) | (75,289,044) | 194,715,430 |
Total increase (decrease) in net assets | (92,022,394) | 209,210,905 |
Net Assets | ||
Beginning of period | 819,381,710 | 610,170,805 |
End of period (including undistributed net investment income of $66,943 and distributions in excess of net investment income of $74,407, respectively) | $ 727,359,316 | $ 819,381,710 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.33 | $ 10.14 | $ 9.42 | $ 9.31 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .360 | .410E | .546 | .559 | .545 |
Net realized and unrealized gain (loss) | (.144) | .205E | .730 | .115 | (.696) |
Total from investment operations | .216 | .615 | 1.276 | .674 | (.151) |
Distributions from net investment income | (.356) | (.425) | (.556) | (.564) | (.559) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.426) | (.425) | (.556) | (.564) | (.559) |
Net asset value, end of period | $ 10.12 | $ 10.33 | $ 10.14 | $ 9.42 | $ 9.31 |
Total ReturnA,B | 2.11% | 6.31% | 13.95% | 7.53% | (1.53)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .83% | .83% | .87% | .85% | .87% |
Expenses net of voluntary | .83% | .83% | .87% | .85% | .87% |
Expenses net of all reductions | .83% | .83% | .86% | .85% | .87% |
Net investment income (loss) | 3.50% | 4.11%E | 5.61% | 6.02% | 5.73% |
Supplemental Data | |||||
Net assets, end of period | $ 69,011 | $ 68,973 | $ 43,205 | $ 15,053 | $ 15,273 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .350 | .398E | .535 | .549 | .541 |
Net realized and unrealized gain (loss) | (.144) | .206E | .731 | .114 | (.710) |
Total from investment operations | .206 | .604 | 1.266 | .663 | (.169) |
Distributions from net investment income | (.346) | (.414) | (.546) | (.553) | (.551) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.416) | (.414) | (.546) | (.553) | (.551) |
Net asset value, end of period | $ 10.11 | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 2.01% | 6.19% | 13.86% | 7.41% | (1.71)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .94% | .96% | .95% | .96% |
Expenses net of voluntary | .93% | .94% | .96% | .95% | .96% |
Expenses net of all reductions | .93% | .94% | .96% | .95% | .95% |
Net investment income (loss) | 3.39% | 4.00%E | 5.52% | 5.92% | 5.65% |
Supplemental Data | |||||
Net assets, end of period | $ 304,517 | $ 366,209 | $ 293,105 | $ 182,049 | $ 215,089 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.31 | $ 10.12 | $ 9.41 | $ 9.30 | $ 10.01 |
Income from Investment Operations | |||||
Net investment income (loss)C | .282 | .335E | .474 | .490 | .479 |
Net realized and unrealized gain (loss) | (.144) | .205E | .720 | .114 | (.699) |
Total from investment operations | .138 | .540 | 1.194 | .604 | (.220) |
Distributions from net investment income | (.278) | (.350) | (.484) | (.494) | (.490) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.348) | (.350) | (.484) | (.494) | (.490) |
Net asset value, end of period | $ 10.10 | $ 10.31 | $ 10.12 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 1.34% | 5.52% | 13.03% | 6.73% | (2.24)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Expenses net of voluntary | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Expenses net of all reductions | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Net investment income (loss) | 2.74% | 3.36%E | 4.88% | 5.28% | 5.01% |
Supplemental Data | |||||
Net assets, end of period | $ 176,855 | $ 230,244 | $ 158,864 | $ 77,424 | $ 94,871 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .275 | .327E | .468 | .482 | .468 |
Net realized and unrealized gain (loss) | (.144) | .205E | .729 | .115 | (.708) |
Total from investment operations | .131 | .532 | 1.197 | .597 | (.240) |
Distributions from net investment income | (.271) | (.342) | (.477) | (.487) | (.480) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.341) | (.342) | (.477) | (.487) | (.480) |
Net asset value, end of period | $ 10.11 | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 1.27% | 5.44% | 13.05% | 6.64% | (2.43)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Expenses net of voluntary | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Expenses net of all reductions | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Net investment income (loss) | 2.66% | 3.29%E | 4.81% | 5.20% | 4.91% |
Supplemental Data | |||||
Net assets, end of period | $ 80,620 | $ 103,002 | $ 87,214 | $ 30,133 | $ 35,652 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.28 | $ 10.09 | $ 9.38 | $ 9.27 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss)B | .370 | .422D | .560 | .572 | .567 |
Net realized and unrealized gain (loss) | (.138) | .207D | .723 | .118 | (.720) |
Total from investment operations | .232 | .629 | 1.283 | .690 | (.153) |
Distributions from net investment income | (.372) | (.439) | (.573) | (.580) | (.577) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.442) | (.439) | (.573) | (.580) | (.577) |
Net asset value, end of period | $ 10.07 | $ 10.28 | $ 10.09 | $ 9.38 | $ 9.27 |
Total ReturnA | 2.28% | 6.49% | 14.11% | 7.75% | (1.55)% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .68% | .69% | .69% | .66% | .68% |
Expenses net of voluntary | .68% | .69% | .69% | .66% | .68% |
Expenses net of all reductions | .68% | .69% | .69% | .66% | .68% |
Net investment income (loss) | 3.64% | 4.26%D | 5.79% | 6.20% | 5.92% |
Supplemental Data | |||||
Net assets, end of period | $ 96,356 | $ 50,953 | $ 27,782 | $ 22,067 | $ 22,636 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Government Investment Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 8,051,315 | |
Unrealized depreciation | (6,223,302) | |
Net unrealized appreciation (depreciation) | 1,828,013 | |
Undistributed ordinary income | 2,146,357 | |
Undistributed long-term capital gain | 6,404,624 | |
Cost for federal income tax purposes | $ 758,401,633 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 25,752,285 | $ 25,095,039 |
Long-term Capital Gains | 5,552,244 | - |
Total | $ 31,304,529 | $ 25,095,039 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements - continued
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 113,819 | $ 115 |
Class T | 0% | .25% | 885,879 | 1,967 |
Class B | .65% | .25% | 1,971,726 | 1,424,437 |
Class C | .75% | .25% | 997,822 | 188,613 |
$ 3,969,246 | $ 1,615,132 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 76,654 |
Class T | 42,830 |
Class B* | 920,065 |
Class C* | 37,286 |
$ 1,076,835 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 150,197 | .20 |
Class T | 706,491 | .20 |
Class B | 455,610 | .21 |
Class C | 178,990 | .18 |
Institutional Class | 144,451 | .20 |
$ 1,635,739 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $1,996.
Annual Report
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 2,622,269 | $ 2,181,697 |
Class T | 11,938,897 | 12,304,840 |
Class B | 5,949,059 | 5,967,868 |
Class C | 2,630,246 | 2,860,429 |
Institutional Class | 2,611,814 | 1,780,205 |
Total | $ 25,752,285 | $ 25,095,039 |
From net realized gain | ||
Class A | $ 465,596 | $ - |
Class T | 2,483,022 | - |
Class B | 1,550,205 | - |
Class C | 695,824 | - |
Institutional Class | 357,597 | - |
Total | $ 5,552,244 | $ - |
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 5,954,963 | 8,573,146 | $ 61,424,786 | $ 85,475,457 |
Reinvestment of distributions | 259,349 | 180,940 | 2,665,148 | 1,804,454 |
Shares redeemed | (6,073,729) | (6,337,442) | (62,468,909) | (62,899,268) |
Net increase (decrease) | 140,583 | 2,416,644 | $ 1,621,025 | $ 24,380,643 |
Class T | ||||
Shares sold | 13,752,553 | 21,895,424 | $ 141,665,954 | $ 220,004,190 |
Reinvestment of distributions | 1,299,921 | 1,123,549 | 13,348,077 | 11,204,410 |
Shares redeemed | (20,424,771) | (16,470,613) | (209,811,679) | (164,080,969) |
Net increase (decrease) | (5,372,297) | 6,548,360 | $ (54,797,648) | $ 67,127,631 |
Class B | ||||
Shares sold | 5,724,003 | 13,607,849 | $ 59,070,876 | $ 136,910,243 |
Reinvestment of distributions | 562,238 | 445,140 | 5,768,256 | 4,440,806 |
Shares redeemed | (11,112,103) | (7,420,261) | (113,895,988) | (73,913,807) |
Net increase (decrease) | (4,825,862) | 6,632,728 | $ (49,056,856) | $ 67,437,242 |
Annual Report
Notes to Financial Statements - continued
8. Share Transactions - continued
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class C | ||||
Shares sold | 3,433,368 | 6,367,811 | $ 35,389,290 | $ 63,862,680 |
Reinvestment of distributions | 228,727 | 190,224 | 2,347,518 | 1,897,581 |
Shares redeemed | (5,670,985) | (5,186,545) | (58,122,648) | (51,534,348) |
Net increase (decrease) | (2,008,890) | 1,371,490 | $ (20,385,840) | $ 14,225,913 |
Institutional Class | ||||
Shares sold | 6,469,585 | 4,224,894 | $ 66,283,395 | $ 41,724,600 |
Reinvestment of distributions | 244,539 | 158,060 | 2,497,316 | 1,571,439 |
Shares redeemed | (2,100,471) | (2,180,456) | (21,450,436) | (21,752,038) |
Net increase (decrease) | 4,613,653 | 2,202,498 | $ 47,330,275 | $ 21,544,001 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Government Investment Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Government Investment Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Government Investment Fund as of October 31, 2003, 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 12, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Government Investment (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight Churchhill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Government Investment. He serves as Head of Fidelity's Fixed-income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchhill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Government Investment. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Thomas J. Silvia (42) | |
Year of Election or Appointment: 1998 Vice President of Advisor Government Investment. Mr. Silvia is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Silvia managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Government Investment. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Government Investment. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Government Investment. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Government Investment. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Government Investment. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Government Investment. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Advisor Government Investment. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Government Investment. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Government Investment. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Government Investment. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Government Investment Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share 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 | 12/8/03 | 12/5/03 | $.10 |
Class T | 12/8/03 | 12/5/03 | $.10 |
Class B | 12/8/03 | 12/5/03 | $.10 |
Class C | 12/8/03 | 12/5/03 | $.10 |
A total of 57.74% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments Money
Management, Inc.
Fidelity International
Investment Advisors
Fidelity International
Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AGOV-UANN-1203
1.784746.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Government Investment
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional ClassA | 2.28% | 5.68% | 5.97% |
A Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. The initial offering of Institutional Class shares took place on July 3, 1995. Returns prior to July 3, 1995 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Government Investment Fund - Institutional Class on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Government Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Tom Silvia, Portfolio Manager of Fidelity® Advisor Government Investment Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Government Investment Fund's Institutional Class shares returned 2.28%, compared to the 1.70% return for the fund's peer group, the LipperSM General U.S. Government Funds Average. Additionally, the fund's benchmark - the Lehman Brothers Government Bond Index - returned 2.90%. Timely moves in and out of the mortgage sector boosted the fund's returns. Security selection within this group, including a focus on prepayment-resistant mortgage securities, also worked in the fund's favor. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Securities that helped cushion prepayment risk included those made up of mortgages originated in geographic areas with slower prepayment rates and collateralized mortgage obligations. The fund also benefited from its comparatively small stake in Treasury securities, which underperformed agency securities during the year. Detracting from performance was my decision not to invest in Treasury Inflation-Protected Securities (TIPS), which performed quite well during the year.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of October 31, 2003 | ||
% of fund's | % of fund's investments | |
Less than 4% | 4.7 | 5.7 |
4 - 4.99% | 5.6 | 1.2 |
5 - 5.99% | 10.5 | 9.9 |
6 - 6.99% | 47.1 | 44.1 |
7 - 7.99% | 13.0 | 7.3 |
8 - 8.99% | 5.7 | 6.8 |
9 - 9.99% | 0.2 | 0.3 |
10 - 10.99% | 1.9 | 2.0 |
11 - 11.99% | 1.2 | 10.4 |
12 - 12.99% | 1.8 | 0.0 |
13 - 13.99% | 4.0 | 3.7 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 8.1 | 8.2 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 5.3 | 5.0 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
 | Mortgage Securities 9.9% | | Mortgage Securities 5.8% | ||||
 | CMOs and | | CMOs and | ||||
 | U.S. Treasury | | U.S. Treasury | ||||
 | U.S. Government | | U.S. Government | ||||
 | Short-Term |  | Short-Term | ||||
* Futures and Swaps | 0.00% | ** Futures and Swaps | 6.8% | ||||
A Short-Term Investments and Net Other Assets are not included in the pie chart.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
U.S. Government and Government Agency Obligations - 63.5% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 32.7% | ||||
Fannie Mae: | ||||
6% 5/15/08 | $ 6,158,000 | $ 6,818,519 | ||
6.125% 3/15/12 | 8,050,000 | 8,923,803 | ||
6.25% 2/1/11 | 4,660,000 | 5,096,908 | ||
6.625% 9/15/09 | 1,620,000 | 1,848,823 | ||
6.625% 11/15/30 | 18,000,000 | 20,281,248 | ||
Farm Credit Systems Financial Assistance Corp. 8.8% 6/10/05 | 710,000 | 787,028 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 35,351,000 | 35,464,512 | ||
4.5% 7/15/13 | 25,000,000 | 24,452,450 | ||
5.875% 3/21/11 | 8,310,000 | 8,886,556 | ||
7% 3/15/10 | 48,000,000 | 55,822,323 | ||
Government Loan Trusts (assets of Trust guaranteed by U.S. Government through Agency for International Development) Series 1-B, 8.5% 4/1/06 | 450,596 | 493,141 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1993-C, 5.2% 10/15/04 | 42,489 | 43,743 | ||
Series 1993-D, 5.23% 5/15/05 | 72,978 | 74,545 | ||
Series 1994-A, 7.12% 4/15/06 | 4,620,903 | 4,931,150 | ||
Series 1994-F, 8.187% 12/15/04 | 566,122 | 576,403 | ||
Series 1995-A, 6.28% 6/15/04 | 412,941 | 420,940 | ||
Guaranteed Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | ||||
Series 1994-A, 7.39% 6/26/06 | 2,250,000 | 2,416,927 | ||
Series 1994-B, 7.5% 1/26/06 | 83,161 | 89,472 | ||
Overseas Private Investment Corp. U.S. Government guaranteed participation certificates: | ||||
Series 1996-A1, 6.726% 9/15/10 | 1,217,391 | 1,340,031 | ||
Series 2000-016, 6.07% 12/15/14 | 4,200,000 | 4,562,250 | ||
6.77% 11/15/13 | 1,340,385 | 1,482,800 | ||
6.99% 5/21/16 | 4,462,500 | 5,064,670 | ||
Private Export Funding Corp. secured: | ||||
5.34% 3/15/06 | 4,640,000 | 4,963,181 | ||
5.66% 9/15/11 (a) | 2,610,000 | 2,799,225 | ||
6.67% 9/15/09 | 880,000 | 1,003,634 | ||
6.86% 4/30/04 | 100,750 | 103,420 | ||
Small Business Administration guaranteed development participation certificates Series 2002-20K Class 1, 5.08% 11/1/22 | 5,882,423 | 5,926,503 | ||
U.S. Government and Government Agency Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency Obligations - continued | ||||
State of Israel (guaranteed by U.S. Government through Agency for International Development): | ||||
5.89% 8/15/05 | $ 8,560,000 | $ 9,066,059 | ||
6.6% 2/15/08 | 13,100,000 | 14,195,448 | ||
6.8% 2/15/12 | 5,000,000 | 5,574,420 | ||
U.S. Department of Housing and Urban Development Government guaranteed participation certificates Series 1999-A: | ||||
5.75% 8/1/06 | 2,100,000 | 2,279,775 | ||
5.96% 8/1/09 | 1,800,000 | 1,920,258 | ||
U.S. Trade Trust Certificates (assets of Trust guaranteed by U.S. Government through Export-Import Bank) 8.17% 1/15/07 | 210,000 | 231,218 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 237,941,383 | |||
U.S. Treasury Obligations - 30.8% | ||||
U.S. Treasury Bonds: | ||||
6% 2/15/26 | 4,500,000 | 4,943,322 | ||
6.125% 8/15/29 | 33,229,000 | 37,306,032 | ||
6.25% 8/15/23 | 30,000,000 | 33,857,820 | ||
8% 11/15/21 | 29,994,000 | 40,197,809 | ||
10% 5/15/10 | 11,170,000 | 12,564,943 | ||
11.25% 2/15/15 | 5,506,000 | 8,791,105 | ||
12% 8/15/13 | 10,000,000 | 13,877,730 | ||
13.25% 5/15/14 | 20,500,000 | 30,660,313 | ||
U.S. Treasury Notes: | ||||
5% 8/15/11 | 36,000,000 | 38,414,520 | ||
6% 8/15/09 | 3,000,000 | 3,392,109 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 224,005,703 | |||
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $457,981,497) | 461,947,086 | |||
U.S. Government Agency - Mortgage Securities - 9.9% | ||||
Fannie Mae - 9.1% | ||||
4% 11/1/18 (b) | 9,953,845 | 9,664,561 | ||
6% 9/1/17 | 9,140,964 | 9,507,486 | ||
6.5% 2/1/10 to 8/1/32 | 5,986,737 | 6,227,373 | ||
6.5% 11/1/33 (b) | 30,000,000 | 31,162,500 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Fannie Mae - continued | ||||
7% 4/1/26 to 7/1/32 | $ 7,593,556 | $ 8,001,505 | ||
7.5% 3/1/28 to 4/1/29 | 81,774 | 87,351 | ||
8.5% 9/1/16 to 1/1/17 | 27,487 | 30,072 | ||
9% 11/1/11 to 5/1/14 | 629,299 | 693,336 | ||
9.5% 11/1/06 to 5/1/20 | 406,138 | 444,902 | ||
11.5% 6/15/19 | 98,276 | 111,632 | ||
12.5% 8/1/15 | 3,714 | 4,257 | ||
65,934,975 | ||||
Freddie Mac - 0.5% | ||||
6.775% 11/15/03 | 1,383,854 | 1,381,808 | ||
7.5% 3/1/15 to 3/1/16 | 1,633,655 | 1,739,411 | ||
8.5% 8/1/09 to 2/1/10 | 68,132 | 73,711 | ||
9% 10/1/08 to 10/1/20 | 169,106 | 185,304 | ||
9.5% 5/1/21 to 7/1/21 | 123,719 | 137,946 | ||
11% 7/1/13 to 5/1/14 | 150,758 | 169,186 | ||
12.5% 2/1/10 to 6/1/19 | 66,752 | 75,761 | ||
3,763,127 | ||||
Government National Mortgage Association - 0.3% | ||||
6.5% 6/20/32 | 330,307 | 344,827 | ||
7.5% 9/15/06 to 8/15/29 | 398,351 | 420,080 | ||
8% 12/15/23 | 1,080,894 | 1,178,979 | ||
9% 9/15/05 to 12/15/09 | 4,477 | 4,548 | ||
10.5% 11/15/17 to 1/20/18 | 109,472 | 123,447 | ||
13.5% 7/15/11 | 12,986 | 15,132 | ||
2,087,013 | ||||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $71,074,523) | 71,785,115 | |||
Collateralized Mortgage Obligations - 26.8% | ||||
U.S. Government Agency - 26.8% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1992-168 Class KB, 7% 10/25/22 | 6,161,044 | 6,629,713 | ||
Series 1993-160 Class PK, 6.5% 11/25/22 | 3,344,376 | 3,421,197 | ||
Series 1994-27 Class PJ, 6.5% 6/25/23 | 2,000,000 | 2,110,786 | ||
Series 1993-187 Class L, 6.5% 7/25/23 | 1,700,000 | 1,815,506 | ||
Series 2003-28 Class KQ, 5% 4/25/23 | 1,913,709 | 1,924,821 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class: | ||||
Series 2001-30 Class PL, 7% 2/25/31 | $ 6,079,537 | $ 6,317,725 | ||
Series 2001-53 Class OH, 6.5% 6/25/30 | 314,598 | 321,140 | ||
Series 2001-56 Class KD, 6.5% 7/25/30 | 9,847,922 | 10,078,800 | ||
Series 2002-55 Class QB, 5.5% 8/25/12 | 519,843 | 526,070 | ||
Series 2003-77 Class WZ, 4.5% 8/25/18 | 6,599,023 | 6,401,052 | ||
Series 2003-88 Class WZ, 4.5% 9/25/18 | 535,470 | 536,579 | ||
Freddie Mac sequential pay: | ||||
Series 2343 Class VD, 7% 8/15/16 | 5,164,000 | 5,536,353 | ||
Series 2355 Class AE, 6% 9/15/31 | 11,855,897 | 12,261,926 | ||
Series 2361 Class KB, 6.25% 1/15/28 | 17,600,000 | 18,033,859 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed: | ||||
planned amortization class Series 1681 Class PJ, 7% 12/15/23 | 4,000,000 | 4,307,488 | ||
sequential pay Series 2333 Class KA, 6.5% 7/15/31 | 11,921,000 | 12,706,463 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 1141 Class G, 9% 9/15/21 | 341,436 | 346,567 | ||
Series 1671 Class G, 6.5% 8/15/23 | 12,922,605 | 13,408,375 | ||
Series 1727 Class H, 6.5% 8/15/23 | 2,600,000 | 2,745,408 | ||
Series 2206 Class PA, 7.5% 11/15/21 | 505,217 | 508,425 | ||
Series 2275 Class PM, 6.5% 10/15/29 | 3,832,913 | 3,922,430 | ||
Series 2322 Class HC, 6.5% 3/15/30 | 187,969 | 191,632 | ||
Series 2368 Class PQ, 6.5% 8/15/30 | 2,750,000 | 2,808,619 | ||
sequential pay: | ||||
Series 2278 Class VB, 6.5% 3/15/14 | 5,035,000 | 5,165,128 | ||
Series 2285 Class VB, 6.5% 10/15/16 | 4,000,000 | 4,110,579 | ||
Series 2303 Class VT, 6% 2/15/12 | 1,374,108 | 1,392,314 | ||
Series 2448 Class VH, 6.5% 5/15/18 | 4,835,000 | 5,115,114 | ||
Series 1624 Class KC, 6% 6/15/08 | 5,857,482 | 5,932,647 | ||
Series 2410 Class MK, 6.5% 6/15/29 | 5,000,000 | 5,063,388 | ||
Series 2473 Class JB, 5.5% 2/15/29 | 890,000 | 902,673 | ||
Series 2568 Class SA, 10.528% 9/15/28 (c) | 1,410,747 | 1,452,098 | ||
Series 2628 Class AZ, 4.5% 6/15/18 | 1,664,611 | 1,664,611 | ||
Series 2663 Class ZM, 5% 8/15/18 | 424,603 | 424,342 | ||
Series 2664 Class EZ, 5.5% 8/15/33 | 1,855,475 | 1,849,382 | ||
target amortization class Series 2156 Class TC, 6.25% 5/15/29 | 10,000,000 | 10,390,798 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
planned amortization class Series 2002-19 Class PE, 6% 10/20/30 | $ 25,000,000 | $ 26,025,550 | ||
sequential pay Series 2000-12 Class B, 7.5% 12/16/28 | 2,092,334 | 2,129,233 | ||
Series 1998-1 Class PE, 6.35% 1/20/28 | 5,000,000 | 5,316,525 | ||
Series 2001-53 Class TA, 6% 12/20/30 | 1,097,057 | 1,122,129 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $196,546,204) | 194,917,445 | |||
Cash Equivalents - 4.3% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 31,582,816 | 31,580,000 | |
TOTAL INVESTMENT PORTFOLIO - 104.5% (Cost $757,182,224) | 760,229,646 | ||
NET OTHER ASSETS - (4.5)% | (32,870,330) | |
NET ASSETS - 100% | $ 727,359,316 |
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,799,225 or 0.4% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
Other Information |
Purchases and sales of long-term U.S. government and government agency obligations aggregated $2,072,597,748 and $2,121,563,547, respectively. |
Income Tax Information |
The fund hereby designates approximately $6,275,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $31,580,000) (cost $757,182,224) - See accompanying schedule | $ 760,229,646 | |
Cash | 186 | |
Receivable for investments sold | 2,346,611 | |
Receivable for fund shares sold | 1,204,864 | |
Interest receivable | 8,565,159 | |
Prepaid expenses | 4,322 | |
Total assets | 772,350,788 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 40,901,531 | |
Payable for fund shares redeemed | 3,092,431 | |
Distributions payable | 269,661 | |
Accrued management fee | 263,603 | |
Distribution fees payable | 277,386 | |
Other payables and accrued expenses | 186,860 | |
Total liabilities | 44,991,472 | |
Net Assets | $ 727,359,316 | |
Net Assets consist of: | ||
Paid in capital | $ 713,430,180 | |
Undistributed net investment income | 66,943 | |
Accumulated undistributed net realized gain (loss) on investments | 10,814,771 | |
Net unrealized appreciation (depreciation) on investments | 3,047,422 | |
Net Assets | $ 727,359,316 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 10.12 | |
Maximum offering price per share (100/95.25 of $10.12) | $ 10.62 | |
Class T: | $ 10.11 | |
Maximum offering price per share (100/96.50 of $10.11) | $ 10.48 | |
Class B: | $ 10.10 | |
Class C: | $ 10.11 | |
Institutional Class: | $ 10.07 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 35,493,647 | |
Security lending | 37,007 | |
Total income | 35,530,654 | |
Expenses | ||
Management fee | $ 3,534,766 | |
Transfer agent fees | 1,635,739 | |
Distribution fees | 3,969,246 | |
Accounting and security lending fees | 204,893 | |
Non-interested trustees' compensation | 3,492 | |
Custodian fees and expenses | 29,697 | |
Registration fees | 141,516 | |
Audit | 31,090 | |
Legal | 7,365 | |
Miscellaneous | 5,866 | |
Total expenses before reductions | 9,563,670 | |
Expense reductions | (1,996) | 9,561,674 |
Net investment income (loss) | 25,968,980 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 12,571,429 | |
Swap agreements | (587,702) | |
Total net realized gain (loss) | 11,983,727 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (23,491,452) | |
Swap agreements | 109,924 | |
Total change in net unrealized appreciation (depreciation) | (23,381,528) | |
Net gain (loss) | (11,397,801) | |
Net increase (decrease) in net assets resulting from operations | $ 14,571,179 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 25,968,980 | $ 24,322,158 |
Net realized gain (loss) | 11,983,727 | 16,893,164 |
Change in net unrealized appreciation (depreciation) | (23,381,528) | (1,624,808) |
Net increase (decrease) in net assets resulting | 14,571,179 | 39,590,514 |
Distributions to shareholders from net investment income | (25,752,285) | (25,095,039) |
Distributions to shareholders from net realized gain | (5,552,244) | - |
Total distributions | (31,304,529) | (25,095,039) |
Share transactions - net increase (decrease) | (75,289,044) | 194,715,430 |
Total increase (decrease) in net assets | (92,022,394) | 209,210,905 |
Net Assets | ||
Beginning of period | 819,381,710 | 610,170,805 |
End of period (including undistributed net investment income of $66,943 and distributions in excess of net investment income of $74,407, respectively) | $ 727,359,316 | $ 819,381,710 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.33 | $ 10.14 | $ 9.42 | $ 9.31 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .360 | .410E | .546 | .559 | .545 |
Net realized and unrealized gain (loss) | (.144) | .205E | .730 | .115 | (.696) |
Total from investment operations | .216 | .615 | 1.276 | .674 | (.151) |
Distributions from net investment income | (.356) | (.425) | (.556) | (.564) | (.559) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.426) | (.425) | (.556) | (.564) | (.559) |
Net asset value, end of period | $ 10.12 | $ 10.33 | $ 10.14 | $ 9.42 | $ 9.31 |
Total ReturnA,B | 2.11% | 6.31% | 13.95% | 7.53% | (1.53)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .83% | .83% | .87% | .85% | .87% |
Expenses net of voluntary | .83% | .83% | .87% | .85% | .87% |
Expenses net of all reductions | .83% | .83% | .86% | .85% | .87% |
Net investment income (loss) | 3.50% | 4.11%E | 5.61% | 6.02% | 5.73% |
Supplemental Data | |||||
Net assets, end of period | $ 69,011 | $ 68,973 | $ 43,205 | $ 15,053 | $ 15,273 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .350 | .398E | .535 | .549 | .541 |
Net realized and unrealized gain (loss) | (.144) | .206E | .731 | .114 | (.710) |
Total from investment operations | .206 | .604 | 1.266 | .663 | (.169) |
Distributions from net investment income | (.346) | (.414) | (.546) | (.553) | (.551) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.416) | (.414) | (.546) | (.553) | (.551) |
Net asset value, end of period | $ 10.11 | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 2.01% | 6.19% | 13.86% | 7.41% | (1.71)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .94% | .96% | .95% | .96% |
Expenses net of voluntary | .93% | .94% | .96% | .95% | .96% |
Expenses net of all reductions | .93% | .94% | .96% | .95% | .95% |
Net investment income (loss) | 3.39% | 4.00%E | 5.52% | 5.92% | 5.65% |
Supplemental Data | |||||
Net assets, end of period | $ 304,517 | $ 366,209 | $ 293,105 | $ 182,049 | $ 215,089 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.31 | $ 10.12 | $ 9.41 | $ 9.30 | $ 10.01 |
Income from Investment Operations | |||||
Net investment income (loss)C | .282 | .335E | .474 | .490 | .479 |
Net realized and unrealized gain (loss) | (.144) | .205E | .720 | .114 | (.699) |
Total from investment operations | .138 | .540 | 1.194 | .604 | (.220) |
Distributions from net investment income | (.278) | (.350) | (.484) | (.494) | (.490) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.348) | (.350) | (.484) | (.494) | (.490) |
Net asset value, end of period | $ 10.10 | $ 10.31 | $ 10.12 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 1.34% | 5.52% | 13.03% | 6.73% | (2.24)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Expenses net of voluntary | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Expenses net of all reductions | 1.59% | 1.58% | 1.60% | 1.59% | 1.59% |
Net investment income (loss) | 2.74% | 3.36%E | 4.88% | 5.28% | 5.01% |
Supplemental Data | |||||
Net assets, end of period | $ 176,855 | $ 230,244 | $ 158,864 | $ 77,424 | $ 94,871 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 | $ 10.02 |
Income from Investment Operations | |||||
Net investment income (loss)C | .275 | .327E | .468 | .482 | .468 |
Net realized and unrealized gain (loss) | (.144) | .205E | .729 | .115 | (.708) |
Total from investment operations | .131 | .532 | 1.197 | .597 | (.240) |
Distributions from net investment income | (.271) | (.342) | (.477) | (.487) | (.480) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.341) | (.342) | (.477) | (.487) | (.480) |
Net asset value, end of period | $ 10.11 | $ 10.32 | $ 10.13 | $ 9.41 | $ 9.30 |
Total ReturnA,B | 1.27% | 5.44% | 13.05% | 6.64% | (2.43)% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Expenses net of voluntary | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Expenses net of all reductions | 1.66% | 1.66% | 1.67% | 1.67% | 1.69% |
Net investment income (loss) | 2.66% | 3.29%E | 4.81% | 5.20% | 4.91% |
Supplemental Data | |||||
Net assets, end of period | $ 80,620 | $ 103,002 | $ 87,214 | $ 30,133 | $ 35,652 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 10.28 | $ 10.09 | $ 9.38 | $ 9.27 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss)B | .370 | .422D | .560 | .572 | .567 |
Net realized and unrealized gain (loss) | (.138) | .207D | .723 | .118 | (.720) |
Total from investment operations | .232 | .629 | 1.283 | .690 | (.153) |
Distributions from net investment income | (.372) | (.439) | (.573) | (.580) | (.577) |
Distributions from net realized gain | (.070) | - | - | - | - |
Total distributions | (.442) | (.439) | (.573) | (.580) | (.577) |
Net asset value, end of period | $ 10.07 | $ 10.28 | $ 10.09 | $ 9.38 | $ 9.27 |
Total ReturnA | 2.28% | 6.49% | 14.11% | 7.75% | (1.55)% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .68% | .69% | .69% | .66% | .68% |
Expenses net of voluntary | .68% | .69% | .69% | .66% | .68% |
Expenses net of all reductions | .68% | .69% | .69% | .66% | .68% |
Net investment income (loss) | 3.64% | 4.26%D | 5.79% | 6.20% | 5.92% |
Supplemental Data | |||||
Net assets, end of period | $ 96,356 | $ 50,953 | $ 27,782 | $ 22,067 | $ 22,636 |
Portfolio turnover rate | 262% | 251% | 260% | 155% | 174% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Government Investment Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 8,051,315 | |
Unrealized depreciation | (6,223,302) | |
Net unrealized appreciation (depreciation) | 1,828,013 | |
Undistributed ordinary income | 2,146,357 | |
Undistributed long-term capital gain | 6,404,624 | |
Cost for federal income tax purposes | $ 758,401,633 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 25,752,285 | $ 25,095,039 |
Long-term Capital Gains | 5,552,244 | - |
Total | $ 31,304,529 | $ 25,095,039 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements - continued
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 113,819 | $ 115 |
Class T | 0% | .25% | 885,879 | 1,967 |
Class B | .65% | .25% | 1,971,726 | 1,424,437 |
Class C | .75% | .25% | 997,822 | 188,613 |
$ 3,969,246 | $ 1,615,132 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 76,654 |
Class T | 42,830 |
Class B* | 920,065 |
Class C* | 37,286 |
$ 1,076,835 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 150,197 | .20 |
Class T | 706,491 | .20 |
Class B | 455,610 | .21 |
Class C | 178,990 | .18 |
Institutional Class | 144,451 | .20 |
$ 1,635,739 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $1,996.
Annual Report
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 2,622,269 | $ 2,181,697 |
Class T | 11,938,897 | 12,304,840 |
Class B | 5,949,059 | 5,967,868 |
Class C | 2,630,246 | 2,860,429 |
Institutional Class | 2,611,814 | 1,780,205 |
Total | $ 25,752,285 | $ 25,095,039 |
From net realized gain | ||
Class A | $ 465,596 | $ - |
Class T | 2,483,022 | - |
Class B | 1,550,205 | - |
Class C | 695,824 | - |
Institutional Class | 357,597 | - |
Total | $ 5,552,244 | $ - |
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 5,954,963 | 8,573,146 | $ 61,424,786 | $ 85,475,457 |
Reinvestment of distributions | 259,349 | 180,940 | 2,665,148 | 1,804,454 |
Shares redeemed | (6,073,729) | (6,337,442) | (62,468,909) | (62,899,268) |
Net increase (decrease) | 140,583 | 2,416,644 | $ 1,621,025 | $ 24,380,643 |
Class T | ||||
Shares sold | 13,752,553 | 21,895,424 | $ 141,665,954 | $ 220,004,190 |
Reinvestment of distributions | 1,299,921 | 1,123,549 | 13,348,077 | 11,204,410 |
Shares redeemed | (20,424,771) | (16,470,613) | (209,811,679) | (164,080,969) |
Net increase (decrease) | (5,372,297) | 6,548,360 | $ (54,797,648) | $ 67,127,631 |
Class B | ||||
Shares sold | 5,724,003 | 13,607,849 | $ 59,070,876 | $ 136,910,243 |
Reinvestment of distributions | 562,238 | 445,140 | 5,768,256 | 4,440,806 |
Shares redeemed | (11,112,103) | (7,420,261) | (113,895,988) | (73,913,807) |
Net increase (decrease) | (4,825,862) | 6,632,728 | $ (49,056,856) | $ 67,437,242 |
Annual Report
Notes to Financial Statements - continued
8. Share Transactions - continued
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class C | ||||
Shares sold | 3,433,368 | 6,367,811 | $ 35,389,290 | $ 63,862,680 |
Reinvestment of distributions | 228,727 | 190,224 | 2,347,518 | 1,897,581 |
Shares redeemed | (5,670,985) | (5,186,545) | (58,122,648) | (51,534,348) |
Net increase (decrease) | (2,008,890) | 1,371,490 | $ (20,385,840) | $ 14,225,913 |
Institutional Class | ||||
Shares sold | 6,469,585 | 4,224,894 | $ 66,283,395 | $ 41,724,600 |
Reinvestment of distributions | 244,539 | 158,060 | 2,497,316 | 1,571,439 |
Shares redeemed | (2,100,471) | (2,180,456) | (21,450,436) | (21,752,038) |
Net increase (decrease) | 4,613,653 | 2,202,498 | $ 47,330,275 | $ 21,544,001 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Government Investment Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Government Investment Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Government Investment Fund as of October 31, 2003, 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 12, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Government Investment (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight Churchhill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Government Investment. He serves as Head of Fidelity's Fixed-income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchhill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Government Investment. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Thomas J. Silvia (42) | |
Year of Election or Appointment: 1998 Vice President of Advisor Government Investment. Mr. Silvia is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Silvia managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Government Investment. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Government Investment. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Government Investment. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Government Investment. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Government Investment. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Government Investment. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Advisor Government Investment. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Government Investment. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Government Investment. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Government Investment. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Government Investment Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share 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 | 12/8/03 | 12/5/03 | $.10 |
A total of 57.74% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments Money
Management, Inc.
Fidelity International
Investment Advisors
Fidelity International
Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity FundSM |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AGOVI-UANN-1203
1.784747.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
High Income Advantage
Fund - Class A, Class T, Class B and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Class A (incl. 4.75% sales charge)A | 52.95% | 5.02% | 6.46% | |
Class T (incl. 3.50% sales charge) | 54.65% | 5.19% | 6.57% | |
Class B (incl. contingent deferred sales charge)B | 54.42% | 4.98% | 6.43% | |
Class C (incl. contingent deferred sales charge)C | 58.11% | 5.17% | 6.17% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on September 3, 1996. Returns prior to September 3, 1996 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
B Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996). The initial offering of Class B shares took place on June 30, 1994. Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to June 30, 1994 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five year and past 10 year total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between June 30, 1994 and November 3, 1997 are those of Class B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns between November 3, 1997 and January 1, 1996 and prior to June 30, 1994 would have been lower. Class C shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor High Income Advantage Fund - Class T on October 31, 1993, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Merrill Lynch High Yield Master II Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Tom Soviero, Portfolio Manager of Fidelity® Advisor High Income Advantage Fund
High-yield staged a remarkable turnaround during the one-year period ending October 31, 2003, enjoying four consecutive quarters of positive returns for the first time since 1998. A declining default rate, increasing flows into high-yield mutual funds, rebounding equity markets, signs of an economic recovery and a focus on corporate debt reduction paced high-yield's recovery for much of the period. In July 2003, however, low-quality debt had its first monthly decline since October 2002, hurt by weakness in investment-grade bonds, the poor showing of the energy sector during the month, and profit taking that led to soft demand and negative fund flows. The rally re-emerged in August, though, bolstered by resurgent demand due to further evidence of an economic recovery, the robust performance of stocks, and the continued efforts of corporate America to deleverage and improve its balance sheets. For the 12 months overall, the Merrill Lynch® U.S. High Yield Master II Index gained 33.10%, one of its strongest one-year periods ever.
For the year ending October 31, 2003, Fidelity Advisor High Income Advantage Fund's Class A, Class T, Class B and Class C shares returned 60.58%, 60.26%, 59.42% and 59.11%, respectively. The fund outperformed the 33.10% return of the Merrill Lynch index, as well as the 28.04% return of the LipperSM High Current Yield Funds Average. The fund benefited from overweightings in B-rated bonds and three of the top-performing sectors: cable TV, telecommunications and electric utilities. The fund also had very large positions in some of the best-performing companies. Specific positive contributors included AES, Cablevision and Telewest. AES, an independent power producer, had a management and balance sheet transformation. It dealt with a potential liquidity crisis by selling underperforming assets while extending its debt maturities with a bond swap. Cable provider Cablevision improved its balance sheet by selling its Bravo network in 2002. The company's core cable franchise benefited from the rapid growth in high-speed Internet subscriptions. Telewest, the U.K. cable operator, underwent a massive debt-for-equity swap and saw prices of its securities rise. Fundamentals remained strong while progress was made on improving its balance sheet. Detractors included Levi Strauss and WestPoint Stevens. Levi's turnaround took longer than expected, while distressed investment WestPoint experienced weakening fundamentals that contributed to its Chapter 11 bankruptcy.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
AES Corp. | 6.7 | 6.4 |
Qwest Services Corp. | 4.9 | 3.5 |
Level 3 Communications, Inc. | 4.0 | 4.9 |
Ahold Fin Usa, Inc. | 3.8 | 2.8 |
Williams Companies, Inc. | 3.8 | 1.8 |
23.2 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Telecommunications | 22.1 | 19.1 |
Electric Utilities | 15.0 | 9.4 |
Energy | 10.3 | 8.3 |
Food and Drug Retail | 9.9 | 8.3 |
Cable TV | 3.3 | 9.1 |
Quality Diversification (% of fund's net assets) as of October 31, 2003 | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| AAA,AA,A 0.0% | | AAA, AA, A 0.0% | ||||
 | BBB 0.2% | | BBB 0.3% | ||||
| BB 1.4% | | BB 3.1% | ||||
 | B 36.1% | | B 32.7% | ||||
 | CCC,CC,C 36.7% | | CCC,CC,C 32.8% | ||||
| D 0.2% | | D 1.5% | ||||
 | Not Rated 6.5% | | Not Rated 1.5% | ||||
 | Equities 10.6% | | Equities 10.3% | ||||
 | Short-Term | | Short-Term | ||||
We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Nonconvertible | | Nonconvertible | ||||
| Convertible Bonds, Preferred Stocks 2.6% | | Convertible Bonds, Preferred Stocks 7.0% | ||||
| Common Stocks 9.1% | | Common Stocks 6.9% | ||||
| Other Investments 4.1% | | Other Investments 5.4% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 5.3% | ** Foreign investments | 3.1% | ||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Corporate Bonds - 77.0% | ||||
Principal | Value (Note 1) | |||
Convertible Bonds - 1.1% | ||||
Cable TV - 0.3% | ||||
Telewest Finance Jersey Ltd. 6% 7/7/05 (c)(f) | $ 11,375 | $ 9,100 | ||
Energy - 0.1% | ||||
Hanover Compressor Co. 4.75% 3/15/08 | 2,360 | 2,145 | ||
Food and Drug Retail - 0.2% | ||||
Rite Aid Corp. 4.75% 12/1/06 (f) | 4,000 | 4,654 | ||
Technology - 0.1% | ||||
Amkor Technology, Inc. 5% 3/15/07 | 3,840 | 3,686 | ||
Telecommunications - 0.4% | ||||
American Tower Corp. 6.25% 10/15/09 | 6,900 | 6,762 | ||
Level 3 Communications, Inc. 6% 9/15/09 | 4,920 | 3,321 | ||
10,083 | ||||
TOTAL CONVERTIBLE BONDS | 29,668 | |||
Nonconvertible Bonds - 75.9% | ||||
Aerospace - 0.0% | ||||
BE Aerospace, Inc. 8.5% 10/1/10 (f) | 860 | 899 | ||
Air Transportation - 2.8% | ||||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 13,320 | 11,788 | ||
6.977% 11/23/22 | 842 | 745 | ||
7.377% 5/23/19 | 3,337 | 2,369 | ||
7.379% 5/23/16 | 4,016 | 2,731 | ||
7.8% 4/1/08 | 9,740 | 8,376 | ||
10.18% 1/2/13 | 1,745 | 1,274 | ||
AMR Corp. 9% 8/1/12 | 16,520 | 13,670 | ||
Continental Airlines, Inc. 8% 12/15/05 | 2,970 | 2,881 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.795% 8/2/18 | 329 | 277 | ||
6.9% 1/2/18 | 2,191 | 2,169 | ||
7.256% 9/15/21 | 690 | 704 | ||
8.307% 4/2/18 | 372 | 320 | ||
Delta Air Lines, Inc.: | ||||
7.9% 12/15/09 | 7,515 | 6,162 | ||
8.3% 12/15/29 | 3,571 | 2,375 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 985 | 887 | ||
7.779% 11/18/05 | 1,250 | 1,150 | ||
7.779% 1/2/12 | 2,355 | 2,014 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Air Transportation - continued | ||||
Northwest Airlines, Inc.: | ||||
7.625% 3/15/05 | $ 4,010 | $ 3,779 | ||
7.875% 3/15/08 | 4,675 | 3,822 | ||
8.875% 6/1/06 | 9,065 | 7,751 | ||
9.875% 3/15/07 | 800 | 720 | ||
Northwest Airlines, Inc. pass thru trust certificates 9.179% 10/1/11 | 1,888 | 1,454 | ||
77,418 | ||||
Auto Parts Distribution - 0.1% | ||||
Keystone Automotive Operations, Inc. 9.75% 11/1/13 (f) | 1,640 | 1,730 | ||
Automotive - 0.1% | ||||
General Motors Corp. 7.125% 7/15/13 | 2,755 | 2,867 | ||
Building Materials - 1.6% | ||||
Norcraft Companies LP/Norcraft Finance Corp. 9% 11/1/11 (f) | 1,590 | 1,670 | ||
Owens Corning: | ||||
7% 3/15/09 (c) | 25,600 | 11,456 | ||
7.5% 5/1/05 (c) | 12,000 | 5,370 | ||
7.5% 8/1/18 (c) | 4,000 | 1,790 | ||
7.7% 5/1/08 (c) | 1,440 | 644 | ||
Texas Industries, Inc. 10.25% 6/15/11 (f) | 20,680 | 23,058 | ||
43,988 | ||||
Cable TV - 2.0% | ||||
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp. 10% 5/15/11 | 9,245 | 7,419 | ||
Pegasus Communications Corp. 12.5% 8/1/07 | 2,070 | 1,708 | ||
Pegasus Satellite Communications, Inc.: | ||||
0% 3/1/07 (d) | 9,895 | 6,778 | ||
11.25% 1/15/10 (f) | 10,999 | 8,414 | ||
Telewest Communications PLC yankee: | ||||
9.875% 2/1/10 (c) | 14,745 | 7,594 | ||
11.25% 11/1/08 (c) | 6,627 | 3,562 | ||
Telewest PLC yankee 9.625% 10/1/06 (c) | 39,735 | 21,060 | ||
56,535 | ||||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Capital Goods - 0.7% | ||||
Hexcel Corp. 9.75% 1/15/09 | $ 12,074 | $ 12,617 | ||
Terex Corp. 10.375% 4/1/11 | 6,615 | 7,442 | ||
20,059 | ||||
Chemicals - 2.6% | ||||
Avecia Group PLC 11% 7/1/09 | 15,800 | 14,536 | ||
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 (f) | 5,920 | 6,157 | ||
Geo Specialty Chemicals, Inc. 10.125% 8/1/08 | 19,720 | 7,888 | ||
Geon Co. 6.875% 12/15/05 | 900 | 833 | ||
HMP Equity Holdings Corp. 0% 5/15/08 unit (f) | 8,510 | 4,255 | ||
Huntsman ICI Chemicals LLC 10.125% 7/1/09 | 13,210 | 12,483 | ||
Huntsman LLC 11.625% 10/15/10 (f) | 5,240 | 5,030 | ||
Nalco Co. 8.875% 11/15/13 (f) | 4,240 | 4,404 | ||
Phibro Animal Health Corp. 13% 12/1/07 unit (f) | 2,450 | 2,536 | ||
PolyOne Corp.: | ||||
8.875% 5/1/12 | 9,960 | 8,217 | ||
10.625% 5/15/10 | 7,260 | 6,643 | ||
72,982 | ||||
Consumer Products - 2.9% | ||||
Revlon Consumer Products Corp.: | ||||
8.125% 2/1/06 | 51,810 | 34,713 | ||
8.625% 2/1/08 | 17,037 | 8,007 | ||
9% 11/1/06 | 31,293 | 20,966 | ||
12% 12/1/05 | 16,645 | 16,479 | ||
80,165 | ||||
Containers - 1.7% | ||||
Applied Extrusion Technologies, Inc. 10.75% 7/1/11 | 4,460 | 3,122 | ||
Owens-Illinois, Inc.: | ||||
7.5% 5/15/10 | 10,330 | 10,123 | ||
7.8% 5/15/18 | 9,710 | 9,127 | ||
8.1% 5/15/07 | 9,092 | 9,456 | ||
U.S. Can Corp. 10.875% 7/15/10 (f) | 4,690 | 4,831 | ||
Vitro SA de CV 11.75% 11/1/13 (f) | 10,670 | 10,323 | ||
46,982 | ||||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Diversified Financial Services - 0.1% | ||||
Metris Companies, Inc.: | ||||
10% 11/1/04 | $ 430 | $ 335 | ||
10.125% 7/15/06 | 2,515 | 2,062 | ||
2,397 | ||||
Electric Utilities - 12.4% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 22,394 | 22,058 | ||
8.75% 6/15/08 | 12,699 | 13,048 | ||
8.75% 5/15/13 (f) | 3,760 | 4,009 | ||
9% 5/15/15 (f) | 16,355 | 17,500 | ||
9.375% 9/15/10 | 38,244 | 40,491 | ||
9.5% 6/1/09 | 16,336 | 17,377 | ||
Allegheny Energy Supply Co. LLC: | ||||
7.8% 3/15/11 | 21,396 | 19,470 | ||
8.75% 4/15/12 (f) | 24,645 | 22,981 | ||
Calpine Canada Energy Finance ULC 8.5% 5/1/08 | 15,460 | 11,479 | ||
Calpine Corp.: | ||||
7.75% 4/15/09 | 23,330 | 16,798 | ||
7.875% 4/1/08 | 7,620 | 5,334 | ||
8.5% 7/15/10 (f) | 14,695 | 13,519 | ||
8.5% 2/15/11 | 13,550 | 9,688 | ||
8.625% 8/15/10 | 8,920 | 6,289 | ||
8.75% 7/15/13 (f) | 16,840 | 15,493 | ||
CMS Energy Corp.: | ||||
7.5% 1/15/09 | 9,000 | 9,191 | ||
7.75% 8/1/10 (f) | 6,570 | 6,726 | ||
8.5% 4/15/11 | 17,255 | 18,031 | ||
8.9% 7/15/08 | 17,185 | 18,388 | ||
Illinois Power Co. 11.5% 12/15/10 | 26,310 | 31,506 | ||
Reliant Resources, Inc.: | ||||
9.25% 7/15/10 (f) | 11,860 | 10,674 | ||
9.5% 7/15/13 (f) | 13,890 | 12,432 | ||
342,482 | ||||
Energy - 9.8% | ||||
El Paso Corp.: | ||||
7% 5/15/11 | 27,685 | 23,325 | ||
7.875% 6/15/12 | 830 | 708 | ||
El Paso Energy Corp.: | ||||
6.75% 5/15/09 | 37,730 | 32,071 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
El Paso Energy Corp.: - continued | ||||
6.95% 12/15/07 | $ 42,430 | $ 37,975 | ||
7.8% 8/1/31 | 2,125 | 1,615 | ||
El Paso Production Holding Co. 7.75% 6/1/13 (f) | 6,500 | 6,240 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 8.5% 6/1/10 | 10,060 | 10,965 | ||
Hanover Equipment Trust 8.75% 9/1/11 | 4,170 | 4,253 | ||
Parker Drilling Co. 9.625% 10/1/13 (f) | 3,050 | 3,142 | ||
The Coastal Corp.: | ||||
6.5% 5/15/06 | 5,745 | 5,084 | ||
6.5% 6/1/08 | 12,115 | 9,965 | ||
6.95% 6/1/28 | 370 | 258 | ||
7.5% 8/15/06 | 5,730 | 5,221 | ||
7.75% 6/15/10 | 21,640 | 18,232 | ||
7.75% 10/15/35 | 1,970 | 1,458 | ||
Williams Companies, Inc.: | ||||
6.5% 8/1/06 | 28,410 | 29,191 | ||
6.75% 1/15/06 | 4,620 | 4,747 | ||
7.125% 9/1/11 | 10,040 | 10,291 | ||
7.5% 1/15/31 | 10,225 | 9,612 | ||
7.625% 7/15/19 | 15,245 | 14,940 | ||
7.75% 6/15/31 | 6,000 | 5,700 | ||
7.875% 9/1/21 | 7,825 | 7,747 | ||
8.125% 3/15/12 | 6,675 | 7,209 | ||
8.625% 6/1/10 | 7,850 | 8,596 | ||
8.75% 3/15/32 | 5,000 | 5,225 | ||
Williams Holdings of Delaware, Inc. 6.25% 2/1/06 | 5,600 | 5,740 | ||
269,510 | ||||
Entertainment/Film - 0.1% | ||||
Livent, Inc. yankee 9.375% 10/15/04 (c) | 11,100 | 1,887 | ||
Food and Drug Retail - 8.7% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 41,590 | 41,070 | ||
6.875% 5/1/29 | 13,130 | 11,554 | ||
8.25% 7/15/10 | 49,237 | 52,807 | ||
Nutritional Sourcing Corp. 10.125% 8/1/09 | 5,550 | 3,732 | ||
Rite Aid Corp.: | ||||
6.125% 12/15/08 (f) | 8,975 | 8,437 | ||
6.875% 8/15/13 | 5,860 | 5,538 | ||
7.125% 1/15/07 | 17,855 | 18,034 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Food and Drug Retail - continued | ||||
Rite Aid Corp.: - continued | ||||
8.125% 5/1/10 | $ 8,080 | $ 8,646 | ||
9.25% 6/1/13 | 8,250 | 8,828 | ||
9.5% 2/15/11 | 2,700 | 3,038 | ||
11.25% 7/1/08 | 11,855 | 13,278 | ||
12.5% 9/15/06 | 8,905 | 10,374 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 29,690 | 25,162 | ||
9.125% 12/15/11 | 33,160 | 28,103 | ||
238,601 | ||||
Gaming - 0.2% | ||||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 5,130 | 5,900 | ||
Healthcare - 0.5% | ||||
Genesis HealthCare Corp. 8% 10/15/13 (f) | 1,520 | 1,554 | ||
National Nephrology Associates, Inc. 9% 11/1/11 (f) | 2,150 | 2,215 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 7,265 | 6,756 | ||
6.5% 6/1/12 | 3,090 | 2,874 | ||
13,399 | ||||
Homebuilding/Real Estate - 0.8% | ||||
Champion Home Builders Co. 11.25% 4/15/07 | 20,705 | 21,740 | ||
Hotels - 0.3% | ||||
Capstar Hotel Co. 8.75% 8/15/07 | 5,910 | 5,895 | ||
Gaylord Entertainment Co. 8% 11/15/13 (f)(g) | 1,460 | 1,504 | ||
Hines Nurseries, Inc. 10.25% 10/1/11 (f) | 1,630 | 1,728 | ||
9,127 | ||||
Leisure - 0.7% | ||||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (f) | 16,410 | 18,954 | ||
Metals/Mining - 0.3% | ||||
Haynes International, Inc. 11.625% 9/1/04 | 15,655 | 8,297 | ||
Publishing/Printing - 0.3% | ||||
American Color Graphics, Inc. 10% 6/15/10 (f) | 7,390 | 8,055 | ||
Railroad - 0.4% | ||||
TFM SA de CV 12.5% 6/15/12 | 8,880 | 9,724 | ||
Restaurants - 0.1% | ||||
Morton's Restaurant Group, Inc. 7.5% 7/1/10 (f) | 1,920 | 1,747 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Services - 0.1% | ||||
Foster Wheeler Corp. 6.75% 11/15/05 | $ 4,780 | $ 2,629 | ||
Shipping - 0.6% | ||||
Evergreen International Aviation, Inc. 12% 5/15/10 (f) | 8,810 | 7,841 | ||
General Maritime Corp. 10% 3/15/13 | 6,700 | 7,504 | ||
15,345 | ||||
Steels - 1.3% | ||||
AK Steel Corp.: | ||||
7.75% 6/15/12 | 18,715 | 12,726 | ||
7.875% 2/15/09 | 660 | 459 | ||
Allegheny Ludlum Corp. 6.95% 12/15/25 | 3,260 | 2,347 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 (f) | 20,310 | 20,970 | ||
36,502 | ||||
Super Retail - 1.8% | ||||
Barneys, Inc. 9% 4/1/08 | 6,720 | 6,048 | ||
Golfsmith International, Inc. 8.375% 10/15/09 | 8,930 | 7,412 | ||
J. Crew Intermediate LLC 0% 5/15/08 (d)(f) | 28,649 | 21,630 | ||
J. Crew Operating Corp. 10.375% 10/15/07 | 13,465 | 13,869 | ||
48,959 | ||||
Technology - 2.3% | ||||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 (f) | 7,925 | 8,401 | ||
9.25% 2/15/08 | 3,500 | 3,903 | ||
Danka Business Systems PLC 11% 6/15/10 (f) | 7,240 | 6,661 | ||
Marconi Corp. PLC 8% 4/30/08 (f) | 11,170 | 10,947 | ||
ON Semiconductor Corp./Semiconductor Components Industries LLC: | ||||
12% 3/15/10 | 7,000 | 8,330 | ||
13% 5/15/08 (h) | 3,240 | 3,758 | ||
SCG Holding Corp./Semiconductor Components Industries LLC 12% 8/1/09 | 12,370 | 13,236 | ||
Xerox Corp. 7.625% 6/15/13 | 9,060 | 9,196 | ||
64,432 | ||||
Telecommunications - 18.4% | ||||
Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 (f) | 3,240 | 3,353 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 (f)(g) | 3,400 | 3,400 | ||
Crown Castle International Corp.: | ||||
0% 8/1/11 (d) | 12,230 | 12,352 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
Crown Castle International Corp.: - continued | ||||
9.375% 8/1/11 | $ 9,405 | $ 10,298 | ||
9.5% 8/1/11 | 3,070 | 3,362 | ||
10.75% 8/1/11 | 17,045 | 19,090 | ||
Level 3 Communications, Inc.: | ||||
0% 12/1/08 (d) | 47,150 | 43,378 | ||
0% 3/15/10 (d) | 9,810 | 7,995 | ||
9.125% 5/1/08 | 5,060 | 4,605 | ||
11% 3/15/08 | 42,600 | 41,322 | ||
11.25% 3/15/10 | 4,965 | 4,493 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (f) | 27,920 | 28,827 | ||
MCI Communications Corp.: | ||||
6.5% 4/15/10 (c) | 4,210 | 3,473 | ||
6.95% 8/15/06 (c) | 5,715 | 4,715 | ||
7.125% 6/15/27 (c) | 31,379 | 24,476 | ||
7.5% 8/20/04 (c) | 6,000 | 4,680 | ||
7.75% 3/15/24 (c) | 5,455 | 4,473 | ||
7.75% 3/23/25 (c) | 8,370 | 6,947 | ||
8.25% 1/20/23 (c) | 770 | 635 | ||
Nextel Partners, Inc.: | ||||
8.125% 7/1/11 (f) | 23,705 | 24,061 | ||
11% 3/15/10 | 5,720 | 6,235 | ||
11% 3/15/10 | 11,720 | 12,892 | ||
12.5% 11/15/09 | 14,005 | 16,106 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (f) | 5,000 | 5,675 | ||
13.5% 12/15/10 (f) | 110,354 | 128,561 | ||
Satelites Mexicanos SA de CV 5.62% 6/30/04 (f)(h) | 10,043 | 8,650 | ||
SBA Communications Corp. 10.25% 2/1/09 | 7,380 | 6,605 | ||
SpectraSite, Inc. 8.25% 5/15/10 (f) | 4,960 | 5,258 | ||
Time Warner Telecom LLC/Time Warner Telecom, Inc. 9.75% 7/15/08 | 16,450 | 16,738 | ||
Time Warner Telecom, Inc. 10.125% 2/1/11 | 12,950 | 13,436 | ||
Triton PCS, Inc.: | ||||
8.75% 11/15/11 | 4,970 | 4,808 | ||
9.375% 2/1/11 | 9,070 | 8,979 | ||
WorldCom, Inc.: | ||||
6.4% 8/15/05 (c) | 6,585 | 2,420 | ||
6.5% 5/15/04 (c) | 2,025 | 744 | ||
7.375% 1/15/06 (c)(f) | 8,665 | 3,184 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
WorldCom, Inc.: - continued | ||||
7.5% 5/15/11 (c) | $ 1,350 | $ 496 | ||
7.75% 4/1/27 (c) | 5,000 | 1,838 | ||
8% 5/15/06 (c) | 22,730 | 8,353 | ||
506,913 | ||||
Textiles & Apparel - 2.2% | ||||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 11,355 | 8,687 | ||
11.625% 1/15/08 | 13,360 | 11,556 | ||
12.25% 12/15/12 | 17,605 | 14,700 | ||
Sealy Corp., Inc. 10% 12/18/08 pay-in-kind (i) | 20,395 | 16,520 | ||
WestPoint Stevens, Inc.: | ||||
7.875% 6/15/05 (c) | 20,010 | 2,801 | ||
7.875% 6/15/08 (c) | 49,160 | 6,882 | ||
61,146 | ||||
TOTAL NONCONVERTIBLE BONDS | 2,091,371 | |||
TOTAL CORPORATE BONDS (Cost $1,967,228) | 2,121,039 | |||
Commercial Mortgage Securities - 0.3% | ||||
First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 7.9843% 4/29/39 (f)(h) | 10,700 | 8,617 | ||
Common Stocks - 9.1% | |||
Shares | |||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 15,928 | 0 | |
Cable TV - 1.0% | |||
EchoStar Communications Corp. Class A (a) | 702,396 | 26,916 | |
NTL, Inc. warrants 1/13/11 (a) | 3 | 0 | |
Pegasus Communications Corp. warrants 1/1/07 (a) | 6,509 | 0 | |
26,916 | |||
Chemicals - 0.1% | |||
Hercules Trust II unit | 5,500 | 3,685 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
Consumer Products - 0.0% | |||
Revlon, Inc. Class A (a) | 269,226 | $ 708 | |
Containers - 1.3% | |||
Owens-Illinois, Inc. (a) | 2,920,800 | 35,926 | |
Trivest 1992 Special Fund Ltd. (i) | 3,037,732 | 30 | |
35,956 | |||
Diversified Financial Services - 0.0% | |||
ECM Corp. LP (f) | 900 | 77 | |
Electric Utilities - 2.6% | |||
AES Corp. (a) | 8,206,409 | 71,806 | |
Energy - 0.4% | |||
Chesapeake Energy Corp. | 1,000,000 | 11,930 | |
Entertainment/Film - 0.4% | |||
AMC Entertainment, Inc. (a) | 772,300 | 10,503 | |
Livent, Inc. (a) | 125,200 | 0 | |
10,503 | |||
Food and Drug Retail - 1.0% | |||
Pathmark Stores, Inc. (a)(e) | 2,811,078 | 19,256 | |
Pathmark Stores, Inc. warrants 9/19/10 (a) | 747,828 | 748 | |
Rite Aid Corp. (a) | 1,233,272 | 7,067 | |
27,071 | |||
Healthcare - 1.7% | |||
DaVita, Inc. (a) | 1,293,564 | 45,404 | |
Super Retail - 0.0% | |||
Barneys, Inc. warrants 4/1/08 (a) | 6,720 | 67 | |
Technology - 0.1% | |||
Ampex Corp. Class A (a) | 3,560 | 8 | |
ChipPAC, Inc. Class A (a) | 300,000 | 2,502 | |
2,510 | |||
Telecommunications - 0.5% | |||
Cincinnati Bell, Inc. (a) | 954,428 | 4,877 | |
Crown Castle International Corp. (a) | 22,887 | 290 | |
Level 3 Communications, Inc. (a) | 700,000 | 3,773 | |
McLeodUSA, Inc. Class A (a) | 1,977,550 | 2,334 | |
SpectraSite, Inc. (a) | 72,968 | 2,828 | |
14,102 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
Textiles & Apparel - 0.0% | |||
Arena Brands Holding Corp. Class B | 42,253 | $ 635 | |
Pillowtex Corp. (a) | 490,256 | 2 | |
637 | |||
TOTAL COMMON STOCKS (Cost $210,374) | 251,372 | ||
Preferred Stocks - 1.5% | |||
Convertible Preferred Stocks - 0.7% | |||
Paper - 0.5% | |||
Temple-Inland, Inc. 7.50% DECS | 232,000 | 12,266 | |
Telecommunications - 0.2% | |||
Crown Castle International Corp. 6.25% PIERS | 151,600 | 6,443 | |
TOTAL CONVERTIBLE PREFERRED STOCKS | 18,709 | ||
Nonconvertible Preferred Stocks - 0.8% | |||
Broadcasting - 0.6% | |||
Granite Broadcasting Corp. 12.75% pay-in-kind | 19,000 | 13,490 | |
Spanish Broadcasting System, Inc. 10.75% (f) | 2,530 | 2,555 | |
16,045 | |||
Diversified Financial Services - 0.2% | |||
American Annuity Group Capital Trust II 8.875% | 6,040 | 6,004 | |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | 22,049 | ||
TOTAL PREFERRED STOCKS (Cost $38,138) | 40,758 | ||
Floating Rate Loans - 3.8% | ||||
Principal | ||||
Building Materials - 0.2% | ||||
Owens Corning revolver loan 0% 11/15/04 (h) | $ 7,020 | 4,984 | ||
Chemicals - 0.0% | ||||
Huntsman Co. LLC Tranche B term loan 8.9375% 3/31/07 (h) | 2,358 | 2,069 | ||
Floating Rate Loans - continued | ||||
Principal | Value (Note 1) | |||
Hotels - 1.0% | ||||
Wyndham International, Inc. term loan: | ||||
5.875% 4/1/06 (h) | $ 7,726 | $ 7,301 | ||
5.875% 6/30/06 (h) | 21,896 | 20,144 | ||
27,445 | ||||
Telecommunications - 2.6% | ||||
Centennial Puerto Rico Operations Corp.: | ||||
Tranche B term loan 4.4355% 5/31/07 (h) | 1,794 | 1,794 | ||
Tranche C term loan 4.6892% 11/30/07 (h) | 1,787 | 1,787 | ||
McLeodUSA, Inc.: | ||||
revolver loan 4.6733% 5/31/07 (h) | 9,402 | 5,265 | ||
Tranche A term loan 4.68% 5/31/07 (h) | 10,409 | 5,829 | ||
Tranche B term loan 5.43% 5/30/08 (h) | 86,482 | 48,430 | ||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (h) | 4,307 | 4,317 | ||
Tranche C term loan 4.8125% 12/31/08 (h) | 4,307 | 4,317 | ||
71,739 | ||||
TOTAL FLOATING RATE LOANS (Cost $107,105) | 106,237 | |||
Money Market Funds - 8.0% | |||
Shares | |||
Fidelity Cash Central Fund, 1.07% (b) | 220,178,670 | 220,179 | |
Cash Equivalents - 0.4% | |||
Maturity | Value (Note 1) | ||
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.01%, dated 10/31/03 due 11/3/03) | 10,864 | $ 10,863 | |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $2,562,372) | 2,759,065 | ||
NET OTHER ASSETS - (0.1)% | (3,465) | ||
NET ASSETS - 100% | $ 2,755,600 | ||
Security Type Abbreviations | ||
DECS | - | Dividend Enhanced Convertible Stock/Debt Exchangeable for Common Stock |
PIERS | - | Preferred Income Equity Redeemable Securities |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Affiliated company |
(f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $542,639,000 or 19.7% of net assets. |
(g) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost (000s) |
Sealy Corp., Inc. 10% 12/18/08 pay-in-kind | 2/23/98 - 9/30/03 | $ 19,680 |
Trivest 1992 Special Fund Ltd. | 7/30/92 | $ - |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $2,527,947,000 and $2,663,970,000, respectively. |
The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $10,000 for the period. |
The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144a issues) amounted to $16,551,000 or 0.6% of net assets. |
The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $106,237,000 or 3.8% of net assets. |
The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which loans were outstanding amounted to $20,127,000. The weighted average interest rate was 1.21%. At period end there were no interfund loans outstanding. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $1,282,168,000 of which $314,609,000, $488,641,000 and $478,918,000 will expire on October 31, 2008, 2009 and 2010, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Assets | ||
Investment in securities, at value (including securities loaned of $1,750 and repurchase agreements of $10,863)(cost $2,562,372) - See accompanying schedule | $ 2,759,065 | |
Cash | 725 | |
Receivable for investments sold | 20,010 | |
Delayed delivery | 1,511 | |
Receivable for fund shares sold | 6,206 | |
Interest receivable | 51,094 | |
Prepaid expenses | 14 | |
Other receivables | 20 | |
Total assets | 2,838,645 | |
Liabilities | ||
Payable for investments purchased | $ 61,787 | |
Delayed delivery | 6,330 | |
Payable for fund shares redeemed | 6,025 | |
Distributions payable | 3,092 | |
Accrued management fee | 1,310 | |
Distribution fees payable | 964 | |
Other payables and accrued expenses | 571 | |
Collateral on securities loaned, at value | 2,966 | |
Total liabilities | 83,045 | |
Net Assets | $ 2,755,600 | |
Net Assets consist of: | ||
Paid in capital | $ 3,697,244 | |
Undistributed net investment income | 148,601 | |
Accumulated undistributed net realized gain (loss) on investments | (1,286,939) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 196,694 | |
Net Assets | $ 2,755,600 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Calculation of Maximum Offering Price | $ 9.50 | |
Maximum offering price per share (100/95.25 of $9.50) | $ 9.97 | |
Class T: | $ 9.52 | |
Maximum offering price per share (100/96.50 of $9.52) | $ 9.87 | |
Class B: | $ 9.47 | |
Class C: | $ 9.49 | |
Institutional Class: | $ 9.24 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended October 31, 2003 | |
Investment Income | ||
Dividends | $ 9,962 | |
Interest | 272,233 | |
Security lending | 29 | |
Total income | 282,224 | |
Expenses | ||
Management fee | $ 14,298 | |
Transfer agent fees | 4,834 | |
Distribution fees | 10,432 | |
Accounting and security lending fees | 655 | |
Non-interested trustees' compensation | 10 | |
Appreciation in deferred trustee compensation account | 9 | |
Custodian fees and expenses | 75 | |
Registration fees | 253 | |
Audit | 69 | |
Legal | 115 | |
Interest | 5 | |
Miscellaneous | 23 | |
Total expenses before reductions | 30,778 | |
Expense reductions | (11) | 30,767 |
Net investment income (loss) | 251,457 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 198,118 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 677,025 | |
Assets and liabilities in foreign currencies | 1 | |
Total change in net unrealized appreciation (depreciation) | 677,026 | |
Net gain (loss) | 875,144 | |
Net increase (decrease) in net assets resulting from operations | $ 1,126,601 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 251,457 | $ 231,624 |
Net realized gain (loss) | 198,118 | (525,349) |
Change in net unrealized appreciation (depreciation) | 677,026 | (33,435) |
Net increase (decrease) in net assets resulting | 1,126,601 | (327,160) |
Distributions to shareholders from net investment income | (187,268) | (202,863) |
Share transactions - net increase (decrease) | (50,567) | (252,315) |
Total increase (decrease) in net assets | 888,766 | (782,338) |
Net Assets | ||
Beginning of period | 1,866,834 | 2,649,172 |
End of period (including undistributed net investment income of $148,601 and undistributed net investment income of $79,736, respectively) | $ 2,755,600 | $ 1,866,834 |
A Certain amounts have been reclassified. See Note 1 of the Notes to the Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.40 | $ 8.17 | $ 9.64 | $ 11.12 | $ 11.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .873 | .767 E,F | .869 | 1.059 | 1.022 |
Net realized and unrealized gain (loss) | 2.875 | (1.866) E,F | (1.558) | (1.634) | .287 |
Total from investment operations | 3.748 | (1.099) | (.689) | (.575) | 1.309 |
Distributions from net investment income | (.648) | (.671) | (.781) | (.905) | (1.030) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.049) |
Total distributions | (.648) | (.671) | (.781) | (.905) | (1.279) |
Net asset value, end of period | $ 9.50 | $ 6.40 | $ 8.17 | $ 9.64 | $ 11.12 |
Total Return A,B | 60.58% | (14.39)% | (7.64)% | (5.66)% | 11.98% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .99% | 1.02% | .97% | .94% | .95% |
Expenses net of voluntary waivers, if any | .99% | 1.02% | .97% | .94% | .95% |
Expenses net of all reductions | .99% | 1.01% | .97% | .94% | .95% |
Net investment income (loss) | 10.45% | 10.12% E,F | 9.53% | 9.86% | 8.89% |
Supplemental Data | |||||
Net assets, end of period | $ 307 | $ 157 | $ 189 | $ 209 | $ 221 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 11.01% to 10.12%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.42 | $ 8.18 | $ 9.66 | $ 11.14 | $ 11.11 |
Income from Investment Operations | |||||
Net investment income (loss) C | .859 | .766 E,F | .865 | 1.055 | 1.021 |
Net realized and unrealized gain (loss) | 2.883 | (1.860) E,F | (1.572) | (1.640) | .274 |
Total from investment operations | 3.742 | (1.094) | (.707) | (.585) | 1.295 |
Distributions from net investment income | (.642) | (.666) | (.773) | (.895) | (1.017) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.048) |
Total distributions | (.642) | (.666) | (.773) | (.895) | (1.265) |
Net asset value, end of period | $ 9.52 | $ 6.42 | $ 8.18 | $ 9.66 | $ 11.14 |
Total Return A,B | 60.26% | (14.30)% | (7.81)% | (5.73)% | 11.83% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.06% | 1.08% | 1.06% | 1.03% | 1.04% |
Expenses net of voluntary waivers, if any | 1.06% | 1.08% | 1.06% | 1.03% | 1.04% |
Expenses net of all reductions | 1.06% | 1.08% | 1.05% | 1.03% | 1.04% |
Net investment income (loss) | 10.38% | 10.05% E,F | 9.45% | 9.76% | 8.80% |
Supplemental Data | |||||
Net assets, end of period | $ 1,398 | $ 1,070 | $ 1,473 | $ 1,777 | $ 2,351 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.95% to 10.05%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.38 | $ 8.15 | $ 9.61 | $ 11.09 | $ 11.07 |
Income from Investment Operations | |||||
Net investment income (loss) C | .802 | .712 E,F | .801 | .978 | .938 |
Net realized and unrealized gain (loss) | 2.873 | (1.868) E,F | (1.549) | (1.634) | .276 |
Total from investment operations | 3.675 | (1.156) | (.748) | (.656) | 1.214 |
Distributions from net investment income | (.585) | (.614) | (.712) | (.824) | (.949) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.045) |
Total distributions | (.585) | (.614) | (.712) | (.824) | (1.194) |
Net asset value, end of period | $ 9.47 | $ 6.38 | $ 8.15 | $ 9.61 | $ 11.09 |
Total Return A,B | 59.42% | (15.07)% | (8.25)% | (6.39)% | 11.10% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.75% | 1.78% | 1.73% | 1.70% | 1.70% |
Expenses net of voluntary waivers, if any | 1.75% | 1.78% | 1.73% | 1.70% | 1.70% |
Expenses net of all reductions | 1.75% | 1.77% | 1.72% | 1.70% | 1.69% |
Net investment income (loss) | 9.69% | 9.36% E,F | 8.78% | 9.10% | 8.15% |
Supplemental Data | |||||
Net assets, end of period | $ 613 | $ 426 | $ 704 | $ 956 | $ 1,192 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.25% to 9.36%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.40 | $ 8.16 | $ 9.63 | $ 11.11 | $ 11.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .801 | .708 E,F | .796 | .969 | .926 |
Net realized and unrealized gain (loss) | 2.868 | (1.859) E,F | (1.560) | (1.634) | .280 |
Total from investment operations | 3.669 | (1.151) | (.764) | (.665) | 1.206 |
Distributions from net investment income | (.579) | (.609) | (.706) | (.815) | (.941) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.045) |
Total distributions | (.579) | (.609) | (.706) | (.815) | (1.186) |
Net asset value, end of period | $ 9.49 | $ 6.40 | $ 8.16 | $ 9.63 | $ 11.11 |
Total Return A,B | 59.11% | (14.98)% | (8.41)% | (6.45)% | 11.00% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.82% | 1.84% | 1.80% | 1.78% | 1.78% |
Expenses net of voluntary waivers, if any | 1.82% | 1.84% | 1.80% | 1.78% | 1.78% |
Expenses net of all reductions | 1.82% | 1.84% | 1.79% | 1.78% | 1.78% |
Net investment income (loss) | 9.62% | 9.29% E,F | 8.71% | 9.02% | 8.06% |
Supplemental Data | |||||
Net assets, end of period | $ 219 | $ 132 | $ 197 | $ 247 | $ 269 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.19% to 9.29%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.24 | $ 7.97 | $ 9.43 | $ 10.90 | $ 10.90 |
Income from Investment Operations | |||||
Net investment income (loss) B | .867 | .759 D,E | .862 | 1.055 | 1.024 |
Net realized and unrealized gain (loss) | 2.796 | (1.805) D,E | (1.528) | (1.606) | .269 |
Total from investment operations | 3.663 | (1.046) | (.666) | (.551) | 1.293 |
Distributions from net investment income | (.663) | (.684) | (.794) | (.919) | (1.044) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.049) |
Total distributions | (.663) | (.684) | (.794) | (.919) | (1.293) |
Net asset value, end of period | $ 9.24 | $ 6.24 | $ 7.97 | $ 9.43 | $ 10.90 |
Total Return A | 60.82% | (14.09)% | (7.58)% | (5.56)% | 12.05% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .82% | .85% | .83% | .82% | .82% |
Expenses net of voluntary waivers, if any | .82% | .85% | .83% | .82% | .82% |
Expenses net of all reductions | .82% | .85% | .83% | .82% | .81% |
Net investment income (loss) | 10.62% | 10.28% D,E | 9.67% | 9.98% | 9.03% |
Supplemental Data | |||||
Net assets, end of period | $ 218 | $ 82 | $ 87 | $ 89 | $ 123 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
E As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.067 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 11.18% to 10.28%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor High Income Advantage Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Reclassification of Financial Information. As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. Net investment income for the fund decreased by $21,068 with a corresponding decrease to realized loss of $18,529 and $2,539, respectively. The reclassification has no impact on the net assets of the fund.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Annual Report
1. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds, and are marked-to-market. Deferred amounts remain in the fund until distributed in accordance with the Plan.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due prior period premium and discount on debt securities, market discount, partnerships, non-taxable dividends, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 376,413 | | |
Unrealized depreciation | (138,875) | |
Net unrealized appreciation (depreciation) | 237,538 | |
Undistributed ordinary income | 116,957 | |
Capital loss carryforward | (1,282,168) | |
Cost for federal income tax purposes | $ 2,521,527 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 187,268 | $ 202,863 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Short-term Trading (Redemption) Fees. Shares purchased on or after March 31, 2004 and held in the fund less than 90 days will be subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which will be retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Annual Report
2. Operating Policies - continued
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .45% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 358 | $ - |
Class T | 0% | .25% | 3,387 | 47 |
Class B | .65% | .25% | 4,870 | 3,518 |
Class C | .75% | .25% | 1,817 | 287 |
$ 10,432 | $ 3,852 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||
Class A | $ 88 | |
Class T | 107 | |
Class B* | 1,289 | |
Class C* | 93 | |
$ 1,577 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 502 | .21 |
Class T | 2,519 | .19 |
Class B | 1,188 | .22 |
Class C | 346 | .19 |
Institutional Class | 279 | .19 |
$ 4,834 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $1,740 for the period.
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the fund's Statement of Assets and Liabilities.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the fund provided services to the fund in addition to trade execution. These services included payments of certain expenses on behalf of the fund totaling $5 for the period. In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $6.
8. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 18,374 | $ 16,162 |
Class T | 106,158 | 115,656 |
Class B | 38,278 | 48,298 |
Class C | 12,553 | 14,125 |
Institutional Class | 11,905 | 8,622 |
Total | $ 187,268 | $ 202,863 |
Annual Report
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 34,832 | 21,043 | $ 293,119 | $ 159,197 |
Reinvestment of distributions | 1,400 | 1,377 | 11,574 | 10,381 |
Shares redeemed | (28,472) | (20,911) | (242,005) | (158,574) |
Net increase (decrease) | 7,760 | 1,509 | $ 62,688 | $ 11,004 |
Class T | ||||
Shares sold | 147,909 | 85,605 | $ 1,204,516 | $ 638,278 |
Reinvestment of distributions | 10,623 | 12,279 | 86,420 | 92,952 |
Shares redeemed | (178,448) | (111,104) | (1,494,673) | (840,910) |
Net increase (decrease) | (19,916) | (13,220) | $ (203,737) | $ (109,680) |
Class B | ||||
Shares sold | 13,142 | 9,029 | $ 110,687 | $ 69,180 |
Reinvestment of distributions | 2,927 | 3,846 | 23,946 | 29,103 |
Shares redeemed | (18,040) | (32,582) | (149,301) | (243,268) |
Net increase (decrease) | (1,971) | (19,707) | $ (14,668) | $ (144,985) |
Class C | ||||
Shares sold | 12,912 | 9,341 | $ 109,440 | $ 71,251 |
Reinvestment of distributions | 918 | 1,069 | 7,575 | 8,109 |
Shares redeemed | (11,394) | (13,949) | (96,409) | (104,686) |
Net increase (decrease) | 2,436 | (3,539) | $ 20,606 | $ (25,326) |
Institutional Class | ||||
Shares sold | 37,471 | 16,721 | $ 306,562 | $ 121,164 |
Reinvestment of distributions | 1,212 | 966 | 9,794 | 7,097 |
Shares redeemed | (28,190) | (15,426) | (231,812) | (111,589) |
Net increase (decrease) | 10,493 | 2,261 | $ 84,544 | $ 16,672 |
10. Transactions with Affiliated Companies.
An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows:
Affiliate | Purchase | Sales | Dividend | Value |
Pathmark Stores, Inc. | $ - | $ - | $ - | $ 19,256 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor High Income Advantage Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor High Income Advantage Fund ("the Fund"), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 High Income Advantage Fund as of October 31, 2003, and 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor High Income Advantage (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Advisor High Income Advantage. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Thomas T. Soviero (40) | |
Year of Election or Appointment: 2000 Vice President of Advisor High Income Advantage. Prior to assuming his current responsibilities, Mr. Soviero managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor High Income Advantage. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor High Income Advantage. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor High Income Advantage. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor High Income Advantage. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor High Income Advantage. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor High Income Advantage. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income Advantage. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income Advantage. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Advisor High Income Advantage. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 0.06% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
HY-UANN-1203
1.784750.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
High Income Advantage
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional ClassA | 60.82% | 6.21% | 7.07% |
A Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee.The initial offering of Institutional Class shares took place on July 3, 1995. Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. Returns prior to July 3, 1995 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor High Income Advantage Fund - Institutional Class on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Merrill Lynch High Yield Master II Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Tom Soviero, Portfolio Manager of Fidelity® Advisor High Income Advantage Fund
High-yield staged a remarkable turnaround during the one-year period ending October 31, 2003, enjoying four consecutive quarters of positive returns for the first time since 1998. A declining default rate, increasing flows into high-yield mutual funds, rebounding equity markets, signs of an economic recovery and a focus on corporate debt reduction paced high-yield's recovery for much of the period. In July 2003, however, low-quality debt had its first monthly decline since October 2002, hurt by weakness in investment-grade bonds, the poor showing of the energy sector during the month, and profit taking that led to soft demand and negative fund flows. The rally re-emerged in August, though, bolstered by resurgent demand due to further evidence of an economic recovery, the robust performance of stocks, and the continued efforts of corporate America to deleverage and improve its balance sheets. For the 12 months overall, the Merrill Lynch® U.S. High Yield Master II Index gained 33.10%, one of its strongest one-year periods ever.
For the year that ended October 31, 2003, Fidelity Advisor High Income Advantage Fund's Institutional Class returned 60.82%. The fund outperformed the 33.10% return of the Merrill Lynch index, as well as the 28.04% return of the LipperSM High Current Yield Funds Average. The fund benefited from overweightings in B-rated bonds and three of the top-performing sectors: cable TV, telecommunications and electric utilities. The fund also had very large positions in some of the best-performing companies. Specific positive contributors included AES, Cablevision and Telewest. AES, an independent power producer, had a management and balance sheet transformation. It dealt with a potential liquidity crisis by selling underperforming assets while extending its debt maturities with a bond swap. Cable provider Cablevision improved its balance sheet by selling its Bravo network in 2002. The company's core cable franchise benefited from the rapid growth in high-speed-Internet subscriptions. Telewest, the U.K. cable operator, underwent a massive debt-for-equity swap and saw prices of its securities rise. Fundamentals remained strong while progress was made on improving its balance sheet. Detractors included Levi Strauss and WestPoint Stevens. Levi's turnaround took longer than expected, while distressed investment WestPoint experienced weakening fundamentals that contributed to its Chapter 11 bankruptcy.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
AES Corp. | 6.7 | 6.4 |
Qwest Services Corp. | 4.9 | 3.5 |
Level 3 Communications, Inc. | 4.0 | 4.9 |
Ahold Fin Usa, Inc. | 3.8 | 2.8 |
Williams Companies, Inc. | 3.8 | 1.8 |
23.2 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Telecommunications | 22.1 | 19.1 |
Electric Utilities | 15.0 | 9.4 |
Energy | 10.3 | 8.3 |
Food and Drug Retail | 9.9 | 8.3 |
Cable TV | 3.3 | 9.1 |
Quality Diversification (% of fund's net assets) as of October 31, 2003 | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| AAA,AA,A 0.0% | | AAA, AA, A 0.0% | ||||
| BBB 0.2% | | BBB 0.3% | ||||
| BB 1.4% | | BB 3.1% | ||||
| B 36.1% | | B 32.7% | ||||
| CCC,CC,C 36.7% | | CCC,CC,C 32.8% | ||||
| D 0.2% | | D 1.5% | ||||
| Not Rated 6.5% | | Not Rated 1.5% | ||||
| Equities 10.6% | | Equities 10.3% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's Investors Services, Inc. Where Moody's ratings are not available, we have used S&P ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Nonconvertible | | Nonconvertible | ||||
| Convertible Bonds, Preferred Stocks 2.6% | | Convertible Bonds, Preferred Stocks 7.0% | ||||
| Common Stocks 9.1% | | Common Stocks 6.9% | ||||
| Other Investments 4.1% | | Other Investments 5.4% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 5.3% | ** Foreign investments | 3.1% | ||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Corporate Bonds - 77.0% | ||||
Principal | Value (Note 1) | |||
Convertible Bonds - 1.1% | ||||
Cable TV - 0.3% | ||||
Telewest Finance Jersey Ltd. 6% 7/7/05 (c)(f) | $ 11,375 | $ 9,100 | ||
Energy - 0.1% | ||||
Hanover Compressor Co. 4.75% 3/15/08 | 2,360 | 2,145 | ||
Food and Drug Retail - 0.2% | ||||
Rite Aid Corp. 4.75% 12/1/06 (f) | 4,000 | 4,654 | ||
Technology - 0.1% | ||||
Amkor Technology, Inc. 5% 3/15/07 | 3,840 | 3,686 | ||
Telecommunications - 0.4% | ||||
American Tower Corp. 6.25% 10/15/09 | 6,900 | 6,762 | ||
Level 3 Communications, Inc. 6% 9/15/09 | 4,920 | 3,321 | ||
10,083 | ||||
TOTAL CONVERTIBLE BONDS | 29,668 | |||
Nonconvertible Bonds - 75.9% | ||||
Aerospace - 0.0% | ||||
BE Aerospace, Inc. 8.5% 10/1/10 (f) | 860 | 899 | ||
Air Transportation - 2.8% | ||||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 13,320 | 11,788 | ||
6.977% 11/23/22 | 842 | 745 | ||
7.377% 5/23/19 | 3,337 | 2,369 | ||
7.379% 5/23/16 | 4,016 | 2,731 | ||
7.8% 4/1/08 | 9,740 | 8,376 | ||
10.18% 1/2/13 | 1,745 | 1,274 | ||
AMR Corp. 9% 8/1/12 | 16,520 | 13,670 | ||
Continental Airlines, Inc. 8% 12/15/05 | 2,970 | 2,881 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.795% 8/2/18 | 329 | 277 | ||
6.9% 1/2/18 | 2,191 | 2,169 | ||
7.256% 9/15/21 | 690 | 704 | ||
8.307% 4/2/18 | 372 | 320 | ||
Delta Air Lines, Inc.: | ||||
7.9% 12/15/09 | 7,515 | 6,162 | ||
8.3% 12/15/29 | 3,571 | 2,375 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 985 | 887 | ||
7.779% 11/18/05 | 1,250 | 1,150 | ||
7.779% 1/2/12 | 2,355 | 2,014 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Air Transportation - continued | ||||
Northwest Airlines, Inc.: | ||||
7.625% 3/15/05 | $ 4,010 | $ 3,779 | ||
7.875% 3/15/08 | 4,675 | 3,822 | ||
8.875% 6/1/06 | 9,065 | 7,751 | ||
9.875% 3/15/07 | 800 | 720 | ||
Northwest Airlines, Inc. pass thru trust certificates 9.179% 10/1/11 | 1,888 | 1,454 | ||
77,418 | ||||
Auto Parts Distribution - 0.1% | ||||
Keystone Automotive Operations, Inc. 9.75% 11/1/13 (f) | 1,640 | 1,730 | ||
Automotive - 0.1% | ||||
General Motors Corp. 7.125% 7/15/13 | 2,755 | 2,867 | ||
Building Materials - 1.6% | ||||
Norcraft Companies LP/Norcraft Finance Corp. 9% 11/1/11 (f) | 1,590 | 1,670 | ||
Owens Corning: | ||||
7% 3/15/09 (c) | 25,600 | 11,456 | ||
7.5% 5/1/05 (c) | 12,000 | 5,370 | ||
7.5% 8/1/18 (c) | 4,000 | 1,790 | ||
7.7% 5/1/08 (c) | 1,440 | 644 | ||
Texas Industries, Inc. 10.25% 6/15/11 (f) | 20,680 | 23,058 | ||
43,988 | ||||
Cable TV - 2.0% | ||||
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp. 10% 5/15/11 | 9,245 | 7,419 | ||
Pegasus Communications Corp. 12.5% 8/1/07 | 2,070 | 1,708 | ||
Pegasus Satellite Communications, Inc.: | ||||
0% 3/1/07 (d) | 9,895 | 6,778 | ||
11.25% 1/15/10 (f) | 10,999 | 8,414 | ||
Telewest Communications PLC yankee: | ||||
9.875% 2/1/10 (c) | 14,745 | 7,594 | ||
11.25% 11/1/08 (c) | 6,627 | 3,562 | ||
Telewest PLC yankee 9.625% 10/1/06 (c) | 39,735 | 21,060 | ||
56,535 | ||||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Capital Goods - 0.7% | ||||
Hexcel Corp. 9.75% 1/15/09 | $ 12,074 | $ 12,617 | ||
Terex Corp. 10.375% 4/1/11 | 6,615 | 7,442 | ||
20,059 | ||||
Chemicals - 2.6% | ||||
Avecia Group PLC 11% 7/1/09 | 15,800 | 14,536 | ||
Equistar Chemicals LP/Equistar Funding Corp. 10.625% 5/1/11 (f) | 5,920 | 6,157 | ||
Geo Specialty Chemicals, Inc. 10.125% 8/1/08 | 19,720 | 7,888 | ||
Geon Co. 6.875% 12/15/05 | 900 | 833 | ||
HMP Equity Holdings Corp. 0% 5/15/08 unit (f) | 8,510 | 4,255 | ||
Huntsman ICI Chemicals LLC 10.125% 7/1/09 | 13,210 | 12,483 | ||
Huntsman LLC 11.625% 10/15/10 (f) | 5,240 | 5,030 | ||
Nalco Co. 8.875% 11/15/13 (f) | 4,240 | 4,404 | ||
Phibro Animal Health Corp. 13% 12/1/07 unit (f) | 2,450 | 2,536 | ||
PolyOne Corp.: | ||||
8.875% 5/1/12 | 9,960 | 8,217 | ||
10.625% 5/15/10 | 7,260 | 6,643 | ||
72,982 | ||||
Consumer Products - 2.9% | ||||
Revlon Consumer Products Corp.: | ||||
8.125% 2/1/06 | 51,810 | 34,713 | ||
8.625% 2/1/08 | 17,037 | 8,007 | ||
9% 11/1/06 | 31,293 | 20,966 | ||
12% 12/1/05 | 16,645 | 16,479 | ||
80,165 | ||||
Containers - 1.7% | ||||
Applied Extrusion Technologies, Inc. 10.75% 7/1/11 | 4,460 | 3,122 | ||
Owens-Illinois, Inc.: | ||||
7.5% 5/15/10 | 10,330 | 10,123 | ||
7.8% 5/15/18 | 9,710 | 9,127 | ||
8.1% 5/15/07 | 9,092 | 9,456 | ||
U.S. Can Corp. 10.875% 7/15/10 (f) | 4,690 | 4,831 | ||
Vitro SA de CV 11.75% 11/1/13 (f) | 10,670 | 10,323 | ||
46,982 | ||||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Diversified Financial Services - 0.1% | ||||
Metris Companies, Inc.: | ||||
10% 11/1/04 | $ 430 | $ 335 | ||
10.125% 7/15/06 | 2,515 | 2,062 | ||
2,397 | ||||
Electric Utilities - 12.4% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 22,394 | 22,058 | ||
8.75% 6/15/08 | 12,699 | 13,048 | ||
8.75% 5/15/13 (f) | 3,760 | 4,009 | ||
9% 5/15/15 (f) | 16,355 | 17,500 | ||
9.375% 9/15/10 | 38,244 | 40,491 | ||
9.5% 6/1/09 | 16,336 | 17,377 | ||
Allegheny Energy Supply Co. LLC: | ||||
7.8% 3/15/11 | 21,396 | 19,470 | ||
8.75% 4/15/12 (f) | 24,645 | 22,981 | ||
Calpine Canada Energy Finance ULC 8.5% 5/1/08 | 15,460 | 11,479 | ||
Calpine Corp.: | ||||
7.75% 4/15/09 | 23,330 | 16,798 | ||
7.875% 4/1/08 | 7,620 | 5,334 | ||
8.5% 7/15/10 (f) | 14,695 | 13,519 | ||
8.5% 2/15/11 | 13,550 | 9,688 | ||
8.625% 8/15/10 | 8,920 | 6,289 | ||
8.75% 7/15/13 (f) | 16,840 | 15,493 | ||
CMS Energy Corp.: | ||||
7.5% 1/15/09 | 9,000 | 9,191 | ||
7.75% 8/1/10 (f) | 6,570 | 6,726 | ||
8.5% 4/15/11 | 17,255 | 18,031 | ||
8.9% 7/15/08 | 17,185 | 18,388 | ||
Illinois Power Co. 11.5% 12/15/10 | 26,310 | 31,506 | ||
Reliant Resources, Inc.: | ||||
9.25% 7/15/10 (f) | 11,860 | 10,674 | ||
9.5% 7/15/13 (f) | 13,890 | 12,432 | ||
342,482 | ||||
Energy - 9.8% | ||||
El Paso Corp.: | ||||
7% 5/15/11 | 27,685 | 23,325 | ||
7.875% 6/15/12 | 830 | 708 | ||
El Paso Energy Corp.: | ||||
6.75% 5/15/09 | 37,730 | 32,071 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
El Paso Energy Corp.: - continued | ||||
6.95% 12/15/07 | $ 42,430 | $ 37,975 | ||
7.8% 8/1/31 | 2,125 | 1,615 | ||
El Paso Production Holding Co. 7.75% 6/1/13 (f) | 6,500 | 6,240 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 8.5% 6/1/10 | 10,060 | 10,965 | ||
Hanover Equipment Trust 8.75% 9/1/11 | 4,170 | 4,253 | ||
Parker Drilling Co. 9.625% 10/1/13 (f) | 3,050 | 3,142 | ||
The Coastal Corp.: | ||||
6.5% 5/15/06 | 5,745 | 5,084 | ||
6.5% 6/1/08 | 12,115 | 9,965 | ||
6.95% 6/1/28 | 370 | 258 | ||
7.5% 8/15/06 | 5,730 | 5,221 | ||
7.75% 6/15/10 | 21,640 | 18,232 | ||
7.75% 10/15/35 | 1,970 | 1,458 | ||
Williams Companies, Inc.: | ||||
6.5% 8/1/06 | 28,410 | 29,191 | ||
6.75% 1/15/06 | 4,620 | 4,747 | ||
7.125% 9/1/11 | 10,040 | 10,291 | ||
7.5% 1/15/31 | 10,225 | 9,612 | ||
7.625% 7/15/19 | 15,245 | 14,940 | ||
7.75% 6/15/31 | 6,000 | 5,700 | ||
7.875% 9/1/21 | 7,825 | 7,747 | ||
8.125% 3/15/12 | 6,675 | 7,209 | ||
8.625% 6/1/10 | 7,850 | 8,596 | ||
8.75% 3/15/32 | 5,000 | 5,225 | ||
Williams Holdings of Delaware, Inc. 6.25% 2/1/06 | 5,600 | 5,740 | ||
269,510 | ||||
Entertainment/Film - 0.1% | ||||
Livent, Inc. yankee 9.375% 10/15/04 (c) | 11,100 | 1,887 | ||
Food and Drug Retail - 8.7% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 41,590 | 41,070 | ||
6.875% 5/1/29 | 13,130 | 11,554 | ||
8.25% 7/15/10 | 49,237 | 52,807 | ||
Nutritional Sourcing Corp. 10.125% 8/1/09 | 5,550 | 3,732 | ||
Rite Aid Corp.: | ||||
6.125% 12/15/08 (f) | 8,975 | 8,437 | ||
6.875% 8/15/13 | 5,860 | 5,538 | ||
7.125% 1/15/07 | 17,855 | 18,034 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Food and Drug Retail - continued | ||||
Rite Aid Corp.: - continued | ||||
8.125% 5/1/10 | $ 8,080 | $ 8,646 | ||
9.25% 6/1/13 | 8,250 | 8,828 | ||
9.5% 2/15/11 | 2,700 | 3,038 | ||
11.25% 7/1/08 | 11,855 | 13,278 | ||
12.5% 9/15/06 | 8,905 | 10,374 | ||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | 29,690 | 25,162 | ||
9.125% 12/15/11 | 33,160 | 28,103 | ||
238,601 | ||||
Gaming - 0.2% | ||||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 5,130 | 5,900 | ||
Healthcare - 0.5% | ||||
Genesis HealthCare Corp. 8% 10/15/13 (f) | 1,520 | 1,554 | ||
National Nephrology Associates, Inc. 9% 11/1/11 (f) | 2,150 | 2,215 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 7,265 | 6,756 | ||
6.5% 6/1/12 | 3,090 | 2,874 | ||
13,399 | ||||
Homebuilding/Real Estate - 0.8% | ||||
Champion Home Builders Co. 11.25% 4/15/07 | 20,705 | 21,740 | ||
Hotels - 0.3% | ||||
Capstar Hotel Co. 8.75% 8/15/07 | 5,910 | 5,895 | ||
Gaylord Entertainment Co. 8% 11/15/13 (f)(g) | 1,460 | 1,504 | ||
Hines Nurseries, Inc. 10.25% 10/1/11 (f) | 1,630 | 1,728 | ||
9,127 | ||||
Leisure - 0.7% | ||||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (f) | 16,410 | 18,954 | ||
Metals/Mining - 0.3% | ||||
Haynes International, Inc. 11.625% 9/1/04 | 15,655 | 8,297 | ||
Publishing/Printing - 0.3% | ||||
American Color Graphics, Inc. 10% 6/15/10 (f) | 7,390 | 8,055 | ||
Railroad - 0.4% | ||||
TFM SA de CV 12.5% 6/15/12 | 8,880 | 9,724 | ||
Restaurants - 0.1% | ||||
Morton's Restaurant Group, Inc. 7.5% 7/1/10 (f) | 1,920 | 1,747 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Services - 0.1% | ||||
Foster Wheeler Corp. 6.75% 11/15/05 | $ 4,780 | $ 2,629 | ||
Shipping - 0.6% | ||||
Evergreen International Aviation, Inc. 12% 5/15/10 (f) | 8,810 | 7,841 | ||
General Maritime Corp. 10% 3/15/13 | 6,700 | 7,504 | ||
15,345 | ||||
Steels - 1.3% | ||||
AK Steel Corp.: | ||||
7.75% 6/15/12 | 18,715 | 12,726 | ||
7.875% 2/15/09 | 660 | 459 | ||
Allegheny Ludlum Corp. 6.95% 12/15/25 | 3,260 | 2,347 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 (f) | 20,310 | 20,970 | ||
36,502 | ||||
Super Retail - 1.8% | ||||
Barneys, Inc. 9% 4/1/08 | 6,720 | 6,048 | ||
Golfsmith International, Inc. 8.375% 10/15/09 | 8,930 | 7,412 | ||
J. Crew Intermediate LLC 0% 5/15/08 (d)(f) | 28,649 | 21,630 | ||
J. Crew Operating Corp. 10.375% 10/15/07 | 13,465 | 13,869 | ||
48,959 | ||||
Technology - 2.3% | ||||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 (f) | 7,925 | 8,401 | ||
9.25% 2/15/08 | 3,500 | 3,903 | ||
Danka Business Systems PLC 11% 6/15/10 (f) | 7,240 | 6,661 | ||
Marconi Corp. PLC 8% 4/30/08 (f) | 11,170 | 10,947 | ||
ON Semiconductor Corp./Semiconductor Components Industries LLC: | ||||
12% 3/15/10 | 7,000 | 8,330 | ||
13% 5/15/08 (h) | 3,240 | 3,758 | ||
SCG Holding Corp./Semiconductor Components Industries LLC 12% 8/1/09 | 12,370 | 13,236 | ||
Xerox Corp. 7.625% 6/15/13 | 9,060 | 9,196 | ||
64,432 | ||||
Telecommunications - 18.4% | ||||
Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 (f) | 3,240 | 3,353 | ||
Cincinnati Bell, Inc. 8.375% 1/15/14 (f)(g) | 3,400 | 3,400 | ||
Crown Castle International Corp.: | ||||
0% 8/1/11 (d) | 12,230 | 12,352 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
Crown Castle International Corp.: - continued | ||||
9.375% 8/1/11 | $ 9,405 | $ 10,298 | ||
9.5% 8/1/11 | 3,070 | 3,362 | ||
10.75% 8/1/11 | 17,045 | 19,090 | ||
Level 3 Communications, Inc.: | ||||
0% 12/1/08 (d) | 47,150 | 43,378 | ||
0% 3/15/10 (d) | 9,810 | 7,995 | ||
9.125% 5/1/08 | 5,060 | 4,605 | ||
11% 3/15/08 | 42,600 | 41,322 | ||
11.25% 3/15/10 | 4,965 | 4,493 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (f) | 27,920 | 28,827 | ||
MCI Communications Corp.: | ||||
6.5% 4/15/10 (c) | 4,210 | 3,473 | ||
6.95% 8/15/06 (c) | 5,715 | 4,715 | ||
7.125% 6/15/27 (c) | 31,379 | 24,476 | ||
7.5% 8/20/04 (c) | 6,000 | 4,680 | ||
7.75% 3/15/24 (c) | 5,455 | 4,473 | ||
7.75% 3/23/25 (c) | 8,370 | 6,947 | ||
8.25% 1/20/23 (c) | 770 | 635 | ||
Nextel Partners, Inc.: | ||||
8.125% 7/1/11 (f) | 23,705 | 24,061 | ||
11% 3/15/10 | 5,720 | 6,235 | ||
11% 3/15/10 | 11,720 | 12,892 | ||
12.5% 11/15/09 | 14,005 | 16,106 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (f) | 5,000 | 5,675 | ||
13.5% 12/15/10 (f) | 110,354 | 128,561 | ||
Satelites Mexicanos SA de CV 5.62% 6/30/04 (f)(h) | 10,043 | 8,650 | ||
SBA Communications Corp. 10.25% 2/1/09 | 7,380 | 6,605 | ||
SpectraSite, Inc. 8.25% 5/15/10 (f) | 4,960 | 5,258 | ||
Time Warner Telecom LLC/Time Warner Telecom, Inc. 9.75% 7/15/08 | 16,450 | 16,738 | ||
Time Warner Telecom, Inc. 10.125% 2/1/11 | 12,950 | 13,436 | ||
Triton PCS, Inc.: | ||||
8.75% 11/15/11 | 4,970 | 4,808 | ||
9.375% 2/1/11 | 9,070 | 8,979 | ||
WorldCom, Inc.: | ||||
6.4% 8/15/05 (c) | 6,585 | 2,420 | ||
6.5% 5/15/04 (c) | 2,025 | 744 | ||
7.375% 1/15/06 (c)(f) | 8,665 | 3,184 | ||
Corporate Bonds - continued | ||||
Principal | Value (Note 1) | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
WorldCom, Inc.: - continued | ||||
7.5% 5/15/11 (c) | $ 1,350 | $ 496 | ||
7.75% 4/1/27 (c) | 5,000 | 1,838 | ||
8% 5/15/06 (c) | 22,730 | 8,353 | ||
506,913 | ||||
Textiles & Apparel - 2.2% | ||||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 11,355 | 8,687 | ||
11.625% 1/15/08 | 13,360 | 11,556 | ||
12.25% 12/15/12 | 17,605 | 14,700 | ||
Sealy Corp., Inc. 10% 12/18/08 pay-in-kind (i) | 20,395 | 16,520 | ||
WestPoint Stevens, Inc.: | ||||
7.875% 6/15/05 (c) | 20,010 | 2,801 | ||
7.875% 6/15/08 (c) | 49,160 | 6,882 | ||
61,146 | ||||
TOTAL NONCONVERTIBLE BONDS | 2,091,371 | |||
TOTAL CORPORATE BONDS (Cost $1,967,228) | 2,121,039 | |||
Commercial Mortgage Securities - 0.3% | ||||
First Chicago/Lennar Trust I Series 1997-CHL1 Class E, 7.9843% 4/29/39 (f)(h) | 10,700 | 8,617 | ||
Common Stocks - 9.1% | |||
Shares | |||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 15,928 | 0 | |
Cable TV - 1.0% | |||
EchoStar Communications Corp. Class A (a) | 702,396 | 26,916 | |
NTL, Inc. warrants 1/13/11 (a) | 3 | 0 | |
Pegasus Communications Corp. warrants 1/1/07 (a) | 6,509 | 0 | |
26,916 | |||
Chemicals - 0.1% | |||
Hercules Trust II unit | 5,500 | 3,685 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
Consumer Products - 0.0% | |||
Revlon, Inc. Class A (a) | 269,226 | $ 708 | |
Containers - 1.3% | |||
Owens-Illinois, Inc. (a) | 2,920,800 | 35,926 | |
Trivest 1992 Special Fund Ltd. (i) | 3,037,732 | 30 | |
35,956 | |||
Diversified Financial Services - 0.0% | |||
ECM Corp. LP (f) | 900 | 77 | |
Electric Utilities - 2.6% | |||
AES Corp. (a) | 8,206,409 | 71,806 | |
Energy - 0.4% | |||
Chesapeake Energy Corp. | 1,000,000 | 11,930 | |
Entertainment/Film - 0.4% | |||
AMC Entertainment, Inc. (a) | 772,300 | 10,503 | |
Livent, Inc. (a) | 125,200 | 0 | |
10,503 | |||
Food and Drug Retail - 1.0% | |||
Pathmark Stores, Inc. (a)(e) | 2,811,078 | 19,256 | |
Pathmark Stores, Inc. warrants 9/19/10 (a) | 747,828 | 748 | |
Rite Aid Corp. (a) | 1,233,272 | 7,067 | |
27,071 | |||
Healthcare - 1.7% | |||
DaVita, Inc. (a) | 1,293,564 | 45,404 | |
Super Retail - 0.0% | |||
Barneys, Inc. warrants 4/1/08 (a) | 6,720 | 67 | |
Technology - 0.1% | |||
Ampex Corp. Class A (a) | 3,560 | 8 | |
ChipPAC, Inc. Class A (a) | 300,000 | 2,502 | |
2,510 | |||
Telecommunications - 0.5% | |||
Cincinnati Bell, Inc. (a) | 954,428 | 4,877 | |
Crown Castle International Corp. (a) | 22,887 | 290 | |
Level 3 Communications, Inc. (a) | 700,000 | 3,773 | |
McLeodUSA, Inc. Class A (a) | 1,977,550 | 2,334 | |
SpectraSite, Inc. (a) | 72,968 | 2,828 | |
14,102 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
Textiles & Apparel - 0.0% | |||
Arena Brands Holding Corp. Class B | 42,253 | $ 635 | |
Pillowtex Corp. (a) | 490,256 | 2 | |
637 | |||
TOTAL COMMON STOCKS (Cost $210,374) | 251,372 | ||
Preferred Stocks - 1.5% | |||
Convertible Preferred Stocks - 0.7% | |||
Paper - 0.5% | |||
Temple-Inland, Inc. 7.50% DECS | 232,000 | 12,266 | |
Telecommunications - 0.2% | |||
Crown Castle International Corp. 6.25% PIERS | 151,600 | 6,443 | |
TOTAL CONVERTIBLE PREFERRED STOCKS | 18,709 | ||
Nonconvertible Preferred Stocks - 0.8% | |||
Broadcasting - 0.6% | |||
Granite Broadcasting Corp. 12.75% pay-in-kind | 19,000 | 13,490 | |
Spanish Broadcasting System, Inc. 10.75% (f) | 2,530 | 2,555 | |
16,045 | |||
Diversified Financial Services - 0.2% | |||
American Annuity Group Capital Trust II 8.875% | 6,040 | 6,004 | |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | 22,049 | ||
TOTAL PREFERRED STOCKS (Cost $38,138) | 40,758 | ||
Floating Rate Loans - 3.8% | ||||
Principal | ||||
Building Materials - 0.2% | ||||
Owens Corning revolver loan 0% 11/15/04 (h) | $ 7,020 | 4,984 | ||
Chemicals - 0.0% | ||||
Huntsman Co. LLC Tranche B term loan 8.9375% 3/31/07 (h) | 2,358 | 2,069 | ||
Floating Rate Loans - continued | ||||
Principal | Value (Note 1) | |||
Hotels - 1.0% | ||||
Wyndham International, Inc. term loan: | ||||
5.875% 4/1/06 (h) | $ 7,726 | $ 7,301 | ||
5.875% 6/30/06 (h) | 21,896 | 20,144 | ||
27,445 | ||||
Telecommunications - 2.6% | ||||
Centennial Puerto Rico Operations Corp.: | ||||
Tranche B term loan 4.4355% 5/31/07 (h) | 1,794 | 1,794 | ||
Tranche C term loan 4.6892% 11/30/07 (h) | 1,787 | 1,787 | ||
McLeodUSA, Inc.: | ||||
revolver loan 4.6733% 5/31/07 (h) | 9,402 | 5,265 | ||
Tranche A term loan 4.68% 5/31/07 (h) | 10,409 | 5,829 | ||
Tranche B term loan 5.43% 5/30/08 (h) | 86,482 | 48,430 | ||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (h) | 4,307 | 4,317 | ||
Tranche C term loan 4.8125% 12/31/08 (h) | 4,307 | 4,317 | ||
71,739 | ||||
TOTAL FLOATING RATE LOANS (Cost $107,105) | 106,237 | |||
Money Market Funds - 8.0% | |||
Shares | |||
Fidelity Cash Central Fund, 1.07% (b) | 220,178,670 | 220,179 | |
Cash Equivalents - 0.4% | |||
Maturity | Value (Note 1) | ||
Investments in repurchase agreements (Collateralized by U.S. Treasury Obligations, in a joint trading account at 1.01%, dated 10/31/03 due 11/3/03) | 10,864 | $ 10,863 | |
TOTAL INVESTMENT PORTFOLIO - 100.1% (Cost $2,562,372) | 2,759,065 | ||
NET OTHER ASSETS - (0.1)% | (3,465) | ||
NET ASSETS - 100% | $ 2,755,600 | ||
Security Type Abbreviations | ||
DECS | - | Dividend Enhanced Convertible Stock/Debt Exchangeable for Common Stock |
PIERS | - | Preferred Income Equity Redeemable Securities |
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Non-income producing - issuer filed for bankruptcy or is in default of interest payments. |
(d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Affiliated company |
(f) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $542,639,000 or 19.7% of net assets. |
(g) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost (000s) |
Sealy Corp., Inc. 10% 12/18/08 pay-in-kind | 2/23/98 - 9/30/03 | $ 19,680 |
Trivest 1992 Special Fund Ltd. | 7/30/92 | $ - |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $2,527,947,000 and $2,663,970,000, respectively. |
The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $10,000 for the period. |
The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144a issues) amounted to $16,551,000 or 0.6% of net assets. |
The fund invested in loans and loan participations, trade claims or other receivables. At period end the value of these investments amounted to $106,237,000 or 3.8% of net assets. |
The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which loans were outstanding amounted to $20,127,000. The weighted average interest rate was 1.21%. At period end there were no interfund loans outstanding. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $1,282,168,000 of which $314,609,000, $488,641,000 and $478,918,000 will expire on October 31, 2008, 2009 and 2010, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Assets | ||
Investment in securities, at value (including securities loaned of $1,750 and repurchase agreements of $10,863)(cost $2,562,372) - See accompanying schedule | $ 2,759,065 | |
Cash | 725 | |
Receivable for investments sold | 20,010 | |
Delayed delivery | 1,511 | |
Receivable for fund shares sold | 6,206 | |
Interest receivable | 51,094 | |
Prepaid expenses | 14 | |
Other receivables | 20 | |
Total assets | 2,838,645 | |
Liabilities | ||
Payable for investments purchased | $ 61,787 | |
Delayed delivery | 6,330 | |
Payable for fund shares redeemed | 6,025 | |
Distributions payable | 3,092 | |
Accrued management fee | 1,310 | |
Distribution fees payable | 964 | |
Other payables and accrued expenses | 571 | |
Collateral on securities loaned, at value | 2,966 | |
Total liabilities | 83,045 | |
Net Assets | $ 2,755,600 | |
Net Assets consist of: | ||
Paid in capital | $ 3,697,244 | |
Undistributed net investment income | 148,601 | |
Accumulated undistributed net realized gain (loss) on investments | (1,286,939) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 196,694 | |
Net Assets | $ 2,755,600 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | October 31, 2003 | |
Calculation of Maximum Offering Price | $ 9.50 | |
Maximum offering price per share (100/95.25 of $9.50) | $ 9.97 | |
Class T: | $ 9.52 | |
Maximum offering price per share (100/96.50 of $9.52) | $ 9.87 | |
Class B: | $ 9.47 | |
Class C: | $ 9.49 | |
Institutional Class: | $ 9.24 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Amounts in thousands | Year ended October 31, 2003 | |
Investment Income | ||
Dividends | $ 9,962 | |
Interest | 272,233 | |
Security lending | 29 | |
Total income | 282,224 | |
Expenses | ||
Management fee | $ 14,298 | |
Transfer agent fees | 4,834 | |
Distribution fees | 10,432 | |
Accounting and security lending fees | 655 | |
Non-interested trustees' compensation | 10 | |
Appreciation in deferred trustee compensation account | 9 | |
Custodian fees and expenses | 75 | |
Registration fees | 253 | |
Audit | 69 | |
Legal | 115 | |
Interest | 5 | |
Miscellaneous | 23 | |
Total expenses before reductions | 30,778 | |
Expense reductions | (11) | 30,767 |
Net investment income (loss) | 251,457 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 198,118 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 677,025 | |
Assets and liabilities in foreign currencies | 1 | |
Total change in net unrealized appreciation (depreciation) | 677,026 | |
Net gain (loss) | 875,144 | |
Net increase (decrease) in net assets resulting from operations | $ 1,126,601 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Year ended | Year ended |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 251,457 | $ 231,624 |
Net realized gain (loss) | 198,118 | (525,349) |
Change in net unrealized appreciation (depreciation) | 677,026 | (33,435) |
Net increase (decrease) in net assets resulting | 1,126,601 | (327,160) |
Distributions to shareholders from net investment income | (187,268) | (202,863) |
Share transactions - net increase (decrease) | (50,567) | (252,315) |
Total increase (decrease) in net assets | 888,766 | (782,338) |
Net Assets | ||
Beginning of period | 1,866,834 | 2,649,172 |
End of period (including undistributed net investment income of $148,601 and undistributed net investment income of $79,736, respectively) | $ 2,755,600 | $ 1,866,834 |
A Certain amounts have been reclassified. See Note 1 of the Notes to the Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.40 | $ 8.17 | $ 9.64 | $ 11.12 | $ 11.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .873 | .767 E,F | .869 | 1.059 | 1.022 |
Net realized and unrealized gain (loss) | 2.875 | (1.866) E,F | (1.558) | (1.634) | .287 |
Total from investment operations | 3.748 | (1.099) | (.689) | (.575) | 1.309 |
Distributions from net investment income | (.648) | (.671) | (.781) | (.905) | (1.030) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.049) |
Total distributions | (.648) | (.671) | (.781) | (.905) | (1.279) |
Net asset value, end of period | $ 9.50 | $ 6.40 | $ 8.17 | $ 9.64 | $ 11.12 |
Total Return A,B | 60.58% | (14.39)% | (7.64)% | (5.66)% | 11.98% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .99% | 1.02% | .97% | .94% | .95% |
Expenses net of voluntary waivers, if any | .99% | 1.02% | .97% | .94% | .95% |
Expenses net of all reductions | .99% | 1.01% | .97% | .94% | .95% |
Net investment income (loss) | 10.45% | 10.12% E,F | 9.53% | 9.86% | 8.89% |
Supplemental Data | |||||
Net assets, end of period | $ 307 | $ 157 | $ 189 | $ 209 | $ 221 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 11.01% to 10.12%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.42 | $ 8.18 | $ 9.66 | $ 11.14 | $ 11.11 |
Income from Investment Operations | |||||
Net investment income (loss) C | .859 | .766 E,F | .865 | 1.055 | 1.021 |
Net realized and unrealized gain (loss) | 2.883 | (1.860) E,F | (1.572) | (1.640) | .274 |
Total from investment operations | 3.742 | (1.094) | (.707) | (.585) | 1.295 |
Distributions from net investment income | (.642) | (.666) | (.773) | (.895) | (1.017) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.048) |
Total distributions | (.642) | (.666) | (.773) | (.895) | (1.265) |
Net asset value, end of period | $ 9.52 | $ 6.42 | $ 8.18 | $ 9.66 | $ 11.14 |
Total Return A,B | 60.26% | (14.30)% | (7.81)% | (5.73)% | 11.83% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.06% | 1.08% | 1.06% | 1.03% | 1.04% |
Expenses net of voluntary waivers, if any | 1.06% | 1.08% | 1.06% | 1.03% | 1.04% |
Expenses net of all reductions | 1.06% | 1.08% | 1.05% | 1.03% | 1.04% |
Net investment income (loss) | 10.38% | 10.05% E,F | 9.45% | 9.76% | 8.80% |
Supplemental Data | |||||
Net assets, end of period | $ 1,398 | $ 1,070 | $ 1,473 | $ 1,777 | $ 2,351 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.95% to 10.05%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.38 | $ 8.15 | $ 9.61 | $ 11.09 | $ 11.07 |
Income from Investment Operations | |||||
Net investment income (loss) C | .802 | .712 E,F | .801 | .978 | .938 |
Net realized and unrealized gain (loss) | 2.873 | (1.868) E,F | (1.549) | (1.634) | .276 |
Total from investment operations | 3.675 | (1.156) | (.748) | (.656) | 1.214 |
Distributions from net investment income | (.585) | (.614) | (.712) | (.824) | (.949) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.045) |
Total distributions | (.585) | (.614) | (.712) | (.824) | (1.194) |
Net asset value, end of period | $ 9.47 | $ 6.38 | $ 8.15 | $ 9.61 | $ 11.09 |
Total Return A,B | 59.42% | (15.07)% | (8.25)% | (6.39)% | 11.10% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.75% | 1.78% | 1.73% | 1.70% | 1.70% |
Expenses net of voluntary waivers, if any | 1.75% | 1.78% | 1.73% | 1.70% | 1.70% |
Expenses net of all reductions | 1.75% | 1.77% | 1.72% | 1.70% | 1.69% |
Net investment income (loss) | 9.69% | 9.36% E,F | 8.78% | 9.10% | 8.15% |
Supplemental Data | |||||
Net assets, end of period | $ 613 | $ 426 | $ 704 | $ 956 | $ 1,192 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.25% to 9.36%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.40 | $ 8.16 | $ 9.63 | $ 11.11 | $ 11.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .801 | .708 E,F | .796 | .969 | .926 |
Net realized and unrealized gain (loss) | 2.868 | (1.859) E,F | (1.560) | (1.634) | .280 |
Total from investment operations | 3.669 | (1.151) | (.764) | (.665) | 1.206 |
Distributions from net investment income | (.579) | (.609) | (.706) | (.815) | (.941) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.045) |
Total distributions | (.579) | (.609) | (.706) | (.815) | (1.186) |
Net asset value, end of period | $ 9.49 | $ 6.40 | $ 8.16 | $ 9.63 | $ 11.11 |
Total Return A,B | 59.11% | (14.98)% | (8.41)% | (6.45)% | 11.00% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.82% | 1.84% | 1.80% | 1.78% | 1.78% |
Expenses net of voluntary waivers, if any | 1.82% | 1.84% | 1.80% | 1.78% | 1.78% |
Expenses net of all reductions | 1.82% | 1.84% | 1.79% | 1.78% | 1.78% |
Net investment income (loss) | 9.62% | 9.29% E,F | 8.71% | 9.02% | 8.06% |
Supplemental Data | |||||
Net assets, end of period | $ 219 | $ 132 | $ 197 | $ 247 | $ 269 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
F As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.068 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 10.19% to 9.29%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.24 | $ 7.97 | $ 9.43 | $ 10.90 | $ 10.90 |
Income from Investment Operations | |||||
Net investment income (loss) B | .867 | .759 D,E | .862 | 1.055 | 1.024 |
Net realized and unrealized gain (loss) | 2.796 | (1.805) D,E | (1.528) | (1.606) | .269 |
Total from investment operations | 3.663 | (1.046) | (.666) | (.551) | 1.293 |
Distributions from net investment income | (.663) | (.684) | (.794) | (.919) | (1.044) |
Distributions from net realized gain | - | - | - | - | (.120) |
Distributions in excess of net realized gain | - | - | - | - | (.080) |
Distributions from return of capital | - | - | - | - | (.049) |
Total distributions | (.663) | (.684) | (.794) | (.919) | (1.293) |
Net asset value, end of period | $ 9.24 | $ 6.24 | $ 7.97 | $ 9.43 | $ 10.90 |
Total Return A | 60.82% | (14.09)% | (7.58)% | (5.56)% | 12.05% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .82% | .85% | .83% | .82% | .82% |
Expenses net of voluntary waivers, if any | .82% | .85% | .83% | .82% | .82% |
Expenses net of all reductions | .82% | .85% | .83% | .82% | .81% |
Net investment income (loss) | 10.62% | 10.28% D,E | 9.67% | 9.98% | 9.03% |
Supplemental Data | |||||
Net assets, end of period | $ 218 | $ 82 | $ 87 | $ 89 | $ 123 |
Portfolio turnover rate | 111% | 85% | 68% | 63% | 61% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
E As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. The impact of this change was a decrease to net investment income of $0.067 per share with a corresponding increase to net realized and unrealized gain (loss) per share. The ratio of net investment income to average net assets decreased from 11.18% to 10.28%. The reclassification has no impact on the net assets of the fund.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor High Income Advantage Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Foreign Currency. The fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Reclassification of Financial Information. As a result of a revision to reflect accretion of market discount using the interest method, certain amounts for the year ended October 31, 2002 have been reclassified from what was previously reported. Net investment income for the fund decreased by $21,068 with a corresponding decrease to realized loss of $18,529 and $2,539, respectively. The reclassification has no impact on the net assets of the fund.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Annual Report
1. Significant Accounting Policies - continued
Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds, and are marked-to-market. Deferred amounts remain in the fund until distributed in accordance with the Plan.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due prior period premium and discount on debt securities, market discount, partnerships, non-taxable dividends, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 376,413 | | |
Unrealized depreciation | (138,875) | |
Net unrealized appreciation (depreciation) | 237,538 | |
Undistributed ordinary income | 116,957 | |
Capital loss carryforward | (1,282,168) | |
Cost for federal income tax purposes | $ 2,521,527 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 187,268 | $ 202,863 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Short-term Trading (Redemption) Fees. Shares purchased on or after March 31, 2004 and held in the fund less than 90 days will be subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which will be retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Annual Report
2. Operating Policies - continued
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .45% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 358 | $ - |
Class T | 0% | .25% | 3,387 | 47 |
Class B | .65% | .25% | 4,870 | 3,518 |
Class C | .75% | .25% | 1,817 | 287 |
$ 10,432 | $ 3,852 |
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
4. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||
Class A | $ 88 | |
Class T | 107 | |
Class B* | 1,289 | |
Class C* | 93 | |
$ 1,577 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 502 | .21 |
Class T | 2,519 | .19 |
Class B | 1,188 | .22 |
Class C | 346 | .19 |
Institutional Class | 279 | .19 |
$ 4,834 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $1,740 for the period.
Brokerage Commissions. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of the fund's Schedule of Investments.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The value of loaned securities and cash collateral at period end are disclosed on the fund's Statement of Assets and Liabilities.
Annual Report
Notes to Financial Statements - continued
(Amounts in thousands except ratios)
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the fund provided services to the fund in addition to trade execution. These services included payments of certain expenses on behalf of the fund totaling $5 for the period. In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $6.
8. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 18,374 | $ 16,162 |
Class T | 106,158 | 115,656 |
Class B | 38,278 | 48,298 |
Class C | 12,553 | 14,125 |
Institutional Class | 11,905 | 8,622 |
Total | $ 187,268 | $ 202,863 |
Annual Report
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 34,832 | 21,043 | $ 293,119 | $ 159,197 |
Reinvestment of distributions | 1,400 | 1,377 | 11,574 | 10,381 |
Shares redeemed | (28,472) | (20,911) | (242,005) | (158,574) |
Net increase (decrease) | 7,760 | 1,509 | $ 62,688 | $ 11,004 |
Class T | ||||
Shares sold | 147,909 | 85,605 | $ 1,204,516 | $ 638,278 |
Reinvestment of distributions | 10,623 | 12,279 | 86,420 | 92,952 |
Shares redeemed | (178,448) | (111,104) | (1,494,673) | (840,910) |
Net increase (decrease) | (19,916) | (13,220) | $ (203,737) | $ (109,680) |
Class B | ||||
Shares sold | 13,142 | 9,029 | $ 110,687 | $ 69,180 |
Reinvestment of distributions | 2,927 | 3,846 | 23,946 | 29,103 |
Shares redeemed | (18,040) | (32,582) | (149,301) | (243,268) |
Net increase (decrease) | (1,971) | (19,707) | $ (14,668) | $ (144,985) |
Class C | ||||
Shares sold | 12,912 | 9,341 | $ 109,440 | $ 71,251 |
Reinvestment of distributions | 918 | 1,069 | 7,575 | 8,109 |
Shares redeemed | (11,394) | (13,949) | (96,409) | (104,686) |
Net increase (decrease) | 2,436 | (3,539) | $ 20,606 | $ (25,326) |
Institutional Class | ||||
Shares sold | 37,471 | 16,721 | $ 306,562 | $ 121,164 |
Reinvestment of distributions | 1,212 | 966 | 9,794 | 7,097 |
Shares redeemed | (28,190) | (15,426) | (231,812) | (111,589) |
Net increase (decrease) | 10,493 | 2,261 | $ 84,544 | $ 16,672 |
10. Transactions with Affiliated Companies.
An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows:
Affiliate | Purchase | Sales | Dividend | Value |
Pathmark Stores, Inc. | $ - | $ - | $ - | $ 19,256 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor High Income Advantage Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor High Income Advantage Fund ("the Fund"), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 High Income Advantage Fund as of October 31, 2003, and 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor High Income Advantage (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Advisor High Income Advantage. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Thomas T. Soviero (40) | |
Year of Election or Appointment: 2000 Vice President of Advisor High Income Advantage. Prior to assuming his current responsibilities, Mr. Soviero managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor High Income Advantage. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor High Income Advantage. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor High Income Advantage. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor High Income Advantage. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor High Income Advantage. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor High Income Advantage. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income Advantage. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income Advantage. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Advisor High Income Advantage. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 0.06% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International
Investment Advisors
Fidelity Investments Japan Limited
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
HYI-UANN-1203
1.784751.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
High Income
Fund - Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard and Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Life of | |
Class A (incl. 4.75% | 21.18% | 5.22% | |
Class T (incl. 3.50% | 22.66% | 5.45% | |
Class B (incl. contingent | 21.32% | 5.28% | |
Class C (incl. contingent | 25.19% | 5.55% |
A From September 7, 1999.
B Class B shares' contingent deferred sales charge included in the past one year and life of fund total return figures are 5% and 2%, respectively.
C Class C shares' contingent deferred sales charges included in the past one year and life of fund total return figures are 1% and 0%, respectively.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor High Income Fund - Class T on September 7, 1999, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Merrill Lynch® U.S. High Yield Master II Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Matt Conti, Portfolio Manager of Fidelity® Advisor High Income Fund
High yield staged a remarkable turnaround during the one-year period ending October 31, 2003, enjoying four consecutive quarters of positive returns for the first time since 1998. A declining default rate, increasing flows into high-yield mutual funds, rebounding equity markets, signs of an economic recovery and a focus on corporate debt reduction paced high-yield's recovery for much of the period. In July 2003, however, low-quality debt had its first monthly decline since October 2002, hurt by weakness in investment-grade bonds, the poor showing of the energy sector during the month, and profit taking that led to soft demand and negative fund flows. The rally re-emerged in August, though, bolstered by resurgent demand due to further evidence of an economic recovery, the robust performance of stocks, and the continued efforts of corporate America to deleverage and improve its balance sheets. For the 12 months overall, the Merrill Lynch® U.S. High Yield Master II Index gained 33.10%, one of its strongest one-year periods ever.
For the year ending October 31, 2003, the fund's Class A, Class T, Class B and Class C shares returned 27.23%, 27.11%, 26.32% and 26.19%, respectively. In comparison, the Merrill Lynch index returned 33.10% and the LipperSM High Current Yield Funds Average returned 28.04%. Despite strong absolute performance, the fund underperformed its benchmarks due to the outperformance of lower-quality issues. I favored investments in the higher-quality tiers of the junk bond market, and underweighted the lowest-quality segments. I looked to increase investments in companies poised to benefit from an economic rebound, and paid particularly close attention to free cash flow. Drug store chain Rite Aid, clothing retailer J.Crew, AT&T Wireless - no longer in the fund - and Williams Companies all were contributors. Each offered a clean or improving balance sheet as well as solid free cash flow. Detractors included health care provider HealthSouth, energy company Mirant and Dan River. Relative performance also suffered from underweighted positions in cable TV provider Charter Communications and California electric utility Calpine, both of which rebounded from very depressed levels to offer strong returns.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
CSC Holdings, Inc. | 2.5 | 1.8 |
AES Corp. | 2.5 | 1.7 |
Qwest Capital Funding, Inc. | 2.2 | 2.2 |
Nextel Communications, Inc. | 1.5 | 1.7 |
Williams Companies, Inc. | 1.5 | 1.5 |
10.1 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Energy | 11.0 | 10.1 |
Telecommunications | 10.5 | 10.9 |
Technology | 8.1 | 5.9 |
Electric Utilities | 7.2 | 11.0 |
Healthcare | 5.2 | 2.4 |
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| AAA,AA,A 0.0% | | AAA,AA,A 0.0% | ||||
| BBB 0.6% | | BBB 3.2% | ||||
| BB 24.9% | | BB 28.1% | ||||
| B 52.2% | | B 44.8% | ||||
| CCC,CC,C 12.0% | | CCC,CC,C 12.3% | ||||
| Not Rated 2.1% | | Not Rated 1.1% | ||||
| Equities 2.6% | | Equities 1.8% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Nonconvertible | | Nonconvertible | ||||
| Convertible Bonds, Preferred Stocks 3.3% | | Convertible Bonds, Preferred Stocks 2.9% | ||||
| Other Investments 1.3% | | Other Investments 1.1% | ||||
| Short-Term | | Short-Term | ||||
* Foreign | 10.9% | ** Foreign | 10.0% | ||||
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Corporate Bonds - 90.5% | ||||
Principal | Value | |||
Convertible Bonds - 0.7% | ||||
Technology - 0.3% | ||||
Amkor Technology, Inc.: | ||||
5% 3/15/07 | $ 630,000 | $ 604,800 | ||
5.75% 6/1/06 | 630,000 | 630,000 | ||
1,234,800 | ||||
Telecommunications - 0.4% | ||||
Nextel Communications, Inc. 5.25% 1/15/10 | 1,760,000 | 1,689,600 | ||
TOTAL CONVERTIBLE BONDS | 2,924,400 | |||
Nonconvertible Bonds - 89.8% | ||||
Aerospace - 1.4% | ||||
DRS Technologies, Inc. 6.875% 11/1/13 (e) | 310,000 | 311,550 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 3,105,000 | 3,368,925 | ||
Orbital Sciences Corp. 9% 7/15/11 | 1,440,000 | 1,533,600 | ||
5,214,075 | ||||
Air Transportation - 2.3% | ||||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 1,540,000 | 1,362,900 | ||
6.977% 11/23/22 | 117,905 | 104,346 | ||
7.377% 5/23/19 | 467,371 | 331,833 | ||
7.379% 5/23/16 | 497,784 | 338,493 | ||
AMR Corp. 9% 8/1/12 | 860,000 | 711,650 | ||
Continental Airlines, Inc. 8% 12/15/05 | 10,000 | 9,700 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 75,299 | 60,239 | ||
6.9% 1/2/17 | 261,508 | 211,821 | ||
7.73% 9/15/12 | 191,896 | 156,396 | ||
8.307% 4/2/18 | 465,155 | 400,034 | ||
8.321% 11/1/06 | 435,000 | 406,725 | ||
Delta Air Lines, Inc.: | ||||
equipment trust certificates 8.54% 1/2/07 | 64,521 | 55,488 | ||
7.9% 12/15/09 | 2,400,000 | 1,968,000 | ||
10% 8/15/08 (e) | 560,000 | 487,200 | ||
10.14% 8/14/12 | 60,000 | 43,800 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 360,000 | 324,000 | ||
7.779% 1/2/12 | 1,290,664 | 1,103,517 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 298,344 | 247,626 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Air Transportation - continued | ||||
Northwest Airlines, Inc. pass thru trust certificates: - continued | ||||
7.67% 1/2/15 | $ 187,917 | $ 152,213 | ||
8.07% 1/2/15 | 590,208 | 430,852 | ||
8,906,833 | ||||
Automotive - 2.0% | ||||
Cummins, Inc. 5.65% 3/1/98 | 515,000 | 334,750 | ||
Dana Corp.: | ||||
6.5% 3/1/09 | 1,015,000 | 1,004,850 | ||
9% 8/15/11 | 915,000 | 1,015,650 | ||
10.125% 3/15/10 | 325,000 | 365,625 | ||
Dana Credit Corp. 8.375% 8/15/07 (e) | 705,000 | 736,725 | ||
Navistar International Corp.: | ||||
8% 2/1/08 | 210,000 | 214,200 | ||
9.375% 6/1/06 | 200,000 | 217,000 | ||
Stoneridge, Inc. 11.5% 5/1/12 | 1,410,000 | 1,635,600 | ||
Tenneco Automotive, Inc. 11.625% 10/15/09 | 355,000 | 363,875 | ||
TRW Automotive Acquisition Corp.: | ||||
9.375% 2/15/13 (e) | 910,000 | 1,028,300 | ||
11% 2/15/13 (e) | 490,000 | 573,300 | ||
7,489,875 | ||||
Banks and Thrifts - 0.4% | ||||
Western Financial Bank 9.625% 5/15/12 | 1,285,000 | 1,403,863 | ||
Broadcasting - 0.7% | ||||
Spanish Broadcasting System, Inc. 9.625% 11/1/09 | 750,000 | 780,000 | ||
Susquehanna Media Co. 7.375% 4/15/13 | 480,000 | 494,400 | ||
TV Azteca SA de CV: | ||||
euro 10.5% 2/15/07 (Reg. S) | 158,000 | 162,543 | ||
yankee 10.5% 2/15/07 | 1,400,000 | 1,440,250 | ||
2,877,193 | ||||
Building Materials - 1.8% | ||||
FastenTech, Inc. 11.5% 5/1/11 (e) | 610,000 | 646,600 | ||
Juno Lighting, Inc. 11.875% 7/1/09 | 2,325,000 | 2,528,438 | ||
National Waterworks, Inc. 10.5% 12/1/12 | 240,000 | 266,400 | ||
Nortek, Inc.: | ||||
9.125% 9/1/07 | 725,000 | 748,563 | ||
9.25% 3/15/07 | 120,000 | 123,900 | ||
Texas Industries, Inc. 10.25% 6/15/11 (e) | 2,435,000 | 2,715,025 | ||
7,028,926 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Cable TV - 2.3% | ||||
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp. 0% 1/15/11 (c) | $ 510,000 | $ 346,800 | ||
Comcast UK Cable Partners Ltd. yankee 11.2% 11/15/07 | 1,843,000 | 1,843,000 | ||
CSC Holdings, Inc.: | ||||
7.625% 7/15/18 | 470,000 | 460,600 | ||
7.875% 2/15/18 | 510,000 | 502,988 | ||
9.875% 2/15/13 | 795,000 | 826,800 | ||
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | 545,000 | 613,125 | ||
EchoStar DBS Corp.: | ||||
6.375% 10/1/11 (e) | 1,400,000 | 1,393,000 | ||
9.125% 1/15/09 | 869,000 | 984,143 | ||
10.375% 10/1/07 | 1,200,000 | 1,324,500 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 140,000 | 151,200 | ||
NTL, Inc. 19% 1/1/10 | 120,000 | 117,000 | ||
Rogers Cablesystems Ltd. yankee 11% 12/1/15 | 60,000 | 66,600 | ||
8,629,756 | ||||
Capital Goods - 2.1% | ||||
AGCO Corp.: | ||||
8.5% 3/15/06 | 40,000 | 40,000 | ||
9.5% 5/1/08 | 120,000 | 130,800 | ||
Columbus McKinnon Corp. 10% 8/1/10 (e) | 140,000 | 148,400 | ||
Dresser, Inc. 9.375% 4/15/11 | 1,605,000 | 1,653,150 | ||
Jacuzzi Brands, Inc. 9.625% 7/1/10 (e) | 1,045,000 | 1,112,925 | ||
Terex Corp.: | ||||
Series D, 8.875% 4/1/08 | 116,000 | 120,640 | ||
8.875% 4/1/08 | 950,000 | 992,750 | ||
9.25% 7/15/11 | 805,000 | 881,475 | ||
Tyco International Group SA yankee: | ||||
6.125% 1/15/09 | 345,000 | 362,681 | ||
6.375% 10/15/11 | 1,625,000 | 1,690,000 | ||
6.75% 2/15/11 | 385,000 | 409,544 | ||
7% 6/15/28 | 555,000 | 563,325 | ||
8,105,690 | ||||
Chemicals - 2.4% | ||||
Equistar Chemicals LP/Equistar Funding Corp.: | ||||
8.75% 2/15/09 | 280,000 | 280,700 | ||
10.125% 9/1/08 | 565,000 | 593,250 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Chemicals - continued | ||||
Equistar Chemicals LP/Equistar Funding Corp.: - continued | ||||
10.625% 5/1/11 (e) | $ 570,000 | $ 592,800 | ||
HMP Equity Holdings Corp. 0% 5/15/08 unit (e) | 1,560,000 | 780,000 | ||
Huntsman ICI Chemicals LLC 10.125% 7/1/09 | 910,000 | 859,950 | ||
Huntsman International LLC: | ||||
9.875% 3/1/09 | 125,000 | 131,875 | ||
9.875% 3/1/09 (e) | 705,000 | 736,725 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 1,605,000 | 1,693,275 | ||
9.25% 6/15/08 (e) | 635,000 | 669,925 | ||
Nalco Co.: | ||||
7.75% 11/15/11 (e) | 590,000 | 613,600 | ||
8.875% 11/15/13 (e) | 600,000 | 623,250 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 (e) | 960,000 | 1,027,200 | ||
Solutia, Inc.: | ||||
6.72% 10/15/37 | 535,000 | 449,400 | ||
11.25% 7/15/09 | 175,000 | 155,750 | ||
9,207,700 | ||||
Consumer Products - 0.9% | ||||
The Hockey Co. 11.25% 4/15/09 | 1,445,000 | 1,632,850 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 1,510,000 | 1,660,007 | ||
3,292,857 | ||||
Containers - 2.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 1,295,000 | 1,476,300 | ||
Berry Plastics Corp. 10.75% 7/15/12 | 625,000 | 696,875 | ||
BWAY Corp. 10% 10/15/10 (e) | 660,000 | 702,900 | ||
Owens-Brockway Glass Container, Inc. 7.75% 5/15/11 | 530,000 | 553,850 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 1,405,000 | 1,440,125 | ||
7.35% 5/15/08 | 575,000 | 563,500 | ||
7.8% 5/15/18 | 1,341,000 | 1,260,540 | ||
8.1% 5/15/07 | 985,000 | 1,024,400 | ||
Silgan Holdings, Inc.: | ||||
6.75% 11/15/13 (e)(f) | 740,000 | 740,925 | ||
9% 6/1/09 | 985,000 | 1,019,475 | ||
9,478,890 | ||||
Diversified Media - 1.3% | ||||
Corus Entertainment, Inc. 8.75% 3/1/12 | 190,000 | 209,000 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Diversified Media - continued | ||||
LBI Media Holdings, Inc. 0% 10/15/13 (c)(e) | $ 1,240,000 | $ 768,800 | ||
LBI Media, Inc. 10.125% 7/15/12 | 1,380,000 | 1,542,150 | ||
Videotron LTEE 6.875% 1/15/14 (e) | 340,000 | 350,200 | ||
Vivendi Universal SA: | ||||
6.25% 7/15/08 (e) | 1,340,000 | 1,407,000 | ||
9.25% 4/15/10 (e) | 560,000 | 652,400 | ||
4,929,550 | ||||
Electric Utilities - 7.2% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 485,000 | 477,725 | ||
8.5% 11/1/07 | 700,000 | 689,500 | ||
8.75% 6/15/08 | 261,000 | 268,178 | ||
8.75% 5/15/13 (e) | 1,865,000 | 1,988,556 | ||
8.875% 2/15/11 | 434,000 | 445,935 | ||
9% 5/15/15 (e) | 1,230,000 | 1,316,100 | ||
9.375% 9/15/10 | 2,170,000 | 2,297,488 | ||
9.5% 6/1/09 | 1,291,000 | 1,373,301 | ||
10% 12/12/05 (e) | 600,000 | 618,000 | ||
CMS Energy Corp.: | ||||
7.5% 1/15/09 | 95,000 | 97,019 | ||
7.625% 11/15/04 | 595,000 | 605,413 | ||
8.5% 4/15/11 | 2,150,000 | 2,246,750 | ||
8.9% 7/15/08 | 290,000 | 310,300 | ||
9.875% 10/15/07 | 1,955,000 | 2,143,169 | ||
CMS Energy X-TRAS pass thru trust certificates 7% 1/15/05 | 2,120,000 | 2,120,000 | ||
Illinois Power Co. 11.5% 12/15/10 | 2,050,000 | 2,454,875 | ||
Midland Funding Corp. II 11.75% 7/23/05 | 769,811 | 823,698 | ||
MSW Energy Holding LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 (e) | 180,000 | 192,600 | ||
Nevada Power Co.: | ||||
9% 8/15/13 (e) | 1,200,000 | 1,260,000 | ||
10.875% 10/15/09 | 3,495,000 | 3,844,500 | ||
Sierra Pacific Resources 8.75% 5/15/05 | 1,020,000 | 1,020,000 | ||
Southern California Edison Co. 7.25% 3/1/26 | 925,000 | 945,813 | ||
27,538,920 | ||||
Energy - 11.0% | ||||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 390,000 | 418,275 | ||
Chesapeake Energy Corp. 8.375% 11/1/08 | 900,000 | 987,750 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
Clark Refining & Marketing, Inc. 8.875% 11/15/07 | $ 130,000 | $ 130,000 | ||
DI Industries, Inc. 8.875% 7/1/07 | 168,000 | 173,040 | ||
Dynegy Holdings, Inc.: | ||||
9.875% 7/15/10 (e) | 580,000 | 622,050 | ||
10.125% 7/15/13 (e) | 210,000 | 227,850 | ||
El Paso Corp.: | ||||
7% 5/15/11 | 150,000 | 126,375 | ||
7.875% 6/15/12 | 145,000 | 123,613 | ||
El Paso Energy Corp.: | ||||
6.75% 5/15/09 | 280,000 | 238,000 | ||
6.95% 12/15/07 | 590,000 | 528,050 | ||
7.375% 12/15/12 | 30,000 | 24,750 | ||
7.75% 1/15/32 | 1,050,000 | 795,375 | ||
7.8% 8/1/31 | 210,000 | 159,600 | ||
8.05% 10/15/30 | 2,870,000 | 2,224,250 | ||
El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11 | 1,715,000 | 1,869,350 | ||
El Paso Production Holding Co. 7.75% 6/1/13 (e) | 2,580,000 | 2,476,800 | ||
Gemstone Investor Ltd./Gemstone Investor, Inc. 7.71% 10/31/04 (e) | 2,900,000 | 2,885,500 | ||
Grant Prideco, Inc.: | ||||
9% 12/15/09 | 130,000 | 141,050 | ||
9.625% 12/1/07 | 810,000 | 893,025 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 570,000 | 669,750 | ||
Hilcorp Energy I LP/Hilcorp Finance Co. 10.5% 9/1/10 (e) | 1,150,000 | 1,242,000 | ||
Key Energy Services, Inc. 8.375% 3/1/08 | 550,000 | 592,625 | ||
Nuevo Energy Co.: | ||||
9.375% 10/1/10 | 605,000 | 659,450 | ||
9.5% 6/1/08 | 596,000 | 622,820 | ||
Plains Exploration & Production Co. LP: | ||||
Series B, 8.75% 7/1/12 | 390,000 | 423,150 | ||
8.75% 7/1/12 | 630,000 | 683,550 | ||
Range Resources Corp. 7.375% 7/15/13 | 1,160,000 | 1,148,400 | ||
SESI LLC 8.875% 5/15/11 | 630,000 | 677,250 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 620,000 | 517,700 | ||
6.75% 10/1/07 | 545,000 | 472,788 | ||
6.875% 6/1/05 | 2,935,000 | 2,835,944 | ||
7.625% 7/15/11 | 815,000 | 686,638 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
Teekay Shipping Corp. 8.875% 7/15/11 | $ 1,145,000 | $ 1,276,675 | ||
Tesoro Petroleum Corp. 8% 4/15/08 | 705,000 | 743,775 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 35,000 | 28,438 | ||
6.5% 5/15/06 | 420,000 | 371,700 | ||
6.5% 6/1/08 | 1,060,000 | 871,850 | ||
6.95% 6/1/28 | 260,000 | 181,350 | ||
7.5% 8/15/06 | 1,480,000 | 1,348,650 | ||
7.75% 6/15/10 | 380,000 | 320,150 | ||
7.75% 10/15/35 | 190,000 | 140,600 | ||
Transcontinental Gas Pipe Line Corp. 8.875% 7/15/12 | 146,000 | 171,003 | ||
Universal Compression, Inc. 7.25% 5/15/10 | 2,625,000 | 2,730,000 | ||
Western Oil Sands, Inc. 8.375% 5/1/12 | 730,000 | 816,688 | ||
Williams Companies, Inc.: | ||||
6.5% 8/1/06 | 945,000 | 970,988 | ||
6.75% 1/15/06 | 1,500,000 | 1,541,250 | ||
7.125% 9/1/11 | 145,000 | 148,625 | ||
7.875% 9/1/21 | 2,320,000 | 2,296,800 | ||
8.125% 3/15/12 | 695,000 | 750,600 | ||
Williams Holdings of Delaware, Inc. 6.25% 2/1/06 | 1,055,000 | 1,081,375 | ||
42,067,285 | ||||
Environmental - 0.5% | ||||
Allied Waste North America, Inc.: | ||||
7.875% 1/1/09 | 685,000 | 708,975 | ||
7.875% 4/15/13 | 305,000 | 325,588 | ||
9.25% 9/1/12 | 750,000 | 836,250 | ||
Browning-Ferris Industries, Inc. 6.375% 1/15/08 | 25,000 | 24,500 | ||
1,895,313 | ||||
Food and Drug Retail - 2.3% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 865,000 | 854,188 | ||
6.875% 5/1/29 | 800,000 | 704,000 | ||
8.25% 7/15/10 | 1,645,000 | 1,764,263 | ||
Rite Aid Corp.: | ||||
6% 12/15/05 (e) | 515,000 | 513,713 | ||
6.875% 8/15/13 | 1,135,000 | 1,072,575 | ||
7.625% 4/15/05 | 845,000 | 866,125 | ||
9.25% 6/1/13 | 735,000 | 786,450 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Food and Drug Retail - continued | ||||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | $ 1,995,000 | $ 1,690,763 | ||
9.125% 12/15/11 | 630,000 | 533,925 | ||
8,786,002 | ||||
Food/Beverage/Tobacco - 1.3% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | 450,000 | 495,000 | ||
Del Monte Corp. 9.25% 5/15/11 | 1,465,000 | 1,611,500 | ||
Doane Pet Care Co. 9.75% 5/15/07 | 1,155,000 | 1,016,400 | ||
Dole Food Co., Inc. 7.25% 6/15/10 | 1,310,000 | 1,336,200 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 (e) | 570,000 | 632,700 | ||
5,091,800 | ||||
Gaming - 3.6% | ||||
Boyd Gaming Corp.: | ||||
7.75% 12/15/12 | 355,000 | 375,413 | ||
8.75% 4/15/12 | 350,000 | 379,750 | ||
Chumash Casino & Resort Enterprise 9.25% 7/15/10 (d)(e) | 345,000 | 378,638 | ||
Circus Circus Enterprises, Inc. 7.625% 7/15/13 | 345,000 | 361,388 | ||
Herbst Gaming, Inc. 10.75% 9/1/08 | 840,000 | 940,800 | ||
Mandalay Resort Group: | ||||
9.375% 2/15/10 | 345,000 | 395,888 | ||
10.25% 8/1/07 | 345,000 | 396,750 | ||
Mohegan Tribal Gaming Authority: | ||||
6.375% 7/15/09 (e) | 1,090,000 | 1,111,800 | ||
8% 4/1/12 | 170,000 | 184,450 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 | 1,340,000 | 1,410,350 | ||
Park Place Entertainment Corp.: | ||||
7.875% 3/15/10 | 1,170,000 | 1,257,750 | ||
9.375% 2/15/07 | 515,000 | 575,513 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 2,260,000 | 2,463,400 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 1,235,000 | 1,420,250 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 2,130,000 | 2,204,550 | ||
13,856,690 | ||||
Healthcare - 5.2% | ||||
aaiPharma, Inc. 11% 4/1/10 | 65,000 | 71,988 | ||
AmeriPath, Inc. 10.5% 4/1/13 | 1,210,000 | 1,258,400 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Healthcare - continued | ||||
AmerisourceBergen Corp. 7.25% 11/15/12 | $ 2,105,000 | $ 2,168,150 | ||
Biovail Corp. yankee 7.875% 4/1/10 | 1,865,000 | 1,832,363 | ||
Concentra Operating Corp. 9.5% 8/15/10 | 700,000 | 742,000 | ||
Fisher Scientific International, Inc. 8% 9/1/13 (e) | 720,000 | 772,200 | ||
Genesis HealthCare Corp. 8% 10/15/13 (e) | 220,000 | 224,950 | ||
HCA, Inc.: | ||||
6.3% 10/1/12 | 1,350,000 | 1,343,250 | ||
6.75% 7/15/13 | 1,500,000 | 1,531,376 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 3,125,000 | 3,585,938 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 (e) | 905,000 | 993,238 | ||
Rotech Healthcare, Inc. 9.5% 4/1/12 | 905,000 | 972,875 | ||
Senior Housing Properties Trust: | ||||
7.875% 4/15/15 | 945,000 | 992,250 | ||
8.625% 1/15/12 | 1,135,000 | 1,237,150 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 1,300,000 | 1,209,000 | ||
7.375% 2/1/13 | 1,095,000 | 1,062,150 | ||
19,997,278 | ||||
Homebuilding/Real Estate - 3.4% | ||||
Beazer Homes USA, Inc. 8.375% 4/15/12 | 580,000 | 632,200 | ||
D.R. Horton, Inc. 8.5% 4/15/12 | 570,000 | 649,800 | ||
FIMEP SA 10.5% 2/15/13 | 1,000,000 | 1,165,000 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.5% 1/15/14 (f) | 1,100,000 | 1,091,750 | ||
7.75% 5/15/13 (e) | 520,000 | 543,400 | ||
8.875% 4/1/12 | 1,505,000 | 1,625,400 | ||
LNR Property Corp.: | ||||
7.25% 10/15/13 (e) | 1,050,000 | 1,057,875 | ||
7.625% 7/15/13 (e) | 460,000 | 476,100 | ||
Standard Pacific Corp.: | ||||
6.5% 10/1/08 | 490,000 | 497,350 | ||
7.75% 3/15/13 | 1,650,000 | 1,724,250 | ||
Technical Olympic USA, Inc.: | ||||
9% 7/1/10 | 1,290,000 | 1,373,850 | ||
10.375% 7/1/12 | 255,000 | 279,225 | ||
WCI Communities, Inc. 7.875% 10/1/13 (e) | 490,000 | 504,700 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 1,315,000 | 1,459,650 | ||
13,080,550 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Hotels - 1.4% | ||||
Gaylord Entertainment Co. 8% 11/15/13 (e)(f)(g) | $ 200,000 | $ 206,000 | ||
Hilton Hotels Corp. 8.25% 2/15/11 | 1,030,000 | 1,138,150 | ||
HMH Properties, Inc. 7.875% 8/1/05 | 590,000 | 604,750 | ||
Host Marriott LP: | ||||
7.125% 11/1/13 (e)(f) | 1,070,000 | 1,070,000 | ||
9.25% 10/1/07 | 22,000 | 24,255 | ||
ITT Corp. 7.375% 11/15/15 | 1,030,000 | 1,084,075 | ||
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 5/1/07 | 1,210,000 | 1,303,775 | ||
5,431,005 | ||||
Insurance - 0.8% | ||||
AmeriCredit Corp. 9.875% 4/15/06 | 500,000 | 495,000 | ||
Crum & Forster Holdings Corp. 10.375% 6/15/13 (e) | 1,305,000 | 1,402,875 | ||
Leucadia National Corp. 7% 8/15/13 (e) | 1,020,000 | 994,500 | ||
2,892,375 | ||||
Leisure - 2.5% | ||||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 2,220,000 | 2,064,600 | ||
10.5% 7/15/11 (e) | 1,270,000 | 1,308,100 | ||
Premier Parks, Inc. 9.75% 6/15/07 | 2,685,000 | 2,718,563 | ||
Six Flags, Inc. 9.75% 4/15/13 | 540,000 | 526,500 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 970,000 | 1,028,200 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (e) | 1,735,000 | 2,003,925 | ||
9,649,888 | ||||
Metals/Mining - 1.3% | ||||
Arch Western Finance LLC 6.75% 7/1/13 (e) | 1,850,000 | 1,905,500 | ||
Peabody Energy Corp. 6.875% 3/15/13 | 580,000 | 610,450 | ||
Phelps Dodge Corp. 9.5% 6/1/31 | 310,000 | 402,225 | ||
Salt Holdings Corp., Inc.: | ||||
0% 12/15/12 (c)(e) | 1,135,000 | 805,850 | ||
0% 6/1/13 (c)(e) | 1,780,000 | 1,085,800 | ||
4,809,825 | ||||
Paper - 3.4% | ||||
Boise Cascade Corp.: | ||||
6.5% 11/1/10 | 1,250,000 | 1,275,000 | ||
7% 11/1/13 | 700,000 | 715,750 | ||
Buckeye Technologies, Inc. 8.5% 10/1/13 (e) | 560,000 | 593,600 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Paper - continued | ||||
Georgia-Pacific Corp.: | ||||
7.5% 5/15/06 | $ 1,630,000 | $ 1,719,650 | ||
8.125% 5/15/11 | 445,000 | 482,269 | ||
8.875% 5/15/31 | 180,000 | 190,800 | ||
9.125% 7/1/22 | 295,000 | 303,850 | ||
9.625% 3/15/22 | 1,820,000 | 1,870,050 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 | 1,880,000 | 1,898,800 | ||
Millar Western Forest Products Ltd. yankee 9.875% 5/15/08 | 955,000 | 997,975 | ||
Norske Skog Canada Ltd. 8.625% 6/15/11 | 945,000 | 968,625 | ||
Stone Container Corp.: | ||||
8.375% 7/1/12 | 1,075,000 | 1,139,500 | ||
9.25% 2/1/08 | 250,000 | 272,500 | ||
9.75% 2/1/11 | 360,000 | 391,500 | ||
12,819,869 | ||||
Publishing/Printing - 1.3% | ||||
American Color Graphics, Inc. 10% 6/15/10 (e) | 1,030,000 | 1,122,700 | ||
American Media Operations, Inc. 10.25% 5/1/09 | 710,000 | 757,925 | ||
Dex Media West LLC/Dex Media West Finance Co.: | ||||
8.5% 8/15/10 (e) | 440,000 | 480,700 | ||
9.875% 8/15/13 (e) | 520,000 | 591,500 | ||
Moore North America Finance, Inc. 7.875% 1/15/11 (e) | 1,100,000 | 1,171,500 | ||
PEI Holdings, Inc. 11% 3/15/10 | 430,000 | 485,900 | ||
Yell Finance BV: | ||||
0% 8/1/11 (c) | 158,000 | 133,510 | ||
10.75% 8/1/11 | 282,000 | 325,710 | ||
5,069,445 | ||||
Railroad - 0.4% | ||||
TFM SA de CV yankee: | ||||
10.25% 6/15/07 | 50,000 | 51,000 | ||
11.75% 6/15/09 | 1,555,000 | 1,562,775 | ||
1,613,775 | ||||
Restaurants - 1.1% | ||||
Friendly Ice Cream Corp. 10.5% 12/1/07 | 2,340,000 | 2,424,825 | ||
Sbarro, Inc. 11% 9/15/09 | 830,000 | 717,950 | ||
Yum! Brands, Inc. 7.7% 7/1/12 | 910,000 | 1,026,025 | ||
4,168,800 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Services - 1.1% | ||||
Iron Mountain, Inc. 6.625% 1/1/16 | $ 1,870,000 | $ 1,823,250 | ||
JohnsonDiversey, Inc. 9.625% 5/15/12 | 400,000 | 442,000 | ||
United Rentals North America, Inc.: | ||||
7.75% 11/15/13 (e)(f) | 770,000 | 766,150 | ||
10.75% 4/15/08 | 350,000 | 392,000 | ||
Wackenhut Corrections Corp. 8.25% 7/15/13 (e) | 910,000 | 960,050 | ||
4,383,450 | ||||
Shipping - 1.2% | ||||
General Maritime Corp. 10% 3/15/13 | 2,165,000 | 2,424,800 | ||
Overseas Shipholding Group, Inc. 8.25% 3/15/13 | 2,115,000 | 2,241,900 | ||
4,666,700 | ||||
Steels - 1.3% | ||||
AK Steel Corp. 7.75% 6/15/12 | 215,000 | 146,200 | ||
California Steel Industries, Inc. 8.5% 4/1/09 | 1,030,000 | 1,067,338 | ||
CSN Islands VII Corp. 10.75% 9/12/08 (e) | 1,110,000 | 1,153,013 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 (e) | 990,000 | 1,022,175 | ||
Steel Dynamics, Inc. 9.5% 3/15/09 | 1,430,000 | 1,565,850 | ||
4,954,576 | ||||
Super Retail - 1.7% | ||||
Asbury Automotive Group, Inc. 9% 6/15/12 | 2,000,000 | 2,080,000 | ||
AutoNation, Inc. 9% 8/1/08 | 760,000 | 866,400 | ||
Barneys, Inc. 9% 4/1/08 | 2,350,000 | 2,115,000 | ||
J. Crew Intermediate LLC 0% 5/15/08 (c)(e) | 1,157,596 | 873,985 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 405,000 | 449,550 | ||
6,384,935 | ||||
Technology - 7.7% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 2,305,000 | 2,656,513 | ||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 (e) | 3,455,000 | 3,662,300 | ||
9.25% 2/15/08 | 120,000 | 133,800 | ||
10.5% 5/1/09 | 225,000 | 242,438 | ||
Flextronics International Ltd. 6.5% 5/15/13 (e) | 2,850,000 | 2,807,250 | ||
Ingram Micro, Inc. 9.875% 8/15/08 | 2,285,000 | 2,490,650 | ||
IOS Capital LLC 7.25% 6/30/08 | 1,705,000 | 1,696,475 | ||
Micron Technology, Inc. 6.5% 9/30/05 (i) | 3,000,000 | 2,970,000 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 2,150,000 | 2,198,375 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 195,000 | 195,000 | ||
Northern Telecom Ltd. yankee 6.875% 9/1/23 | 290,000 | 275,500 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Technology - continued | ||||
PerkinElmer, Inc. 8.875% 1/15/13 | $ 1,580,000 | $ 1,738,000 | ||
SCG Holding Corp./Semiconductor Components Industries LLC 12% 8/1/09 | 250,000 | 267,500 | ||
Seagate Technology HDD Holdings 8% 5/15/09 | 850,000 | 928,625 | ||
Solectron Corp.: | ||||
7.375% 3/1/06 | 1,310,000 | 1,346,025 | ||
9.625% 2/15/09 | 700,000 | 773,500 | ||
Xerox Corp.: | ||||
7.125% 6/15/10 | 980,000 | 994,700 | ||
7.2% 4/1/16 | 2,870,000 | 2,791,075 | ||
7.625% 6/15/13 | 1,060,000 | 1,075,900 | ||
29,243,626 | ||||
Telecommunications - 9.2% | ||||
Cincinnati Bell, Inc.: | ||||
7.25% 7/15/13 (e) | 1,360,000 | 1,387,200 | ||
8.375% 1/15/14 (e)(f) | 480,000 | 480,000 | ||
Crown Castle International Corp.: | ||||
9.375% 8/1/11 | 1,400,000 | 1,533,000 | ||
9.5% 8/1/11 | 100,000 | 109,500 | ||
10.75% 8/1/11 | 275,000 | 308,000 | ||
Dobson Communications Corp. 8.875% 10/1/13 (e) | 350,000 | 354,375 | ||
Innova S. de R.L. 9.375% 9/19/13 (e) | 840,000 | 840,000 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (e) | 1,050,000 | 1,084,125 | ||
Mobile Telesystems Finance SA 8.375% 10/14/10 (e) | 380,000 | 375,250 | ||
Nextel Communications, Inc.: | ||||
6.875% 10/31/13 | 1,580,000 | 1,595,800 | ||
7.375% 8/1/15 | 1,935,000 | 2,012,400 | ||
9.5% 2/1/11 | 380,000 | 425,600 | ||
Qwest Capital Funding, Inc.: | ||||
5.875% 8/3/04 | 840,000 | 835,800 | ||
7% 8/3/09 | 1,500,000 | 1,387,500 | ||
7.25% 2/15/11 | 540,000 | 496,800 | ||
7.625% 8/3/21 | 465,000 | 395,250 | ||
7.75% 8/15/06 | 5,215,000 | 5,188,907 | ||
Qwest Corp. 8.875% 3/15/12 (e) | 1,045,000 | 1,180,850 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (e) | 405,000 | 459,675 | ||
13.5% 12/15/10 (e) | 775,000 | 902,875 | ||
14% 12/15/14 (e) | 2,680,000 | 3,283,000 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
Rogers Cantel, Inc. yankee: | ||||
8.8% 10/1/07 | $ 3,045,000 | $ 3,121,125 | ||
9.375% 6/1/08 | 495,000 | 517,275 | ||
Rogers Wireless, Inc. 9.625% 5/1/11 | 1,615,000 | 1,865,325 | ||
SBA Communications Corp. 10.25% 2/1/09 | 1,040,000 | 930,800 | ||
Triton PCS, Inc. 9.375% 2/1/11 | 1,670,000 | 1,653,300 | ||
U.S. West Capital Funding, Inc. 6.375% 7/15/08 | 1,965,000 | 1,788,150 | ||
U.S. West Communications: | ||||
5.65% 11/1/04 | 150,000 | 146,250 | ||
6.875% 9/15/33 | 465,000 | 413,850 | ||
35,071,982 | ||||
Textiles & Apparel - 0.8% | ||||
Dan River, Inc. 12.75% 4/15/09 (e) | 910,000 | 254,800 | ||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 425,000 | 325,125 | ||
11.625% 1/15/08 | 460,000 | 397,900 | ||
12.25% 12/15/12 | 595,000 | 496,825 | ||
Russell Corp. 9.25% 5/1/10 | 1,025,000 | 1,066,000 | ||
The William Carter Co. 10.875% 8/15/11 | 340,000 | 385,900 | ||
2,926,550 | ||||
TOTAL NONCONVERTIBLE BONDS | 342,965,847 | |||
TOTAL CORPORATE BONDS (Cost $327,089,670) | 345,890,247 | |||
Commercial Mortgage Securities - 0.2% | ||||
CS First Boston Mortgage Securities Corp. Series 2000-FL1A Class F, 4.1174% 12/15/09 (e)(h) | 67,867 | 63,647 | ||
Mortgage Capital Funding, Inc. Series 1998-MC3 Class F, 7.3041% 11/18/31 (e)(h) | 400,000 | 394,125 | ||
Nomura Asset Securities Corp. Series 1998-D6 Class B1, 6% 3/15/30 (e) | 100,000 | 89,364 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $460,955) | 547,136 | |||
Common Stocks - 0.0% | |||
Shares | Value | ||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 10 | $ 0 | |
Super Retail - 0.0% | |||
Barneys, Inc. warrants 4/1/08 (a) | 2,350 | 23,500 | |
Telecommunications - 0.0% | |||
Crown Castle International Corp. (a)(f) | 2,434 | 30,814 | |
TOTAL COMMON STOCKS (Cost $27,655) | 54,314 | ||
Preferred Stocks - 2.6% | |||
Convertible Preferred Stocks - 0.4% | |||
Telecommunications - 0.4% | |||
Crown Castle International Corp. 6.25% PIERS | 35,400 | 1,504,500 | |
Nonconvertible Preferred Stocks - 2.2% | |||
Banks and Thrifts - 0.1% | |||
Chevy Chase Bank Series C, 8.00% | 14,500 | 391,500 | |
Cable TV - 2.1% | |||
CSC Holdings, Inc.: | |||
(depositary shares) Series M, 11.125% | 32,125 | 3,365,094 | |
Series H, 11.75% | 42,910 | 4,484,095 | |
7,849,189 | |||
Chemicals - 0.0% | |||
NOVA Chemicals Corp. 9.50% | 3,245 | 81,482 | |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | 8,322,171 | ||
TOTAL PREFERRED STOCKS (Cost $9,369,978) | 9,826,671 | ||
Floating Rate Loans - 1.1% | ||||
Principal | ||||
Cable TV - 0.5% | ||||
Century Cable Holdings LLC Tranche B term loan 6% 12/31/09 (h) | $ 700,000 | 623,000 | ||
Hilton Head Communications LP Tranche B term loan 5.25% 3/31/08 (h) | 1,450,000 | 1,254,250 | ||
1,877,250 | ||||
Floating Rate Loans - continued | ||||
Principal Amount | Value | |||
Technology - 0.1% | ||||
Semiconductor Components Industries LLC: | ||||
Tranche B term loan 5.14% 8/4/06 (h) | $ 15,432 | $ 15,471 | ||
Tranche C term loan 5.14% 8/4/07 (h) | 434,173 | 435,258 | ||
Tranche D term loan 5.1875% 8/4/07 (h) | 118,580 | 118,876 | ||
569,605 | ||||
Telecommunications - 0.5% | ||||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (h) | 918,984 | 921,282 | ||
Tranche C term loan 4.8125% 12/31/08 (h) | 918,984 | 921,282 | ||
1,842,564 | ||||
TOTAL FLOATING RATE LOANS (Cost $4,083,804) | 4,289,419 | |||
Money Market Funds - 5.3% | |||
Shares | |||
Fidelity Cash Central Fund, 1.07% (b) | 20,176,487 | 20,176,487 | |
TOTAL INVESTMENT PORTFOLIO - 99.7% (Cost $361,208,549) | 380,784,274 | ||
NET OTHER ASSETS - 0.3% | 1,236,737 | ||
NET ASSETS - 100% | $ 382,021,011 | ||
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(d) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $75,994,279 or 19.9% of net assets. |
(f) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(g) A portion of the security is subject to a forward commitment to sell. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Restricted securities - Investment in securities not registered under the Securities Act of 1933. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Micron Technology, Inc. 6.5% 9/30/05 | 8/8/02 - 1/21/03 | $ 2,633,750 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.1% |
Canada | 3.8% |
Cayman Islands | 1.1% |
Mexico | 1.0% |
Others (individually less than 1%) | 5.0% |
100.0% |
Purchases and sales of securities, other than short-term securities, aggregated $515,505,396 and $356,604,872, respectively. |
The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,970,000 or 0.8% of net assets. |
The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which the loan was outstanding amounted to $7,188,000. The weighted average interest rate was 1.18%. |
The fund invested in loans and loan participations, trade claims or other receivables. At period end, the value of these investments amounted to $4,289,419 or 1.1% of net assets. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $2,456,000 all of which will expire on October 31, 2010. |
A total of .06% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (cost $361,208,549) - See accompanying schedule | $ 380,784,274 | |
Cash | 591,449 | |
Receivable for investments sold | 4,622,349 | |
Delayed delivery | 1,037,525 | |
Receivable for fund shares sold | 1,183,330 | |
Interest receivable | 7,588,091 | |
Prepaid expenses | 1,973 | |
Receivable from investment adviser for expense reductions | 16,575 | |
Total assets | 395,825,566 | |
Liabilities | ||
Payable for investments purchased | $ 6,792,214 | |
Delayed delivery | 5,359,999 | |
Payable for fund shares redeemed | 675,326 | |
Distributions payable | 535,400 | |
Accrued management fee | 179,895 | |
Distribution fees payable | 124,791 | |
Other payables and accrued expenses | 136,930 | |
Total liabilities | 13,804,555 | |
Net Assets | $ 382,021,011 | |
Net Assets consist of: | ||
Paid in capital | $ 360,644,228 | |
Undistributed net investment income | 4,365,838 | |
Accumulated undistributed net realized gain (loss) on investments | (2,564,792) | |
Net unrealized appreciation (depreciation) on investments | 19,575,737 | |
Net Assets | $ 382,021,011 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | $ 9.33 | |
Maximum offering price per share (100/95.25 of $9.33) | $ 9.80 | |
Class T: | $ 9.33 | |
Maximum offering price per share (100/96.50 of $9.33) | $ 9.67 | |
Class B: | $ 9.32 | |
Class C: | $ 9.32 | |
Institutional Class: | $ 9.34 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Dividends | $ 504,077 | |
Interest | 26,848,616 | |
Total income | 27,352,693 | |
Expenses | ||
Management fee | $ 1,712,163 | |
Transfer agent fees | 641,604 | |
Distribution fees | 1,170,200 | |
Accounting fees and expenses | 150,695 | |
Non-interested trustees' compensation | 1,151 | |
Custodian fees and expenses | 28,986 | |
Registration fees | 91,381 | |
Audit | 70,950 | |
Legal | 5,660 | |
Interest | 707 | |
Miscellaneous | 1,672 | |
Total expenses before reductions | 3,875,169 | |
Expense reductions | (198,278) | 3,676,891 |
Net investment income (loss) | 23,675,802 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 15,982,876 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 24,806,908 | |
Net gain (loss) | 40,789,784 | |
Net increase (decrease) in net assets resulting from operations | $ 64,465,586 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 23,675,802 | $ 10,933,030 |
Net realized gain (loss) | 15,982,876 | (11,311,678) |
Change in net unrealized appreciation (depreciation) | 24,806,908 | (4,154,150) |
Net increase (decrease) in net assets resulting | 64,465,586 | (4,532,798) |
Distributions to shareholders from net investment income | (20,668,292) | (10,040,526) |
Share transactions - net increase (decrease) | 169,064,247 | 93,580,401 |
Total increase (decrease) in net assets | 212,861,541 | 79,007,077 |
Net Assets | ||
Beginning of period | 169,159,470 | 90,152,393 |
End of period (including undistributed net investment income of $4,365,838 and undistributed net investment income of $1,057,241, respectively) | $ 382,021,011 | $ 169,159,470 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.89 | $ 8.75 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .725 | .709 H | .760 | .895 | .116 |
Net realized and unrealized gain (loss) | 1.360 | (.908) H | (.602) | (.640) | (.091) |
Total from investment operations | 2.085 | (.199) | .158 | .255 | .025 |
Distributions from net investment income | (.645) | (.661) | (.758) | (.825) | (.105) |
Net asset value, end of period | $ 9.33 | $ 7.89 | $ 8.75 | $ 9.35 | $ 9.92 |
Total Return B,C,D | 27.23% | (2.49)% | 1.83% | 2.40% | .25% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.00% | 1.02% | 1.14% | 1.70% | 11.82% A |
Expenses net of voluntary | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% A |
Expenses net of all reductions | 1.00% | 1.00% | .99% | .98% | 1.00% A |
Net investment income (loss) | 8.26% | 8.42% H | 8.50% | 9.17% | 7.92% A |
Supplemental Data | |||||
Net assets, end of period | $ 61,084 | $ 31,456 | $ 28,046 | $ 13,295 | $ 739 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.89 | $ 8.74 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .717 | .695H | .753 | .898 | .112 |
Net realized and | 1.359 | (.893)H | (.613) | (.656) | (.089) |
Total from investment operations | 2.076 | (.198) | .140 | .242 | .023 |
Distributions from net investment income | (.636) | (.652) | (.750) | (.812) | (.103) |
Net asset value, end of period | $ 9.33 | $ 7.89 | $ 8.74 | $ 9.35 | $ 9.92 |
Total Return B,C,D | 27.11% | (2.47)% | 1.63% | 2.27% | .23% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.19% | 1.24% | 1.39% | 1.83% | 11.91% A |
Expenses net of voluntary | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% A |
Expenses net of all reductions | 1.10% | 1.10% | 1.09% | 1.08% | 1.10% A |
Net investment income (loss) | 8.16% | 8.32% H | 8.40% | 9.07% | 7.82% A |
Supplemental Data | |||||
Net assets, end of period | $ 81,735 | $ 35,751 | $ 16,814 | $ 8,936 | $ 2,422 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.88 | $ 8.74 | $ 9.34 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .658 | .641 H | .692 | .830 | .102 |
Net realized and unrealized gain (loss) | 1.361 | (.904) H | (.601) | (.663) | (.083) |
Total from investment operations | 2.019 | (.263) | .091 | .167 | .019 |
Distributions from net investment income | (.579) | (.597) | (.691) | (.747) | (.099) |
Net asset value, end of period | $ 9.32 | $ 7.88 | $ 8.74 | $ 9.34 | $ 9.92 |
Total Return B,C,D | 26.32% | (3.23)% | 1.08% | 1.50% | .19% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.80% | 1.83% | 1.94% | 2.47% | 12.54% A |
Expenses net of voluntary | 1.75% | 1.75% | 1.75% | 1.75% | 1.75% A |
Expenses net of all reductions | 1.75% | 1.75% | 1.75% | 1.73% | 1.75% A |
Net investment income (loss) | 7.51% | 7.67% H | 7.74% | 8.42% | 7.17% A |
Supplemental Data | |||||
Net assets, end of period | $ 70,661 | $ 32,854 | $ 19,694 | $ 10,054 | $ 2,089 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.88 | $ 8.74 | $ 9.35 | $ 9.91 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss)E | .651 | .635 H | .684 | .819 | .101 |
Net realized and unrealized gain (loss) | 1.359 | (.906) H | (.612) | (.643) | (.093) |
Total from investment operations | 2.010 | (.271) | .072 | .176 | .008 |
Distributions from net investment income | (.570) | (.589) | (.682) | (.736) | (.098) |
Net asset value, end of period | $ 9.32 | $ 7.88 | $ 8.74 | $ 9.35 | $ 9.91 |
Total ReturnB,C,D | 26.19% | (3.32)% | .86% | 1.60% | .08% |
Ratios to Average Net AssetsG | |||||
Expenses before expense | 1.88% | 1.90% | 2.03% | 2.60% | 12.67% A |
Expenses net of voluntary | 1.85% | 1.85% | 1.85% | 1.85% | 1.85% A |
Expenses net of all reductions | 1.85% | 1.85% | 1.84% | 1.83% | 1.85% A |
Net investment income (loss) | 7.41% | 7.57% H | 7.65% | 8.32% | 7.07% A |
Supplemental Data | |||||
Net assets, end of period | $ 59,655 | $ 20,719 | $ 14,218 | $ 6,563 | $ 1,854 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 E |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.90 | $ 8.75 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) D | .739 | .709 G | .772 | .910 | .118 |
Net realized and unrealized gain (loss) | 1.359 | (.886) G | (.599) | (.638) | (.091) |
Total from investment operations | 2.098 | (.177) | .173 | .272 | .027 |
Distributions from net investment income | (.658) | (.673) | (.773) | (.842) | (.107) |
Net asset value, end of period | $ 9.34 | $ 7.90 | $ 8.75 | $ 9.35 | $ 9.92 |
Total Return B,C | 27.38% | (2.23)% | 2.00% | 2.57% | .28% |
Ratios to Average Net Assets F | |||||
Expenses before expense | .96% | .96% | 1.04% | 1.62% | 11.66% A |
Expenses net of voluntary | .85% | .85% | .85% | .85% | .85% A |
Expenses net of all reductions | .85% | .85% | .84% | .83% | .85% A |
Net investment income (loss) | 8.41% | 8.57% G | 8.65% | 9.32% | 8.07% A |
Supplemental Data | |||||
Net assets, end of period | $ 108,885 | $ 48,379 | $ 11,381 | $ 4,910 | $ 719 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period September 7, 1999 (commencement of operations) to October 31, 1999.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Effective November 31, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor High Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, non-taxable dividends, capital loss carryforwards and losses deferred due to wash sales.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 23,256,385 |
Unrealized depreciation | (1,780,310) |
Net unrealized appreciation (depreciation) | 21,476,075 |
Undistributed ordinary income | 4,417,048 |
Capital loss carryforward | (2,455,812) |
Cost for federal income tax purposes | $ 359,308,199 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 20,668,292 | $ 10,040,526 |
Short-Term Trading (Redemption) Fees. Shares purchased after March 1, 2004 and held in the fund less than 90 days will be subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which will be retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The priceof the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery". Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .45% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 71,418 | $ 0 |
Class T | 0% | .25% | 185,235 | 0 |
Class B | .65% | .25% | 485,676 | 350,766 |
Class C | .75% | .25% | 427,871 | 189,622 |
$ 1,170,200 | $ 540,388 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 47,659 |
Class T | 37,004 |
Class B * | 155,019 |
Class C * | 11,098 |
$ 250,780 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 72,824 | .15 |
Class T | 180,888 | .24 |
Class B | 109,509 | .20 |
Class C | 78,300 | .18 |
Institutional Class | 200,083 | .26 |
$ 641,604 |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $171,766 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
Annual Report
6. Expense Reductions.
FMR agreed to reimburse the classes of the fund to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | 1.00% | $ - |
Class T | 1.10% | 67,846 |
Class B | 1.75% | 26,875 |
Class C | 1.85% | 11,371 |
Institutional Class | .85% | 84,194 |
$ 190,286 |
In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $7,992.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 3,463,982 | $ 2,543,786 |
Class T | 5,285,877 | 2,141,296 |
Class B | 3,522,659 | 2,030,312 |
Class C | 2,720,372 | 1,355,055 |
Institutional Class | 5,675,402 | 1,970,077 |
Total | $ 20,668,292 | $ 10,040,526 |
Annual Report
Notes to Financial Statements - continued
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | 2003 | 2002 | 2003 | 2002 |
Class A | ||||
Shares sold | 5,078,597 | 2,194,392 | $ 44,740,558 | $ 18,769,405 |
Reinvestment of distributions | 329,086 | 249,964 | 2,911,571 | 2,101,329 |
Shares redeemed | (2,849,082) | (1,664,899) | (25,436,110) | (13,995,996) |
Net increase (decrease) | 2,558,601 | 779,457 | $ 22,216,019 | $ 6,874,738 |
Class T | ||||
Shares sold | 10,067,102 | 4,891,152 | $ 87,281,226 | $ 40,917,173 |
Reinvestment of distributions | 428,290 | 183,191 | 3,800,828 | 1,530,517 |
Shares redeemed | (6,266,128) | (2,464,273) | (55,411,229) | (20,312,658) |
Net increase (decrease) | 4,229,264 | 2,610,070 | $ 35,670,825 | $ 22,135,032 |
Class B | ||||
Shares sold | 5,222,668 | 3,194,827 | $ 45,487,161 | $ 27,146,325 |
Reinvestment of distributions | 216,886 | 126,092 | 1,919,716 | 1,054,847 |
Shares redeemed | (2,028,953) | (1,407,028) | (17,785,865) | (11,769,382) |
Net increase (decrease) | 3,410,601 | 1,913,891 | $ 29,621,012 | $ 16,431,790 |
Class C | ||||
Shares sold | 5,869,016 | 2,780,792 | $ 51,408,339 | $ 23,675,785 |
Reinvestment of distributions | 179,833 | 81,892 | 1,600,340 | 686,313 |
Shares redeemed | (2,279,628) | (1,861,323) | (20,253,596) | (15,716,727) |
Net increase (decrease) | 3,769,221 | 1,001,361 | $ 32,755,083 | $ 8,645,371 |
Institutional Class | ||||
Shares sold | 9,351,108 | 5,522,402 | $ 82,152,855 | $ 45,295,480 |
Reinvestment of distributions | 470,456 | 159,936 | 4,177,210 | 1,333,527 |
Shares redeemed | (4,293,095) | (857,398) | (37,528,757) | (7,135,537) |
Net increase (decrease) | 5,528,469 | 4,824,940 | $ 48,801,308 | $ 39,493,470 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor High Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor High Income Fund ("the Fund") a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 High Income Fund as of October 31, 2003, 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor High Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/ | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heil- meier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Advisor High Income. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Matthew Conti (37) | |
Year of Election or Appointment: 2001 Vice President of Advisor High Income. Mr. Conti is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Conti managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1999 Secretary of Advisor High Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor High Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor High Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor High Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor High Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1999 Assistant Treasurer of Advisor High Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Advisor High Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International
Investment Advisors
Fidelity Investments Japan Limited
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AHI-UANN-1203
1.784748.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
High Income
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard and Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Life of |
Institutional Class | 27.38 | 6.65% |
A From September 7, 1999.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity ® Advisor High Income Fund - Institutional Class on September 7, 1999, when the fund started. The chart shows how the value of your investment would have grown, and also shows how the Merrill Lynch® U.S. High Yield Master II Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Matt Conti, Portfolio Manager of Fidelity® Advisor High Income Fund
High yield staged a remarkable turnaround during the one-year period ending October 31, 2003, enjoying four consecutive quarters of positive returns for the first time since 1998. A declining default rate, increasing flows into high-yield mutual funds, rebounding equity markets, signs of an economic recovery and a focus on corporate debt reduction paced high-yield's recovery for much of the period. In July 2003, however, low-quality debt had its first monthly decline since October 2002, hurt by weakness in investment-grade bonds, the poor showing of the energy sector during the month, and profit taking that led to soft demand and negative fund flows. The rally re-emerged in August, though, bolstered by resurgent demand due to further evidence of an economic recovery, the robust performance of stocks, and the continued efforts of corporate America to deleverage and improve its balance sheets. For the 12 months overall, the Merrill Lynch® U.S. High Yield Master II Index gained 33.10%, one of its strongest one-year periods ever.
For the year ending October 31, 2003, the fund's Institutional Class shares returned 27.38%. In comparison, the Merrill Lynch index returned 33.10% and the LipperSM High Current Yield Funds Average returned 28.04%. Despite strong absolute performance, the fund underperformed its benchmarks due to the outperformance of lower-quality issues. I favored investments in the higher-quality tiers of the junk bond market, and underweighted the lowest-quality segments. I looked to increase investments in companies poised to benefit from an economic rebound, and paid particularly close attention to free cash flow. Drug store chain Rite Aid, clothing retailer J.Crew, AT&T Wireless - no longer in the fund - and Williams Companies all were contributors. Each offered a clean or improving balance sheet as well as solid free cash flow. Detractors included health care provider HealthSouth, energy company Mirant and Dan River. Relative performance also suffered from underweighted positions in cable TV provider Charter Communications and California electric utility Calpine, both of which rebounded from very depressed levels to offer strong returns.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five Holdings as of October 31, 2003 | ||
(by issuer, excluding cash equivalents) | % of fund's | % of fund's net assets |
CSC Holdings, Inc. | 2.5 | 1.8 |
AES Corp. | 2.5 | 1.7 |
Qwest Capital Funding, Inc. | 2.2 | 2.2 |
Nextel Communications, Inc. | 1.5 | 1.7 |
Williams Companies, Inc. | 1.5 | 1.5 |
10.1 | ||
Top Five Market Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Energy | 11.0 | 10.1 |
Telecommunications | 10.5 | 10.9 |
Technology | 8.1 | 5.9 |
Electric Utilities | 7.2 | 11.0 |
Healthcare | 5.2 | 2.4 |
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| AAA,AA,A 0.0% | | AAA,AA,A 0.0% | ||||
| BBB 0.6% | | BBB 3.2% | ||||
| BB 24.9% | | BB 28.1% | ||||
| B 52.2% | | B 44.8% | ||||
| CCC,CC,C 12.0% | | CCC,CC,C 12.3% | ||||
| Not Rated 2.1% | | Not Rated 1.1% | ||||
| Equities 2.6% | | Equities 1.8% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Nonconvertible | | Nonconvertible | ||||
| Convertible Bonds, Preferred Stocks 3.3% | | Convertible Bonds, Preferred Stocks 2.9% | ||||
| Other Investments 1.3% | | Other Investments 1.1% | ||||
| Short-Term | | Short-Term | ||||
* Foreign | 10.9% | ** Foreign | 10.0% | ||||
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Corporate Bonds - 90.5% | ||||
Principal | Value | |||
Convertible Bonds - 0.7% | ||||
Technology - 0.3% | ||||
Amkor Technology, Inc.: | ||||
5% 3/15/07 | $ 630,000 | $ 604,800 | ||
5.75% 6/1/06 | 630,000 | 630,000 | ||
1,234,800 | ||||
Telecommunications - 0.4% | ||||
Nextel Communications, Inc. 5.25% 1/15/10 | 1,760,000 | 1,689,600 | ||
TOTAL CONVERTIBLE BONDS | 2,924,400 | |||
Nonconvertible Bonds - 89.8% | ||||
Aerospace - 1.4% | ||||
DRS Technologies, Inc. 6.875% 11/1/13 (e) | 310,000 | 311,550 | ||
Dunlop Standard Aerospace Holdings PLC yankee 11.875% 5/15/09 | 3,105,000 | 3,368,925 | ||
Orbital Sciences Corp. 9% 7/15/11 | 1,440,000 | 1,533,600 | ||
5,214,075 | ||||
Air Transportation - 2.3% | ||||
American Airlines, Inc. pass thru trust certificates: | ||||
6.817% 5/23/11 | 1,540,000 | 1,362,900 | ||
6.977% 11/23/22 | 117,905 | 104,346 | ||
7.377% 5/23/19 | 467,371 | 331,833 | ||
7.379% 5/23/16 | 497,784 | 338,493 | ||
AMR Corp. 9% 8/1/12 | 860,000 | 711,650 | ||
Continental Airlines, Inc. 8% 12/15/05 | 10,000 | 9,700 | ||
Continental Airlines, Inc. pass thru trust certificates: | ||||
6.748% 9/15/18 | 75,299 | 60,239 | ||
6.9% 1/2/17 | 261,508 | 211,821 | ||
7.73% 9/15/12 | 191,896 | 156,396 | ||
8.307% 4/2/18 | 465,155 | 400,034 | ||
8.321% 11/1/06 | 435,000 | 406,725 | ||
Delta Air Lines, Inc.: | ||||
equipment trust certificates 8.54% 1/2/07 | 64,521 | 55,488 | ||
7.9% 12/15/09 | 2,400,000 | 1,968,000 | ||
10% 8/15/08 (e) | 560,000 | 487,200 | ||
10.14% 8/14/12 | 60,000 | 43,800 | ||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.299% 9/18/06 | 360,000 | 324,000 | ||
7.779% 1/2/12 | 1,290,664 | 1,103,517 | ||
Northwest Airlines, Inc. pass thru trust certificates: | ||||
7.068% 7/2/17 | 298,344 | 247,626 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Air Transportation - continued | ||||
Northwest Airlines, Inc. pass thru trust certificates: - continued | ||||
7.67% 1/2/15 | $ 187,917 | $ 152,213 | ||
8.07% 1/2/15 | 590,208 | 430,852 | ||
8,906,833 | ||||
Automotive - 2.0% | ||||
Cummins, Inc. 5.65% 3/1/98 | 515,000 | 334,750 | ||
Dana Corp.: | ||||
6.5% 3/1/09 | 1,015,000 | 1,004,850 | ||
9% 8/15/11 | 915,000 | 1,015,650 | ||
10.125% 3/15/10 | 325,000 | 365,625 | ||
Dana Credit Corp. 8.375% 8/15/07 (e) | 705,000 | 736,725 | ||
Navistar International Corp.: | ||||
8% 2/1/08 | 210,000 | 214,200 | ||
9.375% 6/1/06 | 200,000 | 217,000 | ||
Stoneridge, Inc. 11.5% 5/1/12 | 1,410,000 | 1,635,600 | ||
Tenneco Automotive, Inc. 11.625% 10/15/09 | 355,000 | 363,875 | ||
TRW Automotive Acquisition Corp.: | ||||
9.375% 2/15/13 (e) | 910,000 | 1,028,300 | ||
11% 2/15/13 (e) | 490,000 | 573,300 | ||
7,489,875 | ||||
Banks and Thrifts - 0.4% | ||||
Western Financial Bank 9.625% 5/15/12 | 1,285,000 | 1,403,863 | ||
Broadcasting - 0.7% | ||||
Spanish Broadcasting System, Inc. 9.625% 11/1/09 | 750,000 | 780,000 | ||
Susquehanna Media Co. 7.375% 4/15/13 | 480,000 | 494,400 | ||
TV Azteca SA de CV: | ||||
euro 10.5% 2/15/07 (Reg. S) | 158,000 | 162,543 | ||
yankee 10.5% 2/15/07 | 1,400,000 | 1,440,250 | ||
2,877,193 | ||||
Building Materials - 1.8% | ||||
FastenTech, Inc. 11.5% 5/1/11 (e) | 610,000 | 646,600 | ||
Juno Lighting, Inc. 11.875% 7/1/09 | 2,325,000 | 2,528,438 | ||
National Waterworks, Inc. 10.5% 12/1/12 | 240,000 | 266,400 | ||
Nortek, Inc.: | ||||
9.125% 9/1/07 | 725,000 | 748,563 | ||
9.25% 3/15/07 | 120,000 | 123,900 | ||
Texas Industries, Inc. 10.25% 6/15/11 (e) | 2,435,000 | 2,715,025 | ||
7,028,926 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Cable TV - 2.3% | ||||
Charter Communications Holdings LLC/Charter Communications Holdings Capital Corp. 0% 1/15/11 (c) | $ 510,000 | $ 346,800 | ||
Comcast UK Cable Partners Ltd. yankee 11.2% 11/15/07 | 1,843,000 | 1,843,000 | ||
CSC Holdings, Inc.: | ||||
7.625% 7/15/18 | 470,000 | 460,600 | ||
7.875% 2/15/18 | 510,000 | 502,988 | ||
9.875% 2/15/13 | 795,000 | 826,800 | ||
DirecTV Holdings LLC/DirecTV Financing, Inc. 8.375% 3/15/13 | 545,000 | 613,125 | ||
EchoStar DBS Corp.: | ||||
6.375% 10/1/11 (e) | 1,400,000 | 1,393,000 | ||
9.125% 1/15/09 | 869,000 | 984,143 | ||
10.375% 10/1/07 | 1,200,000 | 1,324,500 | ||
LodgeNet Entertainment Corp. 9.5% 6/15/13 | 140,000 | 151,200 | ||
NTL, Inc. 19% 1/1/10 | 120,000 | 117,000 | ||
Rogers Cablesystems Ltd. yankee 11% 12/1/15 | 60,000 | 66,600 | ||
8,629,756 | ||||
Capital Goods - 2.1% | ||||
AGCO Corp.: | ||||
8.5% 3/15/06 | 40,000 | 40,000 | ||
9.5% 5/1/08 | 120,000 | 130,800 | ||
Columbus McKinnon Corp. 10% 8/1/10 (e) | 140,000 | 148,400 | ||
Dresser, Inc. 9.375% 4/15/11 | 1,605,000 | 1,653,150 | ||
Jacuzzi Brands, Inc. 9.625% 7/1/10 (e) | 1,045,000 | 1,112,925 | ||
Terex Corp.: | ||||
Series D, 8.875% 4/1/08 | 116,000 | 120,640 | ||
8.875% 4/1/08 | 950,000 | 992,750 | ||
9.25% 7/15/11 | 805,000 | 881,475 | ||
Tyco International Group SA yankee: | ||||
6.125% 1/15/09 | 345,000 | 362,681 | ||
6.375% 10/15/11 | 1,625,000 | 1,690,000 | ||
6.75% 2/15/11 | 385,000 | 409,544 | ||
7% 6/15/28 | 555,000 | 563,325 | ||
8,105,690 | ||||
Chemicals - 2.4% | ||||
Equistar Chemicals LP/Equistar Funding Corp.: | ||||
8.75% 2/15/09 | 280,000 | 280,700 | ||
10.125% 9/1/08 | 565,000 | 593,250 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Chemicals - continued | ||||
Equistar Chemicals LP/Equistar Funding Corp.: - continued | ||||
10.625% 5/1/11 (e) | $ 570,000 | $ 592,800 | ||
HMP Equity Holdings Corp. 0% 5/15/08 unit (e) | 1,560,000 | 780,000 | ||
Huntsman ICI Chemicals LLC 10.125% 7/1/09 | 910,000 | 859,950 | ||
Huntsman International LLC: | ||||
9.875% 3/1/09 | 125,000 | 131,875 | ||
9.875% 3/1/09 (e) | 705,000 | 736,725 | ||
Millennium America, Inc.: | ||||
9.25% 6/15/08 | 1,605,000 | 1,693,275 | ||
9.25% 6/15/08 (e) | 635,000 | 669,925 | ||
Nalco Co.: | ||||
7.75% 11/15/11 (e) | 590,000 | 613,600 | ||
8.875% 11/15/13 (e) | 600,000 | 623,250 | ||
OMNOVA Solutions, Inc. 11.25% 6/1/10 (e) | 960,000 | 1,027,200 | ||
Solutia, Inc.: | ||||
6.72% 10/15/37 | 535,000 | 449,400 | ||
11.25% 7/15/09 | 175,000 | 155,750 | ||
9,207,700 | ||||
Consumer Products - 0.9% | ||||
The Hockey Co. 11.25% 4/15/09 | 1,445,000 | 1,632,850 | ||
Toys 'R' US, Inc. 7.875% 4/15/13 | 1,510,000 | 1,660,007 | ||
3,292,857 | ||||
Containers - 2.5% | ||||
Anchor Glass Container Corp. 11% 2/15/13 | 1,295,000 | 1,476,300 | ||
Berry Plastics Corp. 10.75% 7/15/12 | 625,000 | 696,875 | ||
BWAY Corp. 10% 10/15/10 (e) | 660,000 | 702,900 | ||
Owens-Brockway Glass Container, Inc. 7.75% 5/15/11 | 530,000 | 553,850 | ||
Owens-Illinois, Inc.: | ||||
7.15% 5/15/05 | 1,405,000 | 1,440,125 | ||
7.35% 5/15/08 | 575,000 | 563,500 | ||
7.8% 5/15/18 | 1,341,000 | 1,260,540 | ||
8.1% 5/15/07 | 985,000 | 1,024,400 | ||
Silgan Holdings, Inc.: | ||||
6.75% 11/15/13 (e)(f) | 740,000 | 740,925 | ||
9% 6/1/09 | 985,000 | 1,019,475 | ||
9,478,890 | ||||
Diversified Media - 1.3% | ||||
Corus Entertainment, Inc. 8.75% 3/1/12 | 190,000 | 209,000 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Diversified Media - continued | ||||
LBI Media Holdings, Inc. 0% 10/15/13 (c)(e) | $ 1,240,000 | $ 768,800 | ||
LBI Media, Inc. 10.125% 7/15/12 | 1,380,000 | 1,542,150 | ||
Videotron LTEE 6.875% 1/15/14 (e) | 340,000 | 350,200 | ||
Vivendi Universal SA: | ||||
6.25% 7/15/08 (e) | 1,340,000 | 1,407,000 | ||
9.25% 4/15/10 (e) | 560,000 | 652,400 | ||
4,929,550 | ||||
Electric Utilities - 7.2% | ||||
AES Corp.: | ||||
8.375% 8/15/07 | 485,000 | 477,725 | ||
8.5% 11/1/07 | 700,000 | 689,500 | ||
8.75% 6/15/08 | 261,000 | 268,178 | ||
8.75% 5/15/13 (e) | 1,865,000 | 1,988,556 | ||
8.875% 2/15/11 | 434,000 | 445,935 | ||
9% 5/15/15 (e) | 1,230,000 | 1,316,100 | ||
9.375% 9/15/10 | 2,170,000 | 2,297,488 | ||
9.5% 6/1/09 | 1,291,000 | 1,373,301 | ||
10% 12/12/05 (e) | 600,000 | 618,000 | ||
CMS Energy Corp.: | ||||
7.5% 1/15/09 | 95,000 | 97,019 | ||
7.625% 11/15/04 | 595,000 | 605,413 | ||
8.5% 4/15/11 | 2,150,000 | 2,246,750 | ||
8.9% 7/15/08 | 290,000 | 310,300 | ||
9.875% 10/15/07 | 1,955,000 | 2,143,169 | ||
CMS Energy X-TRAS pass thru trust certificates 7% 1/15/05 | 2,120,000 | 2,120,000 | ||
Illinois Power Co. 11.5% 12/15/10 | 2,050,000 | 2,454,875 | ||
Midland Funding Corp. II 11.75% 7/23/05 | 769,811 | 823,698 | ||
MSW Energy Holding LLC/MSW Energy Finance Co., Inc. 8.5% 9/1/10 (e) | 180,000 | 192,600 | ||
Nevada Power Co.: | ||||
9% 8/15/13 (e) | 1,200,000 | 1,260,000 | ||
10.875% 10/15/09 | 3,495,000 | 3,844,500 | ||
Sierra Pacific Resources 8.75% 5/15/05 | 1,020,000 | 1,020,000 | ||
Southern California Edison Co. 7.25% 3/1/26 | 925,000 | 945,813 | ||
27,538,920 | ||||
Energy - 11.0% | ||||
BRL Universal Equipment 2001 A LP/BRL Universal Equipment Corp. 8.875% 2/15/08 | 390,000 | 418,275 | ||
Chesapeake Energy Corp. 8.375% 11/1/08 | 900,000 | 987,750 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
Clark Refining & Marketing, Inc. 8.875% 11/15/07 | $ 130,000 | $ 130,000 | ||
DI Industries, Inc. 8.875% 7/1/07 | 168,000 | 173,040 | ||
Dynegy Holdings, Inc.: | ||||
9.875% 7/15/10 (e) | 580,000 | 622,050 | ||
10.125% 7/15/13 (e) | 210,000 | 227,850 | ||
El Paso Corp.: | ||||
7% 5/15/11 | 150,000 | 126,375 | ||
7.875% 6/15/12 | 145,000 | 123,613 | ||
El Paso Energy Corp.: | ||||
6.75% 5/15/09 | 280,000 | 238,000 | ||
6.95% 12/15/07 | 590,000 | 528,050 | ||
7.375% 12/15/12 | 30,000 | 24,750 | ||
7.75% 1/15/32 | 1,050,000 | 795,375 | ||
7.8% 8/1/31 | 210,000 | 159,600 | ||
8.05% 10/15/30 | 2,870,000 | 2,224,250 | ||
El Paso Energy Partners LP/El Paso Energy Partners Finance Corp. 8.5% 6/1/11 | 1,715,000 | 1,869,350 | ||
El Paso Production Holding Co. 7.75% 6/1/13 (e) | 2,580,000 | 2,476,800 | ||
Gemstone Investor Ltd./Gemstone Investor, Inc. 7.71% 10/31/04 (e) | 2,900,000 | 2,885,500 | ||
Grant Prideco, Inc.: | ||||
9% 12/15/09 | 130,000 | 141,050 | ||
9.625% 12/1/07 | 810,000 | 893,025 | ||
GulfTerra Energy Partners LP/GulfTerra Energy Finance Corp. 10.625% 12/1/12 | 570,000 | 669,750 | ||
Hilcorp Energy I LP/Hilcorp Finance Co. 10.5% 9/1/10 (e) | 1,150,000 | 1,242,000 | ||
Key Energy Services, Inc. 8.375% 3/1/08 | 550,000 | 592,625 | ||
Nuevo Energy Co.: | ||||
9.375% 10/1/10 | 605,000 | 659,450 | ||
9.5% 6/1/08 | 596,000 | 622,820 | ||
Plains Exploration & Production Co. LP: | ||||
Series B, 8.75% 7/1/12 | 390,000 | 423,150 | ||
8.75% 7/1/12 | 630,000 | 683,550 | ||
Range Resources Corp. 7.375% 7/15/13 | 1,160,000 | 1,148,400 | ||
SESI LLC 8.875% 5/15/11 | 630,000 | 677,250 | ||
Sonat, Inc.: | ||||
6.625% 2/1/08 | 620,000 | 517,700 | ||
6.75% 10/1/07 | 545,000 | 472,788 | ||
6.875% 6/1/05 | 2,935,000 | 2,835,944 | ||
7.625% 7/15/11 | 815,000 | 686,638 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Energy - continued | ||||
Teekay Shipping Corp. 8.875% 7/15/11 | $ 1,145,000 | $ 1,276,675 | ||
Tesoro Petroleum Corp. 8% 4/15/08 | 705,000 | 743,775 | ||
The Coastal Corp.: | ||||
6.375% 2/1/09 | 35,000 | 28,438 | ||
6.5% 5/15/06 | 420,000 | 371,700 | ||
6.5% 6/1/08 | 1,060,000 | 871,850 | ||
6.95% 6/1/28 | 260,000 | 181,350 | ||
7.5% 8/15/06 | 1,480,000 | 1,348,650 | ||
7.75% 6/15/10 | 380,000 | 320,150 | ||
7.75% 10/15/35 | 190,000 | 140,600 | ||
Transcontinental Gas Pipe Line Corp. 8.875% 7/15/12 | 146,000 | 171,003 | ||
Universal Compression, Inc. 7.25% 5/15/10 | 2,625,000 | 2,730,000 | ||
Western Oil Sands, Inc. 8.375% 5/1/12 | 730,000 | 816,688 | ||
Williams Companies, Inc.: | ||||
6.5% 8/1/06 | 945,000 | 970,988 | ||
6.75% 1/15/06 | 1,500,000 | 1,541,250 | ||
7.125% 9/1/11 | 145,000 | 148,625 | ||
7.875% 9/1/21 | 2,320,000 | 2,296,800 | ||
8.125% 3/15/12 | 695,000 | 750,600 | ||
Williams Holdings of Delaware, Inc. 6.25% 2/1/06 | 1,055,000 | 1,081,375 | ||
42,067,285 | ||||
Environmental - 0.5% | ||||
Allied Waste North America, Inc.: | ||||
7.875% 1/1/09 | 685,000 | 708,975 | ||
7.875% 4/15/13 | 305,000 | 325,588 | ||
9.25% 9/1/12 | 750,000 | 836,250 | ||
Browning-Ferris Industries, Inc. 6.375% 1/15/08 | 25,000 | 24,500 | ||
1,895,313 | ||||
Food and Drug Retail - 2.3% | ||||
Ahold Finance USA, Inc.: | ||||
6.25% 5/1/09 | 865,000 | 854,188 | ||
6.875% 5/1/29 | 800,000 | 704,000 | ||
8.25% 7/15/10 | 1,645,000 | 1,764,263 | ||
Rite Aid Corp.: | ||||
6% 12/15/05 (e) | 515,000 | 513,713 | ||
6.875% 8/15/13 | 1,135,000 | 1,072,575 | ||
7.625% 4/15/05 | 845,000 | 866,125 | ||
9.25% 6/1/13 | 735,000 | 786,450 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Food and Drug Retail - continued | ||||
The Great Atlantic & Pacific Tea Co.: | ||||
7.75% 4/15/07 | $ 1,995,000 | $ 1,690,763 | ||
9.125% 12/15/11 | 630,000 | 533,925 | ||
8,786,002 | ||||
Food/Beverage/Tobacco - 1.3% | ||||
Corn Products International, Inc. 8.25% 7/15/07 | 450,000 | 495,000 | ||
Del Monte Corp. 9.25% 5/15/11 | 1,465,000 | 1,611,500 | ||
Doane Pet Care Co. 9.75% 5/15/07 | 1,155,000 | 1,016,400 | ||
Dole Food Co., Inc. 7.25% 6/15/10 | 1,310,000 | 1,336,200 | ||
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 (e) | 570,000 | 632,700 | ||
5,091,800 | ||||
Gaming - 3.6% | ||||
Boyd Gaming Corp.: | ||||
7.75% 12/15/12 | 355,000 | 375,413 | ||
8.75% 4/15/12 | 350,000 | 379,750 | ||
Chumash Casino & Resort Enterprise 9.25% 7/15/10 (d)(e) | 345,000 | 378,638 | ||
Circus Circus Enterprises, Inc. 7.625% 7/15/13 | 345,000 | 361,388 | ||
Herbst Gaming, Inc. 10.75% 9/1/08 | 840,000 | 940,800 | ||
Mandalay Resort Group: | ||||
9.375% 2/15/10 | 345,000 | 395,888 | ||
10.25% 8/1/07 | 345,000 | 396,750 | ||
Mohegan Tribal Gaming Authority: | ||||
6.375% 7/15/09 (e) | 1,090,000 | 1,111,800 | ||
8% 4/1/12 | 170,000 | 184,450 | ||
MTR Gaming Group, Inc. 9.75% 4/1/10 | 1,340,000 | 1,410,350 | ||
Park Place Entertainment Corp.: | ||||
7.875% 3/15/10 | 1,170,000 | 1,257,750 | ||
9.375% 2/15/07 | 515,000 | 575,513 | ||
Sun International Hotels Ltd./Sun International North America, Inc. 8.875% 8/15/11 | 2,260,000 | 2,463,400 | ||
Venetian Casino Resort LLC/Las Vegas Sands, Inc. 11% 6/15/10 | 1,235,000 | 1,420,250 | ||
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | 2,130,000 | 2,204,550 | ||
13,856,690 | ||||
Healthcare - 5.2% | ||||
aaiPharma, Inc. 11% 4/1/10 | 65,000 | 71,988 | ||
AmeriPath, Inc. 10.5% 4/1/13 | 1,210,000 | 1,258,400 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Healthcare - continued | ||||
AmerisourceBergen Corp. 7.25% 11/15/12 | $ 2,105,000 | $ 2,168,150 | ||
Biovail Corp. yankee 7.875% 4/1/10 | 1,865,000 | 1,832,363 | ||
Concentra Operating Corp. 9.5% 8/15/10 | 700,000 | 742,000 | ||
Fisher Scientific International, Inc. 8% 9/1/13 (e) | 720,000 | 772,200 | ||
Genesis HealthCare Corp. 8% 10/15/13 (e) | 220,000 | 224,950 | ||
HCA, Inc.: | ||||
6.3% 10/1/12 | 1,350,000 | 1,343,250 | ||
6.75% 7/15/13 | 1,500,000 | 1,531,376 | ||
PacifiCare Health Systems, Inc. 10.75% 6/1/09 | 3,125,000 | 3,585,938 | ||
Psychiatric Solutions, Inc. 10.625% 6/15/13 (e) | 905,000 | 993,238 | ||
Rotech Healthcare, Inc. 9.5% 4/1/12 | 905,000 | 972,875 | ||
Senior Housing Properties Trust: | ||||
7.875% 4/15/15 | 945,000 | 992,250 | ||
8.625% 1/15/12 | 1,135,000 | 1,237,150 | ||
Tenet Healthcare Corp.: | ||||
6.375% 12/1/11 | 1,300,000 | 1,209,000 | ||
7.375% 2/1/13 | 1,095,000 | 1,062,150 | ||
19,997,278 | ||||
Homebuilding/Real Estate - 3.4% | ||||
Beazer Homes USA, Inc. 8.375% 4/15/12 | 580,000 | 632,200 | ||
D.R. Horton, Inc. 8.5% 4/15/12 | 570,000 | 649,800 | ||
FIMEP SA 10.5% 2/15/13 | 1,000,000 | 1,165,000 | ||
K. Hovnanian Enterprises, Inc.: | ||||
6.5% 1/15/14 (f) | 1,100,000 | 1,091,750 | ||
7.75% 5/15/13 (e) | 520,000 | 543,400 | ||
8.875% 4/1/12 | 1,505,000 | 1,625,400 | ||
LNR Property Corp.: | ||||
7.25% 10/15/13 (e) | 1,050,000 | 1,057,875 | ||
7.625% 7/15/13 (e) | 460,000 | 476,100 | ||
Standard Pacific Corp.: | ||||
6.5% 10/1/08 | 490,000 | 497,350 | ||
7.75% 3/15/13 | 1,650,000 | 1,724,250 | ||
Technical Olympic USA, Inc.: | ||||
9% 7/1/10 | 1,290,000 | 1,373,850 | ||
10.375% 7/1/12 | 255,000 | 279,225 | ||
WCI Communities, Inc. 7.875% 10/1/13 (e) | 490,000 | 504,700 | ||
William Lyon Homes, Inc. 10.75% 4/1/13 | 1,315,000 | 1,459,650 | ||
13,080,550 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Hotels - 1.4% | ||||
Gaylord Entertainment Co. 8% 11/15/13 (e)(f)(g) | $ 200,000 | $ 206,000 | ||
Hilton Hotels Corp. 8.25% 2/15/11 | 1,030,000 | 1,138,150 | ||
HMH Properties, Inc. 7.875% 8/1/05 | 590,000 | 604,750 | ||
Host Marriott LP: | ||||
7.125% 11/1/13 (e)(f) | 1,070,000 | 1,070,000 | ||
9.25% 10/1/07 | 22,000 | 24,255 | ||
ITT Corp. 7.375% 11/15/15 | 1,030,000 | 1,084,075 | ||
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 5/1/07 | 1,210,000 | 1,303,775 | ||
5,431,005 | ||||
Insurance - 0.8% | ||||
AmeriCredit Corp. 9.875% 4/15/06 | 500,000 | 495,000 | ||
Crum & Forster Holdings Corp. 10.375% 6/15/13 (e) | 1,305,000 | 1,402,875 | ||
Leucadia National Corp. 7% 8/15/13 (e) | 1,020,000 | 994,500 | ||
2,892,375 | ||||
Leisure - 2.5% | ||||
Bally Total Fitness Holding Corp.: | ||||
9.875% 10/15/07 | 2,220,000 | 2,064,600 | ||
10.5% 7/15/11 (e) | 1,270,000 | 1,308,100 | ||
Premier Parks, Inc. 9.75% 6/15/07 | 2,685,000 | 2,718,563 | ||
Six Flags, Inc. 9.75% 4/15/13 | 540,000 | 526,500 | ||
Town Sports International, Inc. 9.625% 4/15/11 | 970,000 | 1,028,200 | ||
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 (e) | 1,735,000 | 2,003,925 | ||
9,649,888 | ||||
Metals/Mining - 1.3% | ||||
Arch Western Finance LLC 6.75% 7/1/13 (e) | 1,850,000 | 1,905,500 | ||
Peabody Energy Corp. 6.875% 3/15/13 | 580,000 | 610,450 | ||
Phelps Dodge Corp. 9.5% 6/1/31 | 310,000 | 402,225 | ||
Salt Holdings Corp., Inc.: | ||||
0% 12/15/12 (c)(e) | 1,135,000 | 805,850 | ||
0% 6/1/13 (c)(e) | 1,780,000 | 1,085,800 | ||
4,809,825 | ||||
Paper - 3.4% | ||||
Boise Cascade Corp.: | ||||
6.5% 11/1/10 | 1,250,000 | 1,275,000 | ||
7% 11/1/13 | 700,000 | 715,750 | ||
Buckeye Technologies, Inc. 8.5% 10/1/13 (e) | 560,000 | 593,600 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Paper - continued | ||||
Georgia-Pacific Corp.: | ||||
7.5% 5/15/06 | $ 1,630,000 | $ 1,719,650 | ||
8.125% 5/15/11 | 445,000 | 482,269 | ||
8.875% 5/15/31 | 180,000 | 190,800 | ||
9.125% 7/1/22 | 295,000 | 303,850 | ||
9.625% 3/15/22 | 1,820,000 | 1,870,050 | ||
Jefferson Smurfit Corp. U.S. 7.5% 6/1/13 | 1,880,000 | 1,898,800 | ||
Millar Western Forest Products Ltd. yankee 9.875% 5/15/08 | 955,000 | 997,975 | ||
Norske Skog Canada Ltd. 8.625% 6/15/11 | 945,000 | 968,625 | ||
Stone Container Corp.: | ||||
8.375% 7/1/12 | 1,075,000 | 1,139,500 | ||
9.25% 2/1/08 | 250,000 | 272,500 | ||
9.75% 2/1/11 | 360,000 | 391,500 | ||
12,819,869 | ||||
Publishing/Printing - 1.3% | ||||
American Color Graphics, Inc. 10% 6/15/10 (e) | 1,030,000 | 1,122,700 | ||
American Media Operations, Inc. 10.25% 5/1/09 | 710,000 | 757,925 | ||
Dex Media West LLC/Dex Media West Finance Co.: | ||||
8.5% 8/15/10 (e) | 440,000 | 480,700 | ||
9.875% 8/15/13 (e) | 520,000 | 591,500 | ||
Moore North America Finance, Inc. 7.875% 1/15/11 (e) | 1,100,000 | 1,171,500 | ||
PEI Holdings, Inc. 11% 3/15/10 | 430,000 | 485,900 | ||
Yell Finance BV: | ||||
0% 8/1/11 (c) | 158,000 | 133,510 | ||
10.75% 8/1/11 | 282,000 | 325,710 | ||
5,069,445 | ||||
Railroad - 0.4% | ||||
TFM SA de CV yankee: | ||||
10.25% 6/15/07 | 50,000 | 51,000 | ||
11.75% 6/15/09 | 1,555,000 | 1,562,775 | ||
1,613,775 | ||||
Restaurants - 1.1% | ||||
Friendly Ice Cream Corp. 10.5% 12/1/07 | 2,340,000 | 2,424,825 | ||
Sbarro, Inc. 11% 9/15/09 | 830,000 | 717,950 | ||
Yum! Brands, Inc. 7.7% 7/1/12 | 910,000 | 1,026,025 | ||
4,168,800 | ||||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Services - 1.1% | ||||
Iron Mountain, Inc. 6.625% 1/1/16 | $ 1,870,000 | $ 1,823,250 | ||
JohnsonDiversey, Inc. 9.625% 5/15/12 | 400,000 | 442,000 | ||
United Rentals North America, Inc.: | ||||
7.75% 11/15/13 (e)(f) | 770,000 | 766,150 | ||
10.75% 4/15/08 | 350,000 | 392,000 | ||
Wackenhut Corrections Corp. 8.25% 7/15/13 (e) | 910,000 | 960,050 | ||
4,383,450 | ||||
Shipping - 1.2% | ||||
General Maritime Corp. 10% 3/15/13 | 2,165,000 | 2,424,800 | ||
Overseas Shipholding Group, Inc. 8.25% 3/15/13 | 2,115,000 | 2,241,900 | ||
4,666,700 | ||||
Steels - 1.3% | ||||
AK Steel Corp. 7.75% 6/15/12 | 215,000 | 146,200 | ||
California Steel Industries, Inc. 8.5% 4/1/09 | 1,030,000 | 1,067,338 | ||
CSN Islands VII Corp. 10.75% 9/12/08 (e) | 1,110,000 | 1,153,013 | ||
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 (e) | 990,000 | 1,022,175 | ||
Steel Dynamics, Inc. 9.5% 3/15/09 | 1,430,000 | 1,565,850 | ||
4,954,576 | ||||
Super Retail - 1.7% | ||||
Asbury Automotive Group, Inc. 9% 6/15/12 | 2,000,000 | 2,080,000 | ||
AutoNation, Inc. 9% 8/1/08 | 760,000 | 866,400 | ||
Barneys, Inc. 9% 4/1/08 | 2,350,000 | 2,115,000 | ||
J. Crew Intermediate LLC 0% 5/15/08 (c)(e) | 1,157,596 | 873,985 | ||
United Auto Group, Inc. 9.625% 3/15/12 | 405,000 | 449,550 | ||
6,384,935 | ||||
Technology - 7.7% | ||||
AMI Semiconductor, Inc. 10.75% 2/1/13 | 2,305,000 | 2,656,513 | ||
Amkor Technology, Inc.: | ||||
7.75% 5/15/13 (e) | 3,455,000 | 3,662,300 | ||
9.25% 2/15/08 | 120,000 | 133,800 | ||
10.5% 5/1/09 | 225,000 | 242,438 | ||
Flextronics International Ltd. 6.5% 5/15/13 (e) | 2,850,000 | 2,807,250 | ||
Ingram Micro, Inc. 9.875% 8/15/08 | 2,285,000 | 2,490,650 | ||
IOS Capital LLC 7.25% 6/30/08 | 1,705,000 | 1,696,475 | ||
Micron Technology, Inc. 6.5% 9/30/05 (i) | 3,000,000 | 2,970,000 | ||
Nortel Networks Corp. 6.125% 2/15/06 | 2,150,000 | 2,198,375 | ||
Northern Telecom Capital Corp. 7.875% 6/15/26 | 195,000 | 195,000 | ||
Northern Telecom Ltd. yankee 6.875% 9/1/23 | 290,000 | 275,500 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Technology - continued | ||||
PerkinElmer, Inc. 8.875% 1/15/13 | $ 1,580,000 | $ 1,738,000 | ||
SCG Holding Corp./Semiconductor Components Industries LLC 12% 8/1/09 | 250,000 | 267,500 | ||
Seagate Technology HDD Holdings 8% 5/15/09 | 850,000 | 928,625 | ||
Solectron Corp.: | ||||
7.375% 3/1/06 | 1,310,000 | 1,346,025 | ||
9.625% 2/15/09 | 700,000 | 773,500 | ||
Xerox Corp.: | ||||
7.125% 6/15/10 | 980,000 | 994,700 | ||
7.2% 4/1/16 | 2,870,000 | 2,791,075 | ||
7.625% 6/15/13 | 1,060,000 | 1,075,900 | ||
29,243,626 | ||||
Telecommunications - 9.2% | ||||
Cincinnati Bell, Inc.: | ||||
7.25% 7/15/13 (e) | 1,360,000 | 1,387,200 | ||
8.375% 1/15/14 (e)(f) | 480,000 | 480,000 | ||
Crown Castle International Corp.: | ||||
9.375% 8/1/11 | 1,400,000 | 1,533,000 | ||
9.5% 8/1/11 | 100,000 | 109,500 | ||
10.75% 8/1/11 | 275,000 | 308,000 | ||
Dobson Communications Corp. 8.875% 10/1/13 (e) | 350,000 | 354,375 | ||
Innova S. de R.L. 9.375% 9/19/13 (e) | 840,000 | 840,000 | ||
Level 3 Financing, Inc. 10.75% 10/15/11 (e) | 1,050,000 | 1,084,125 | ||
Mobile Telesystems Finance SA 8.375% 10/14/10 (e) | 380,000 | 375,250 | ||
Nextel Communications, Inc.: | ||||
6.875% 10/31/13 | 1,580,000 | 1,595,800 | ||
7.375% 8/1/15 | 1,935,000 | 2,012,400 | ||
9.5% 2/1/11 | 380,000 | 425,600 | ||
Qwest Capital Funding, Inc.: | ||||
5.875% 8/3/04 | 840,000 | 835,800 | ||
7% 8/3/09 | 1,500,000 | 1,387,500 | ||
7.25% 2/15/11 | 540,000 | 496,800 | ||
7.625% 8/3/21 | 465,000 | 395,250 | ||
7.75% 8/15/06 | 5,215,000 | 5,188,907 | ||
Qwest Corp. 8.875% 3/15/12 (e) | 1,045,000 | 1,180,850 | ||
Qwest Services Corp.: | ||||
13% 12/15/07 (e) | 405,000 | 459,675 | ||
13.5% 12/15/10 (e) | 775,000 | 902,875 | ||
14% 12/15/14 (e) | 2,680,000 | 3,283,000 | ||
Corporate Bonds - continued | ||||
Principal | Value | |||
Nonconvertible Bonds - continued | ||||
Telecommunications - continued | ||||
Rogers Cantel, Inc. yankee: | ||||
8.8% 10/1/07 | $ 3,045,000 | $ 3,121,125 | ||
9.375% 6/1/08 | 495,000 | 517,275 | ||
Rogers Wireless, Inc. 9.625% 5/1/11 | 1,615,000 | 1,865,325 | ||
SBA Communications Corp. 10.25% 2/1/09 | 1,040,000 | 930,800 | ||
Triton PCS, Inc. 9.375% 2/1/11 | 1,670,000 | 1,653,300 | ||
U.S. West Capital Funding, Inc. 6.375% 7/15/08 | 1,965,000 | 1,788,150 | ||
U.S. West Communications: | ||||
5.65% 11/1/04 | 150,000 | 146,250 | ||
6.875% 9/15/33 | 465,000 | 413,850 | ||
35,071,982 | ||||
Textiles & Apparel - 0.8% | ||||
Dan River, Inc. 12.75% 4/15/09 (e) | 910,000 | 254,800 | ||
Levi Strauss & Co.: | ||||
7% 11/1/06 | 425,000 | 325,125 | ||
11.625% 1/15/08 | 460,000 | 397,900 | ||
12.25% 12/15/12 | 595,000 | 496,825 | ||
Russell Corp. 9.25% 5/1/10 | 1,025,000 | 1,066,000 | ||
The William Carter Co. 10.875% 8/15/11 | 340,000 | 385,900 | ||
2,926,550 | ||||
TOTAL NONCONVERTIBLE BONDS | 342,965,847 | |||
TOTAL CORPORATE BONDS (Cost $327,089,670) | 345,890,247 | |||
Commercial Mortgage Securities - 0.2% | ||||
CS First Boston Mortgage Securities Corp. Series 2000-FL1A Class F, 4.1174% 12/15/09 (e)(h) | 67,867 | 63,647 | ||
Mortgage Capital Funding, Inc. Series 1998-MC3 Class F, 7.3041% 11/18/31 (e)(h) | 400,000 | 394,125 | ||
Nomura Asset Securities Corp. Series 1998-D6 Class B1, 6% 3/15/30 (e) | 100,000 | 89,364 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $460,955) | 547,136 | |||
Common Stocks - 0.0% | |||
Shares | Value | ||
Automotive - 0.0% | |||
Exide Technologies warrants 3/18/06 (a) | 10 | $ 0 | |
Super Retail - 0.0% | |||
Barneys, Inc. warrants 4/1/08 (a) | 2,350 | 23,500 | |
Telecommunications - 0.0% | |||
Crown Castle International Corp. (a)(f) | 2,434 | 30,814 | |
TOTAL COMMON STOCKS (Cost $27,655) | 54,314 | ||
Preferred Stocks - 2.6% | |||
Convertible Preferred Stocks - 0.4% | |||
Telecommunications - 0.4% | |||
Crown Castle International Corp. 6.25% PIERS | 35,400 | 1,504,500 | |
Nonconvertible Preferred Stocks - 2.2% | |||
Banks and Thrifts - 0.1% | |||
Chevy Chase Bank Series C, 8.00% | 14,500 | 391,500 | |
Cable TV - 2.1% | |||
CSC Holdings, Inc.: | |||
(depositary shares) Series M, 11.125% | 32,125 | 3,365,094 | |
Series H, 11.75% | 42,910 | 4,484,095 | |
7,849,189 | |||
Chemicals - 0.0% | |||
NOVA Chemicals Corp. 9.50% | 3,245 | 81,482 | |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | 8,322,171 | ||
TOTAL PREFERRED STOCKS (Cost $9,369,978) | 9,826,671 | ||
Floating Rate Loans - 1.1% | ||||
Principal | ||||
Cable TV - 0.5% | ||||
Century Cable Holdings LLC Tranche B term loan 6% 12/31/09 (h) | $ 700,000 | 623,000 | ||
Hilton Head Communications LP Tranche B term loan 5.25% 3/31/08 (h) | 1,450,000 | 1,254,250 | ||
1,877,250 | ||||
Floating Rate Loans - continued | ||||
Principal Amount | Value | |||
Technology - 0.1% | ||||
Semiconductor Components Industries LLC: | ||||
Tranche B term loan 5.14% 8/4/06 (h) | $ 15,432 | $ 15,471 | ||
Tranche C term loan 5.14% 8/4/07 (h) | 434,173 | 435,258 | ||
Tranche D term loan 5.1875% 8/4/07 (h) | 118,580 | 118,876 | ||
569,605 | ||||
Telecommunications - 0.5% | ||||
Nextel Finance Co.: | ||||
Tranche B term loan 4.5625% 6/30/08 (h) | 918,984 | 921,282 | ||
Tranche C term loan 4.8125% 12/31/08 (h) | 918,984 | 921,282 | ||
1,842,564 | ||||
TOTAL FLOATING RATE LOANS (Cost $4,083,804) | 4,289,419 | |||
Money Market Funds - 5.3% | |||
Shares | |||
Fidelity Cash Central Fund, 1.07% (b) | 20,176,487 | 20,176,487 | |
TOTAL INVESTMENT PORTFOLIO - 99.7% (Cost $361,208,549) | 380,784,274 | ||
NET OTHER ASSETS - 0.3% | 1,236,737 | ||
NET ASSETS - 100% | $ 382,021,011 | ||
Legend |
(a) Non-income producing |
(b) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(c) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(d) Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $75,994,279 or 19.9% of net assets. |
(f) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(g) A portion of the security is subject to a forward commitment to sell. |
(h) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(i) Restricted securities - Investment in securities not registered under the Securities Act of 1933. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Micron Technology, Inc. 6.5% 9/30/05 | 8/8/02 - 1/21/03 | $ 2,633,750 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 89.1% |
Canada | 3.8% |
Cayman Islands | 1.1% |
Mexico | 1.0% |
Others (individually less than 1%) | 5.0% |
100.0% |
Purchases and sales of securities, other than short-term securities, aggregated $515,505,396 and $356,604,872, respectively. |
The fund invested in securities that are not registered under the Securities Act of 1933. At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $2,970,000 or 0.8% of net assets. |
The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which the loan was outstanding amounted to $7,188,000. The weighted average interest rate was 1.18%. |
The fund invested in loans and loan participations, trade claims or other receivables. At period end, the value of these investments amounted to $4,289,419 or 1.1% of net assets. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $2,456,000 all of which will expire on October 31, 2010. |
A total of .06% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (cost $361,208,549) - See accompanying schedule | $ 380,784,274 | |
Cash | 591,449 | |
Receivable for investments sold | 4,622,349 | |
Delayed delivery | 1,037,525 | |
Receivable for fund shares sold | 1,183,330 | |
Interest receivable | 7,588,091 | |
Prepaid expenses | 1,973 | |
Receivable from investment adviser for expense reductions | 16,575 | |
Total assets | 395,825,566 | |
Liabilities | ||
Payable for investments purchased | $ 6,792,214 | |
Delayed delivery | 5,359,999 | |
Payable for fund shares redeemed | 675,326 | |
Distributions payable | 535,400 | |
Accrued management fee | 179,895 | |
Distribution fees payable | 124,791 | |
Other payables and accrued expenses | 136,930 | |
Total liabilities | 13,804,555 | |
Net Assets | $ 382,021,011 | |
Net Assets consist of: | ||
Paid in capital | $ 360,644,228 | |
Undistributed net investment income | 4,365,838 | |
Accumulated undistributed net realized gain (loss) on investments | (2,564,792) | |
Net unrealized appreciation (depreciation) on investments | 19,575,737 | |
Net Assets | $ 382,021,011 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | $ 9.33 | |
Maximum offering price per share (100/95.25 of $9.33) | $ 9.80 | |
Class T: | $ 9.33 | |
Maximum offering price per share (100/96.50 of $9.33) | $ 9.67 | |
Class B: | $ 9.32 | |
Class C: | $ 9.32 | |
Institutional Class: | $ 9.34 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Dividends | $ 504,077 | |
Interest | 26,848,616 | |
Total income | 27,352,693 | |
Expenses | ||
Management fee | $ 1,712,163 | |
Transfer agent fees | 641,604 | |
Distribution fees | 1,170,200 | |
Accounting fees and expenses | 150,695 | |
Non-interested trustees' compensation | 1,151 | |
Custodian fees and expenses | 28,986 | |
Registration fees | 91,381 | |
Audit | 70,950 | |
Legal | 5,660 | |
Interest | 707 | |
Miscellaneous | 1,672 | |
Total expenses before reductions | 3,875,169 | |
Expense reductions | (198,278) | 3,676,891 |
Net investment income (loss) | 23,675,802 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on investment securities | 15,982,876 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 24,806,908 | |
Net gain (loss) | 40,789,784 | |
Net increase (decrease) in net assets resulting from operations | $ 64,465,586 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 23,675,802 | $ 10,933,030 |
Net realized gain (loss) | 15,982,876 | (11,311,678) |
Change in net unrealized appreciation (depreciation) | 24,806,908 | (4,154,150) |
Net increase (decrease) in net assets resulting | 64,465,586 | (4,532,798) |
Distributions to shareholders from net investment income | (20,668,292) | (10,040,526) |
Share transactions - net increase (decrease) | 169,064,247 | 93,580,401 |
Total increase (decrease) in net assets | 212,861,541 | 79,007,077 |
Net Assets | ||
Beginning of period | 169,159,470 | 90,152,393 |
End of period (including undistributed net investment income of $4,365,838 and undistributed net investment income of $1,057,241, respectively) | $ 382,021,011 | $ 169,159,470 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.89 | $ 8.75 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .725 | .709 H | .760 | .895 | .116 |
Net realized and unrealized gain (loss) | 1.360 | (.908) H | (.602) | (.640) | (.091) |
Total from investment operations | 2.085 | (.199) | .158 | .255 | .025 |
Distributions from net investment income | (.645) | (.661) | (.758) | (.825) | (.105) |
Net asset value, end of period | $ 9.33 | $ 7.89 | $ 8.75 | $ 9.35 | $ 9.92 |
Total Return B,C,D | 27.23% | (2.49)% | 1.83% | 2.40% | .25% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.00% | 1.02% | 1.14% | 1.70% | 11.82% A |
Expenses net of voluntary | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% A |
Expenses net of all reductions | 1.00% | 1.00% | .99% | .98% | 1.00% A |
Net investment income (loss) | 8.26% | 8.42% H | 8.50% | 9.17% | 7.92% A |
Supplemental Data | |||||
Net assets, end of period | $ 61,084 | $ 31,456 | $ 28,046 | $ 13,295 | $ 739 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.89 | $ 8.74 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .717 | .695H | .753 | .898 | .112 |
Net realized and | 1.359 | (.893)H | (.613) | (.656) | (.089) |
Total from investment operations | 2.076 | (.198) | .140 | .242 | .023 |
Distributions from net investment income | (.636) | (.652) | (.750) | (.812) | (.103) |
Net asset value, end of period | $ 9.33 | $ 7.89 | $ 8.74 | $ 9.35 | $ 9.92 |
Total Return B,C,D | 27.11% | (2.47)% | 1.63% | 2.27% | .23% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.19% | 1.24% | 1.39% | 1.83% | 11.91% A |
Expenses net of voluntary | 1.10% | 1.10% | 1.10% | 1.10% | 1.10% A |
Expenses net of all reductions | 1.10% | 1.10% | 1.09% | 1.08% | 1.10% A |
Net investment income (loss) | 8.16% | 8.32% H | 8.40% | 9.07% | 7.82% A |
Supplemental Data | |||||
Net assets, end of period | $ 81,735 | $ 35,751 | $ 16,814 | $ 8,936 | $ 2,422 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.88 | $ 8.74 | $ 9.34 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) E | .658 | .641 H | .692 | .830 | .102 |
Net realized and unrealized gain (loss) | 1.361 | (.904) H | (.601) | (.663) | (.083) |
Total from investment operations | 2.019 | (.263) | .091 | .167 | .019 |
Distributions from net investment income | (.579) | (.597) | (.691) | (.747) | (.099) |
Net asset value, end of period | $ 9.32 | $ 7.88 | $ 8.74 | $ 9.34 | $ 9.92 |
Total Return B,C,D | 26.32% | (3.23)% | 1.08% | 1.50% | .19% |
Ratios to Average Net Assets G | |||||
Expenses before expense | 1.80% | 1.83% | 1.94% | 2.47% | 12.54% A |
Expenses net of voluntary | 1.75% | 1.75% | 1.75% | 1.75% | 1.75% A |
Expenses net of all reductions | 1.75% | 1.75% | 1.75% | 1.73% | 1.75% A |
Net investment income (loss) | 7.51% | 7.67% H | 7.74% | 8.42% | 7.17% A |
Supplemental Data | |||||
Net assets, end of period | $ 70,661 | $ 32,854 | $ 19,694 | $ 10,054 | $ 2,089 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 F |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.88 | $ 8.74 | $ 9.35 | $ 9.91 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss)E | .651 | .635 H | .684 | .819 | .101 |
Net realized and unrealized gain (loss) | 1.359 | (.906) H | (.612) | (.643) | (.093) |
Total from investment operations | 2.010 | (.271) | .072 | .176 | .008 |
Distributions from net investment income | (.570) | (.589) | (.682) | (.736) | (.098) |
Net asset value, end of period | $ 9.32 | $ 7.88 | $ 8.74 | $ 9.35 | $ 9.91 |
Total ReturnB,C,D | 26.19% | (3.32)% | .86% | 1.60% | .08% |
Ratios to Average Net AssetsG | |||||
Expenses before expense | 1.88% | 1.90% | 2.03% | 2.60% | 12.67% A |
Expenses net of voluntary | 1.85% | 1.85% | 1.85% | 1.85% | 1.85% A |
Expenses net of all reductions | 1.85% | 1.85% | 1.84% | 1.83% | 1.85% A |
Net investment income (loss) | 7.41% | 7.57% H | 7.65% | 8.32% | 7.07% A |
Supplemental Data | |||||
Net assets, end of period | $ 59,655 | $ 20,719 | $ 14,218 | $ 6,563 | $ 1,854 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 7, 1999 (commencement of operations) to October 31, 1999.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 30, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 E |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.90 | $ 8.75 | $ 9.35 | $ 9.92 | $ 10.00 |
Income from Investment Operations | |||||
Net investment income (loss) D | .739 | .709 G | .772 | .910 | .118 |
Net realized and unrealized gain (loss) | 1.359 | (.886) G | (.599) | (.638) | (.091) |
Total from investment operations | 2.098 | (.177) | .173 | .272 | .027 |
Distributions from net investment income | (.658) | (.673) | (.773) | (.842) | (.107) |
Net asset value, end of period | $ 9.34 | $ 7.90 | $ 8.75 | $ 9.35 | $ 9.92 |
Total Return B,C | 27.38% | (2.23)% | 2.00% | 2.57% | .28% |
Ratios to Average Net Assets F | |||||
Expenses before expense | .96% | .96% | 1.04% | 1.62% | 11.66% A |
Expenses net of voluntary | .85% | .85% | .85% | .85% | .85% A |
Expenses net of all reductions | .85% | .85% | .84% | .83% | .85% A |
Net investment income (loss) | 8.41% | 8.57% G | 8.65% | 9.32% | 8.07% A |
Supplemental Data | |||||
Net assets, end of period | $ 108,885 | $ 48,379 | $ 11,381 | $ 4,910 | $ 719 |
Portfolio turnover rate | 129% | 105% | 139% | 157% | 331% A |
A Annualized
B Total returns 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.
D Calculated based on average shares outstanding during the period.
E For the period September 7, 1999 (commencement of operations) to October 31, 1999.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
G Effective November 31, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor High Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on each fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, non-taxable dividends, capital loss carryforwards and losses deferred due to wash sales.
Annual Report
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 23,256,385 |
Unrealized depreciation | (1,780,310) |
Net unrealized appreciation (depreciation) | 21,476,075 |
Undistributed ordinary income | 4,417,048 |
Capital loss carryforward | (2,455,812) |
Cost for federal income tax purposes | $ 359,308,199 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 20,668,292 | $ 10,040,526 |
Short-Term Trading (Redemption) Fees. Shares purchased after March 1, 2004 and held in the fund less than 90 days will be subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. The fee, which will be retained by the fund, is accounted for as an addition to paid in capital.
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The priceof the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Delayed Delivery Transactions and When-Issued Securities - continued
of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery". Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Loans and Other Direct Debt Instruments. The fund may invest in loans and loan participations, trade claims or other receivables. These investments may include standby financing commitments that obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Information regarding loans and other direct debt instruments is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .45% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .58% of the fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 71,418 | $ 0 |
Class T | 0% | .25% | 185,235 | 0 |
Class B | .65% | .25% | 485,676 | 350,766 |
Class C | .75% | .25% | 427,871 | 189,622 |
$ 1,170,200 | $ 540,388 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 47,659 |
Class T | 37,004 |
Class B * | 155,019 |
Class C * | 11,098 |
$ 250,780 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 72,824 | .15 |
Class T | 180,888 | .24 |
Class B | 109,509 | .20 |
Class C | 78,300 | .18 |
Institutional Class | 200,083 | .26 |
$ 641,604 |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $171,766 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Committed Line of Credit.
The fund participates with other funds managed by FMR in a $3.5 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The fund has agreed to pay commitment fees on its pro rata portion of the line of credit. During the period, there were no borrowings on this line of credit.
Annual Report
6. Expense Reductions.
FMR agreed to reimburse the classes of the fund to the extent operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
Expense | Reimbursement | |
Class A | 1.00% | $ - |
Class T | 1.10% | 67,846 |
Class B | 1.75% | 26,875 |
Class C | 1.85% | 11,371 |
Institutional Class | .85% | 84,194 |
$ 190,286 |
In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $7,992.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 3,463,982 | $ 2,543,786 |
Class T | 5,285,877 | 2,141,296 |
Class B | 3,522,659 | 2,030,312 |
Class C | 2,720,372 | 1,355,055 |
Institutional Class | 5,675,402 | 1,970,077 |
Total | $ 20,668,292 | $ 10,040,526 |
Annual Report
Notes to Financial Statements - continued
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | 2003 | 2002 | 2003 | 2002 |
Class A | ||||
Shares sold | 5,078,597 | 2,194,392 | $ 44,740,558 | $ 18,769,405 |
Reinvestment of distributions | 329,086 | 249,964 | 2,911,571 | 2,101,329 |
Shares redeemed | (2,849,082) | (1,664,899) | (25,436,110) | (13,995,996) |
Net increase (decrease) | 2,558,601 | 779,457 | $ 22,216,019 | $ 6,874,738 |
Class T | ||||
Shares sold | 10,067,102 | 4,891,152 | $ 87,281,226 | $ 40,917,173 |
Reinvestment of distributions | 428,290 | 183,191 | 3,800,828 | 1,530,517 |
Shares redeemed | (6,266,128) | (2,464,273) | (55,411,229) | (20,312,658) |
Net increase (decrease) | 4,229,264 | 2,610,070 | $ 35,670,825 | $ 22,135,032 |
Class B | ||||
Shares sold | 5,222,668 | 3,194,827 | $ 45,487,161 | $ 27,146,325 |
Reinvestment of distributions | 216,886 | 126,092 | 1,919,716 | 1,054,847 |
Shares redeemed | (2,028,953) | (1,407,028) | (17,785,865) | (11,769,382) |
Net increase (decrease) | 3,410,601 | 1,913,891 | $ 29,621,012 | $ 16,431,790 |
Class C | ||||
Shares sold | 5,869,016 | 2,780,792 | $ 51,408,339 | $ 23,675,785 |
Reinvestment of distributions | 179,833 | 81,892 | 1,600,340 | 686,313 |
Shares redeemed | (2,279,628) | (1,861,323) | (20,253,596) | (15,716,727) |
Net increase (decrease) | 3,769,221 | 1,001,361 | $ 32,755,083 | $ 8,645,371 |
Institutional Class | ||||
Shares sold | 9,351,108 | 5,522,402 | $ 82,152,855 | $ 45,295,480 |
Reinvestment of distributions | 470,456 | 159,936 | 4,177,210 | 1,333,527 |
Shares redeemed | (4,293,095) | (857,398) | (37,528,757) | (7,135,537) |
Net increase (decrease) | 5,528,469 | 4,824,940 | $ 48,801,308 | $ 39,493,470 |
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor High Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor High Income Fund ("the Fund") a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 High Income Fund as of October 31, 2003, 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 19, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor High Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/ | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heil- meier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Bart A. Grenier (44) | |
Year of Election or Appointment: 2002 Vice President of Advisor High Income. Mr. Grenier also serves as Vice President of certain Equity Funds (2001), a position he previously held from 1999 to 2000, and Vice President of certain High Income Funds (2002). He is Senior Vice President of FMR (1999) and FMR Co., Inc. (2001), and President and Director of Strategic Advisers, Inc. (2002). He also heads Fidelity's Asset Allocation Group (2000), Fidelity's Growth and Income Group (2001), Fidelity's Value Group (2001), and Fidelity's High Income Division (2001). Previously, Mr. Grenier served as President of Fidelity Ventures (2000), Vice President of certain High Income Funds (1997-2000), High Income Division Head (1997-2000), Group Leader of the Income-Growth and Asset Allocation-Income Groups (1996-2000), and Assistant Equity Division Head (1997-2000). | |
Matthew Conti (37) | |
Year of Election or Appointment: 2001 Vice President of Advisor High Income. Mr. Conti is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Conti managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1999 Secretary of Advisor High Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor High Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor High Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor High Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor High Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1999 Assistant Treasurer of Advisor High Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor High Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 2000 Assistant Treasurer of Advisor High Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity International
Investment Advisors
Fidelity Investments Japan Limited
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York Municipal Income Fund |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AHII-UANN-1203
1.784749.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Intermediate Bond
Fund - Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Returns may reflect the conversion of Class B shares to Class A shares after a maximum of four years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 |
Class A (incl. 3.75% | 2.18% | 5.56% | 5.36% |
Class T (incl. 2.75% | 3.12% | 5.64% | 5.39% |
Class B (incl. contingent | 2.32% | 5.72% | 5.45% |
Class C (incl. contingent | 4.26% | 5.46% | 4.94% |
A Class A shares bear a 0.15% 12b-1 fee that is reflected in returns after September 3, 1996. The initial offering of Class A shares took place on September 3, 1996. Returns between September 10, 1992 (the date Class T shares were first offered) and September 3, 1996 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
B Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996) that is reflected in returns after June 30, 1994. The initial offering of Class B shares took place on June 30, 1994. Returns between September 10, 1992 (the date Class T shares were first offered) and June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to June 30, 1994 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five year and past 10 year total return figures are 3%, 0%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee that is reflected in returns after November 3, 1997. The initial offering of Class C shares took place on November 3, 1997. Returns between June 30, 1994 and November 3, 1997 are those of Class B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1, 1996). Returns between September 10, 1992 (the date Class T shares were first offered) and June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns between November 3, 1997 and January 1, 1996 and prior to June 30, 1994 would have been lower. Class C shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Intermediate Bond Fund - Class T on October 31, 1993, and the current 2.75% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Intermediate Government/Credit Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Kevin Grant, Portfolio Manager of Fidelity® Advisor Intermediate Bond Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Intermediate Bond Fund's Class A, Class T, Class B and Class C shares rose 6.16%, 6.03%, 5.32% and 5.26%, respectively, during the one-year period ending October 31, 2003. In comparison, the LipperSM Short-Intermediate Investment Grade Debt Funds Average and the Lehman Brothers Intermediate Government/Credit Bond Index returned 4.06% and 5.43%, respectively. It was an ideal time to be in riskier assets, and the fund was rewarded for overweighting corporate bonds, which rebounded sharply from last fall's depressed levels amid improved credit conditions. Security selection and timely trading in corporates further aided performance, particularly among BBB-rated issues that had big recoveries. Another plus was avoiding most major rating downgrades that hampered the index and peer average. That said, we did have a few holdings that faltered, but they were very small positions. Complementing our overweighting in corporates was our continued underweighting in government bonds, most notably Treasuries, which, despite posting positive returns, trailed the overall market by a sizable margin. As a result, we captured the massive performance disparity between the segments, with results benefiting not only from the high coupon income received during the period, but also from the capital appreciation on our investments. Elsewhere, while the mortgage sector struggled against a backdrop of increased volatility, the fund did well by generally owning the right bonds.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
 | U.S. Government and |  | U.S. Government and | ||||
 | AAA 15.8% |  | AAA 13.7% | ||||
 | AA 6.3% |  | AA 6.6% | ||||
 | A 19.6% |  | A 17.5% | ||||
 | BBB 23.3% |  | BBB 18.0% | ||||
 | BB and Below 2.0% |  | BB and Below 1.6% | ||||
 | Not Rated 1.5% |  | Not Rated 0.2% | ||||
 | Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 4.8 | 4.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 3.9 | 3.5 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Corporate Bonds 42.4% | | Corporate Bonds 36.3% | ||||
| U.S. Government and | | U.S. Government and | ||||
| Asset-Backed | | Asset-Backed | ||||
| CMOs and Other Mortgage Related Securities 10.7% | | CMOs and Other Mortgage Related Securities 8.4% | ||||
| Municipal Bonds 0.1% | | Municipal Bonds 0.0% | ||||
| Other Investments 1.9% | | Other Investments 2.2% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 9.2% | ** Foreign investments | 6.5% | ||||
* Futures and Swaps | 9.2% | ** Futures and Swaps | 7.8% | ||||
(dagger)Short-Term Investments and Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 41.6% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 3.9% | ||||
Auto Components - 0.7% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.75% 1/15/08 | $ 2,400,000 | $ 2,398,034 | ||
6.4% 5/15/06 | 1,000,000 | 1,068,991 | ||
6.9% 9/1/04 | 1,500,000 | 1,554,911 | ||
7.2% 9/1/09 | 680,000 | 738,584 | ||
7.4% 1/20/05 | 800,000 | 845,703 | ||
7.75% 6/15/05 | 2,100,000 | 2,263,181 | ||
8,869,404 | ||||
Media - 3.2% | ||||
AOL Time Warner, Inc.: | ||||
6.125% 4/15/06 | 2,400,000 | 2,581,450 | ||
6.75% 4/15/11 | 1,700,000 | 1,878,418 | ||
6.875% 5/1/12 | 4,300,000 | 4,760,934 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 2,000,000 | 2,215,000 | ||
Clear Channel Communications, Inc.: | ||||
5.75% 1/15/13 | 700,000 | 724,639 | ||
7.65% 9/15/10 | 5,185,000 | 6,039,084 | ||
Continental Cablevision, Inc. 8.3% 5/15/06 | 6,520,000 | 7,301,285 | ||
Cox Communications, Inc.: | ||||
7.125% 10/1/12 | 1,235,000 | 1,401,726 | ||
7.5% 8/15/04 | 1,850,000 | 1,925,406 | ||
7.75% 8/15/06 | 1,450,000 | 1,636,959 | ||
Hearst-Argyle Television, Inc. 7% 11/15/07 | 1,000,000 | 1,089,224 | ||
Liberty Media Corp. 5.7% 5/15/13 | 1,900,000 | 1,857,567 | ||
News America Holdings, Inc. 7.375% 10/17/08 | 2,000,000 | 2,280,114 | ||
News America, Inc.: | ||||
4.75% 3/15/10 | 2,000,000 | 2,033,946 | ||
6.625% 1/9/08 | 1,700,000 | 1,887,513 | ||
Walt Disney Co. 5.375% 6/1/07 | 2,000,000 | 2,135,990 | ||
41,749,255 | ||||
TOTAL CONSUMER DISCRETIONARY | 50,618,659 | |||
CONSUMER STAPLES - 1.2% | ||||
Beverages - 0.3% | ||||
Miller Brewing Co. 4.25% 8/15/08 (a) | 3,740,000 | 3,776,850 | ||
Food & Staples Retailing - 0.1% | ||||
Fred Meyer, Inc. 7.375% 3/1/05 | 985,000 | 1,052,096 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Food Products - 0.0% | ||||
Kraft Foods, Inc. 5.25% 6/1/07 | $ 330,000 | $ 350,185 | ||
Tobacco - 0.8% | ||||
Altria Group, Inc. 7% 11/4/13 | 2,380,000 | 2,379,334 | ||
Philip Morris Companies, Inc.: | ||||
7.2% 2/1/07 | 2,000,000 | 2,122,156 | ||
7.5% 4/1/04 | 750,000 | 764,043 | ||
7.65% 7/1/08 | 4,635,000 | 5,000,270 | ||
10,265,803 | ||||
TOTAL CONSUMER STAPLES | 15,444,934 | |||
ENERGY - 1.2% | ||||
Energy Equipment & Services - 0.6% | ||||
Kinder Morgan, Inc. 6.5% 9/1/12 | 5,730,000 | 6,310,821 | ||
Weatherford International Ltd. 4.95% 10/15/13 | 1,300,000 | 1,274,939 | ||
7,585,760 | ||||
Oil & Gas - 0.6% | ||||
Canada Occidental Petroleum Ltd. yankee 7.125% 2/4/04 | 2,000,000 | 2,027,460 | ||
Duke Energy Field Services LLC 7.875% 8/16/10 | 3,250,000 | 3,797,459 | ||
Union Pacific Resources Group, Inc. 7% 10/15/06 | 2,700,000 | 2,992,942 | ||
8,817,861 | ||||
TOTAL ENERGY | 16,403,621 | |||
FINANCIALS - 21.4% | ||||
Capital Markets - 3.0% | ||||
Amvescap PLC: | ||||
5.9% 1/15/07 | 665,000 | 716,480 | ||
yankee 6.6% 5/15/05 | 4,000,000 | 4,254,804 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (d) | 1,300,000 | 1,271,721 | ||
4.25% 9/4/12 (d) | 1,510,000 | 1,536,803 | ||
Bear Stearns Companies, Inc. 5.7% 1/15/07 | 880,000 | 951,857 | ||
Credit Suisse First Boston (USA), Inc. 6.5% 1/15/12 | 2,460,000 | 2,716,625 | ||
Goldman Sachs Group, Inc. 4.125% 1/15/08 | 4,550,000 | 4,645,373 | ||
J.P. Morgan Chase & Co.: | ||||
4% 2/1/08 | 1,125,000 | 1,141,152 | ||
5.35% 3/1/07 | 3,270,000 | 3,510,522 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Legg Mason, Inc. 6.75% 7/2/08 | $ 3,710,000 | $ 4,131,642 | ||
Lehman Brothers Holdings, Inc.: | ||||
4% 1/22/08 | 1,600,000 | 1,623,267 | ||
6.25% 5/15/06 | 2,400,000 | 2,614,572 | ||
Merrill Lynch & Co., Inc.: | ||||
4% 11/15/07 | 2,000,000 | 2,044,456 | ||
6.15% 1/26/06 | 625,000 | 678,921 | ||
Morgan Stanley: | ||||
5.3% 3/1/13 | 4,760,000 | 4,830,748 | ||
5.8% 4/1/07 | 740,000 | 807,579 | ||
RBSG Capital Corp. 10.125% 3/1/04 | 1,500,000 | 1,540,910 | ||
39,017,432 | ||||
Commercial Banks - 2.2% | ||||
Bank of America Corp.: | ||||
3.875% 1/15/08 | 600,000 | 608,626 | ||
4.75% 10/15/06 | 985,000 | 1,038,880 | ||
6.25% 4/15/12 | 840,000 | 921,658 | ||
7.125% 9/15/06 | 2,000,000 | 2,237,618 | ||
Fleet Financial Group, Inc. 7.125% 4/15/06 | 2,240,000 | 2,471,616 | ||
FleetBoston Financial Corp.: | ||||
3.85% 2/15/08 | 1,000,000 | 1,012,220 | ||
7.25% 9/15/05 | 1,315,000 | 1,436,716 | ||
Korea Development Bank: | ||||
5.75% 9/10/13 | 3,680,000 | 3,764,846 | ||
7.375% 9/17/04 | 1,110,000 | 1,162,549 | ||
Mellon Bank NA, Pittsburgh: | ||||
6.5% 8/1/05 | 2,000,000 | 2,148,140 | ||
7.375% 5/15/07 | 1,800,000 | 2,067,426 | ||
Mercantile Bancorp, Inc. 7.3% 6/15/07 | 835,000 | 958,014 | ||
PNC Funding Corp. 5.75% 8/1/06 | 5,215,000 | 5,608,357 | ||
Popular North America, Inc. 6.125% 10/15/06 | 1,295,000 | 1,408,983 | ||
U.S. Bank NA, Minnesota 5.7% 12/15/08 | 2,000,000 | 2,169,240 | ||
29,014,889 | ||||
Consumer Finance - 5.9% | ||||
American General Finance Corp.: | ||||
2.75% 6/15/08 | 65,000 | 62,097 | ||
5.375% 10/1/12 | 3,050,000 | 3,082,043 | ||
5.875% 7/14/06 | 2,260,000 | 2,440,569 | ||
Associates Corp. of North America 7.75% 2/15/05 | 2,700,000 | 2,884,526 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: | ||||
4.875% 5/15/08 | $ 2,170,000 | $ 2,225,220 | ||
6.5% 7/30/04 | 2,000,000 | 2,065,102 | ||
6.5% 6/13/13 | 2,315,000 | 2,386,163 | ||
Ford Motor Credit Co.: | ||||
5.8% 1/12/09 | 3,265,000 | 3,180,672 | ||
6.5% 1/25/07 | 300,000 | 309,537 | ||
7.375% 10/28/09 | 8,650,000 | 8,947,283 | ||
General Electric Capital Corp. 3.5% 8/15/07 | 10,000,000 | 10,087,200 | ||
General Motors Acceptance Corp.: | ||||
6.125% 2/1/07 | 910,000 | 955,574 | ||
6.125% 8/28/07 | 910,000 | 958,635 | ||
6.75% 1/15/06 | 8,165,000 | 8,705,548 | ||
6.875% 9/15/11 | 6,415,000 | 6,617,733 | ||
7.5% 7/15/05 | 145,000 | 155,253 | ||
7.75% 1/19/10 | 2,060,000 | 2,240,215 | ||
Household Finance Corp.: | ||||
5.875% 2/1/09 | 1,055,000 | 1,140,899 | ||
6.375% 11/27/12 | 1,595,000 | 1,736,949 | ||
6.5% 1/24/06 | 2,140,000 | 2,328,611 | ||
6.75% 5/15/11 | 3,000,000 | 3,357,258 | ||
Household International, Inc. 8.875% 2/15/08 | 2,550,000 | 2,885,004 | ||
MBNA Corp. 6.25% 1/17/07 | 1,155,000 | 1,251,753 | ||
SLM Corp. 3.625% 3/17/08 | 3,900,000 | 3,898,089 | ||
Wells Fargo Financial, Inc. 5.875% 8/15/08 | 1,900,000 | 2,099,853 | ||
76,001,786 | ||||
Diversified Financial Services - 5.6% | ||||
Alliance Capital Management LP 5.625% 8/15/06 | 1,495,000 | 1,612,094 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 1,100,000 | 1,194,380 | ||
ASIF Global Financing XVIII 3.85% 11/26/07 (a) | 25,000 | 25,236 | ||
Cadbury Schweppes U.S. Finance LLC: | ||||
3.875% 10/1/08 (a) | 1,675,000 | 1,662,020 | ||
5.125% 10/1/13 (a) | 1,055,000 | 1,059,420 | ||
CIT Group, Inc.: | ||||
3.875% 11/3/08 | 740,000 | 733,972 | ||
7.75% 4/2/12 | 2,000,000 | 2,334,124 | ||
Citigroup, Inc.: | ||||
3.5% 2/1/08 | 2,770,000 | 2,767,886 | ||
7.25% 10/1/10 | 700,000 | 814,375 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.57% 11/18/10 | $ 2,020,000 | $ 2,079,130 | ||
7.92% 5/18/12 | 4,845,000 | 4,284,445 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 1,635,000 | 1,624,922 | ||
8.5% 6/15/10 | 5,700,000 | 6,860,001 | ||
Monumental Global Funding II 6.05% 1/19/06 (a) | 4,500,000 | 4,876,029 | ||
NiSource Finance Corp.: | ||||
3.2% 11/1/06 | 1,220,000 | 1,218,316 | ||
7.875% 11/15/10 | 4,355,000 | 5,153,010 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 | 1,000,000 | 1,051,000 | ||
7.375% 12/15/14 | 3,000,000 | 3,150,000 | ||
7.875% 2/1/09 (d) | 3,000,000 | 3,360,000 | ||
Petronas Capital Ltd. 7% 5/22/12 (a) | 4,495,000 | 5,004,823 | ||
Salomon Smith Barney Holdings, Inc. 6.5% 2/15/08 | 2,425,000 | 2,697,526 | ||
Sprint Capital Corp. 6.125% 11/15/08 | 2,100,000 | 2,211,754 | ||
Verizon Global Funding Corp.: | ||||
6.125% 6/15/07 | 500,000 | 546,500 | ||
7.25% 12/1/10 | 4,837,000 | 5,524,159 | ||
7.375% 9/1/12 | 7,040,000 | 8,073,585 | ||
7.75% 6/15/32 | 2,000,000 | 2,318,354 | ||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 95,000 | 101,459 | ||
72,338,520 | ||||
Insurance - 1.6% | ||||
Aegon NV 4.75% 6/1/13 | 3,400,000 | 3,284,594 | ||
Allstate Corp. 7.875% 5/1/05 | 2,060,000 | 2,239,519 | ||
Hartford Financial Services Group, Inc.: | ||||
2.375% 6/1/06 | 730,000 | 722,132 | ||
4.625% 7/15/13 (a) | 730,000 | 695,971 | ||
Principal Life Global Funding I: | ||||
5.125% 6/28/07 (a) | 4,000,000 | 4,248,548 | ||
6.25% 2/15/12 (a) | 5,000,000 | 5,422,740 | ||
Prudential Financial, Inc. 3.75% 5/1/08 | 1,640,000 | 1,634,960 | ||
St. Paul Companies, Inc. 8.125% 4/15/10 | 1,750,000 | 2,110,355 | ||
Travelers Property Casualty Corp. 5% 3/15/13 | 835,000 | 828,053 | ||
21,186,872 | ||||
Real Estate - 2.4% | ||||
AMB Property LP 7.2% 12/15/05 | 2,000,000 | 2,194,234 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Real Estate - continued | ||||
Arden Realty LP: | ||||
7% 11/15/07 | $ 3,460,000 | $ 3,806,996 | ||
8.875% 3/1/05 | 2,590,000 | 2,807,770 | ||
AvalonBay Communities, Inc. 5% 8/1/07 | 1,380,000 | 1,446,175 | ||
Boston Properties, Inc. 6.25% 1/15/13 | 2,500,000 | 2,661,303 | ||
BRE Properties, Inc. 5.95% 3/15/07 | 875,000 | 933,569 | ||
Camden Property Trust 5.875% 11/30/12 | 1,700,000 | 1,773,415 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 1,940,000 | 2,004,845 | ||
CenterPoint Properties Trust 6.75% 4/1/05 | 640,000 | 676,587 | ||
Developers Diversified Realty Corp. 4.625% 8/1/10 | 2,325,000 | 2,321,350 | ||
EOP Operating LP: | ||||
6.5% 1/15/04 | 1,675,000 | 1,690,639 | ||
7.75% 11/15/07 | 3,775,000 | 4,323,904 | ||
Gables Realty LP 5.75% 7/15/07 | 1,915,000 | 2,025,779 | ||
ProLogis 6.7% 4/15/04 | 2,790,000 | 2,859,502 | ||
31,526,068 | ||||
Thrifts & Mortgage Finance - 0.7% | ||||
Abbey National PLC 6.69% 10/17/05 | 1,020,000 | 1,109,682 | ||
Countrywide Home Loans, Inc.: | ||||
3.25% 5/21/08 | 3,460,000 | 3,372,739 | ||
5.5% 8/1/06 | 70,000 | 74,677 | ||
6.935% 7/16/07 | 2,450,000 | 2,717,339 | ||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | 1,665,000 | 1,704,937 | ||
5.625% 1/15/07 | 175,000 | 188,518 | ||
9,167,892 | ||||
TOTAL FINANCIALS | 278,253,459 | |||
INDUSTRIALS - 2.1% | ||||
Aerospace & Defense - 0.9% | ||||
Bombardier, Inc. 6.75% 5/1/12 (a) | 815,000 | 865,938 | ||
Raytheon Co.: | ||||
4.5% 11/15/07 | 2,000,000 | 2,005,698 | ||
8.2% 3/1/06 | 1,900,000 | 2,124,156 | ||
8.3% 3/1/10 | 5,195,000 | 6,171,800 | ||
11,167,592 | ||||
Commercial Services & Supplies - 0.1% | ||||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 1,830,000 | 1,898,603 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Industrial Conglomerates - 0.6% | ||||
Textron Financial Corp. 2.75% 6/1/06 | $ 1,255,000 | $ 1,246,806 | ||
Tyco International Group SA yankee: | ||||
6.125% 1/15/09 | 2,500,000 | 2,628,125 | ||
6.375% 6/15/05 | 1,750,000 | 1,835,313 | ||
6.75% 2/15/11 | 1,455,000 | 1,547,756 | ||
7,258,000 | ||||
Road & Rail - 0.4% | ||||
Canadian Pacific Railway Co. yankee 6.25% 10/15/11 | 2,700,000 | 2,955,795 | ||
Norfolk Southern Corp. 7.35% 5/15/07 | 1,900,000 | 2,155,276 | ||
5,111,071 | ||||
Transportation Infrastructure - 0.1% | ||||
Korea Highway Corp. 4.9% 7/1/13 (a) | 1,635,000 | 1,565,578 | ||
TOTAL INDUSTRIALS | 27,000,844 | |||
INFORMATION TECHNOLOGY - 1.9% | ||||
Communications Equipment - 1.0% | ||||
Motorola, Inc.: | ||||
7.625% 11/15/10 | 5,000,000 | 5,627,495 | ||
8% 11/1/11 | 6,340,000 | 7,339,799 | ||
12,967,294 | ||||
Computers & Peripherals - 0.6% | ||||
Hewlett-Packard Co.: | ||||
6.5% 7/1/12 | 3,000,000 | 3,335,064 | ||
7.15% 6/15/05 | 2,400,000 | 2,590,474 | ||
NCR Corp. 7.125% 6/15/09 | 2,270,000 | 2,488,261 | ||
8,413,799 | ||||
IT Services - 0.3% | ||||
Electronic Data Systems Corp. 6% 8/1/13 (a) | 4,235,000 | 4,010,134 | ||
TOTAL INFORMATION TECHNOLOGY | 25,391,227 | |||
MATERIALS - 1.5% | ||||
Containers & Packaging - 0.0% | ||||
Sealed Air Corp. 5.625% 7/15/13 (a) | 510,000 | 513,921 | ||
Metals & Mining - 1.3% | ||||
Corporacion Nacional del Cobre (Codelco): | ||||
5.5% 10/15/13 (a) | 2,335,000 | 2,345,274 | ||
6.375% 11/30/12 (a) | 5,580,000 | 5,978,211 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Falconbridge Ltd. yankee 7.35% 6/5/12 | $ 710,000 | $ 799,331 | ||
Noranda, Inc. yankee 6% 10/15/15 | 7,300,000 | 7,392,236 | ||
16,515,052 | ||||
Paper & Forest Products - 0.2% | ||||
Boise Cascade Corp. 7.5% 2/1/08 | 2,175,000 | 2,316,110 | ||
TOTAL MATERIALS | 19,345,083 | |||
TELECOMMUNICATION SERVICES - 4.0% | ||||
Diversified Telecommunication Services - 3.1% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 5,046,000 | 6,099,585 | ||
AT&T Corp.: | ||||
6% 3/15/09 | 720,000 | 766,801 | ||
7% 11/15/06 | 710,000 | 786,261 | ||
8.5% 11/15/31 | 2,300,000 | 2,608,103 | ||
British Telecommunications PLC 8.375% 12/15/10 | 2,160,000 | 2,608,546 | ||
Citizens Communications Co. 8.5% 5/15/06 | 1,485,000 | 1,677,417 | ||
France Telecom SA 9% 3/1/11 | 5,600,000 | 6,755,946 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 5,940,000 | 7,079,518 | ||
Telecom Italia Capital 4% 11/15/08 (a) | 3,000,000 | 2,996,316 | ||
Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06 | 175,000 | 189,290 | ||
TELUS Corp. yankee: | ||||
7.5% 6/1/07 | 1,440,000 | 1,599,225 | ||
8% 6/1/11 | 6,550,000 | 7,530,332 | ||
40,697,340 | ||||
Wireless Telecommunication Services - 0.9% | ||||
AT&T Wireless Services, Inc.: | ||||
7.5% 5/1/07 | 5,000,000 | 5,608,345 | ||
7.875% 3/1/11 | 2,530,000 | 2,890,985 | ||
8.75% 3/1/31 | 540,000 | 649,375 | ||
Cingular Wireless LLC 5.625% 12/15/06 | 2,000,000 | 2,156,650 | ||
11,305,355 | ||||
TOTAL TELECOMMUNICATION SERVICES | 52,002,695 | |||
UTILITIES - 4.4% | ||||
Electric Utilities - 3.4% | ||||
Detroit Edison Co. 6.125% 10/1/10 | 1,440,000 | 1,569,057 | ||
Dominion Resources, Inc. 8.125% 6/15/10 | 1,625,000 | 1,943,011 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
DTE Energy Co. 7.05% 6/1/11 | $ 3,320,000 | $ 3,748,745 | ||
Exelon Corp. 6.75% 5/1/11 | 1,735,000 | 1,922,606 | ||
FirstEnergy Corp.: | ||||
5.5% 11/15/06 | 1,500,000 | 1,576,298 | ||
6.45% 11/15/11 | 5,145,000 | 5,465,189 | ||
FPL Group Capital, Inc.: | ||||
1.875% 3/30/05 | 3,095,000 | 3,095,000 | ||
3.25% 4/11/06 | 885,000 | 895,356 | ||
MidAmerican Energy Holdings, Inc. 5.875% 10/1/12 | 4,135,000 | 4,278,389 | ||
Monongahela Power Co. 5% 10/1/06 | 1,370,000 | 1,404,786 | ||
Niagara Mohawk Power Corp. 8.875% 5/15/07 | 400,000 | 469,026 | ||
Oncor Electric Delivery Co.: | ||||
5% 9/1/07 | 2,000,000 | 2,102,440 | ||
6.375% 5/1/12 | 1,155,000 | 1,265,432 | ||
PPL Electric Utilities Corp. 5.875% 8/15/07 | 1,370,000 | 1,488,480 | ||
Progress Energy, Inc. 7.1% 3/1/11 | 1,800,000 | 2,030,283 | ||
PSI Energy, Inc. 6.65% 6/15/06 | 3,775,000 | 4,139,491 | ||
Public Service Co. of Colorado 7.875% 10/1/12 | 1,465,000 | 1,770,032 | ||
TECO Energy, Inc. 7% 5/1/12 | 350,000 | 345,625 | ||
Texas Utilities Electric Co. 8.25% 4/1/04 | 3,000,000 | 3,078,717 | ||
Virginia Electric & Power Co. 5.75% 3/31/06 | 2,000,000 | 2,146,512 | ||
44,734,475 | ||||
Gas Utilities - 0.7% | ||||
Consolidated Natural Gas Co. 5.375% 11/1/06 | 3,330,000 | 3,558,398 | ||
Kinder Morgan Energy Partners LP 5.35% 8/15/07 | 1,070,000 | 1,140,833 | ||
Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (a) | 2,100,000 | 2,436,000 | ||
Texas Eastern Transmission Corp. 7.3% 12/1/10 | 1,010,000 | 1,146,505 | ||
Williams Holdings of Delaware, Inc. 6.125% 12/1/03 | 500,000 | 507,500 | ||
8,789,236 | ||||
Multi-Utilities & Unregulated Power - 0.3% | ||||
Constellation Energy Group, Inc. 7% 4/1/12 | 1,000,000 | 1,133,625 | ||
Williams Companies, Inc. 7.125% 9/1/11 | 2,175,000 | 2,229,375 | ||
3,363,000 | ||||
TOTAL UTILITIES | 56,886,711 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $515,589,651) | 541,347,233 | |||
U.S. Government and Government Agency Obligations - 17.4% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 13.2% | ||||
Fannie Mae: | ||||
4.75% 1/2/07 | $ 25,000,000 | $ 26,230,400 | ||
5.5% 7/18/12 | 25,000,000 | 25,479,475 | ||
6.25% 2/1/11 | 975,000 | 1,066,413 | ||
6.25% 3/22/12 | 4,800,000 | 5,015,275 | ||
6.625% 9/15/09 | 37,000,000 | 42,226,210 | ||
7.125% 6/15/10 | 20,230,000 | 23,680,773 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 5,532,000 | 5,549,763 | ||
4.875% 11/15/13 | 6,510,000 | 6,527,238 | ||
5.25% 11/5/12 | 1,405,000 | 1,408,133 | ||
5.5% 9/15/11 | 17,200,000 | 18,373,694 | ||
5.875% 3/21/11 | 3,170,000 | 3,389,938 | ||
6.625% 9/15/09 | 11,400,000 | 13,003,820 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 171,951,132 | |||
U.S. Treasury Obligations - 4.2% | ||||
U.S. Treasury Bills, yield at date of purchase 0.92% to 0.96% 11/20/03 to 12/11/03 (c) | 660,000 | 659,678 | ||
U.S. Treasury Bonds 11.25% 2/15/15 | 5,325,000 | 8,502,113 | ||
U.S. Treasury Notes: | ||||
2.375% 8/15/06 | 660,000 | 662,063 | ||
4% 11/15/12 | 17,955,000 | 17,683,574 | ||
5% 8/15/11 | 7,470,000 | 7,971,013 | ||
5.625% 5/15/08 | 13,000,000 | 14,389,882 | ||
6.5% 2/15/10 | 4,000,000 | 4,640,156 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 54,508,479 | |||
TOTAL U.S. GOVERNMENT AND (Cost $224,495,405) | 226,459,611 | |||
U.S. Government Agency - Mortgage Securities - 10.6% | ||||
Fannie Mae - 10.2% | ||||
4% 7/1/18 | 4,812,807 | 4,690,620 | ||
4.5% 11/1/18 (b) | 26,000,000 | 25,943,125 | ||
4.5% 8/1/33 to 9/1/33 | 1,994,010 | 1,901,723 | ||
5.5% 9/1/10 to 12/1/14 | 7,873,165 | 8,142,114 | ||
6% 5/1/16 to 4/1/17 | 3,385,037 | 3,521,235 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Fannie Mae - continued | ||||
6.5% 2/1/14 to 5/1/33 | $ 35,166,851 | $ 36,740,747 | ||
6.5% 11/1/18 (b) | 11,929,432 | 12,551,999 | ||
6.5% 11/1/33 (b) | 5,095,479 | 5,292,929 | ||
7% 7/1/09 to 10/1/32 (b) | 28,142,009 | 29,642,402 | ||
7.5% 8/1/17 to 9/1/28 | 2,655,531 | 2,835,031 | ||
8.5% 6/1/11 to 9/1/25 | 310,399 | 338,026 | ||
9.5% 2/1/25 | 341,089 | 380,285 | ||
10% 1/1/20 | 8,914 | 10,123 | ||
10.5% 8/1/20 | 100,379 | 114,832 | ||
11% 8/1/15 | 491,385 | 548,825 | ||
12.5% 12/1/13 to 4/1/15 | 18,689 | 21,575 | ||
TOTAL FANNIE MAE | 132,675,591 | |||
Freddie Mac - 0.0% | ||||
8.5% 9/1/24 to 8/1/27 | 331,830 | 360,307 | ||
9.5% 1/1/17 | 11,587 | 12,932 | ||
10% 4/1/06 to 5/1/09 | 16,922 | 18,294 | ||
10.5% 5/1/21 | 99,406 | 110,218 | ||
11% 12/1/11 | 5,106 | 5,688 | ||
11.5% 10/1/15 | 13,355 | 15,089 | ||
11.75% 10/1/10 | 16,433 | 18,337 | ||
TOTAL FREDDIE MAC | 540,865 | |||
Government National Mortgage Association - 0.4% | ||||
6.5% 2/15/29 | 1,171,125 | 1,227,226 | ||
7% 2/15/28 to 11/15/28 | 2,785,089 | 2,954,694 | ||
7.5% 2/15/28 to 10/15/28 | 42,771 | 45,735 | ||
8% 11/15/05 to 6/15/25 | 384,252 | 409,993 | ||
8.5% 4/15/17 to 12/15/21 | 232,148 | 255,370 | ||
11% 7/20/19 to 8/20/19 | 19,957 | 22,565 | ||
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | 4,915,583 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $137,068,264) | 138,132,039 | |||
Asset-Backed Securities - 9.3% | ||||
Principal | Value | |||
ACE Securities Corp.: | ||||
Series 2002-HE2 Class A2, 1.55% 8/25/32 (d) | $ 1,561,745 | $ 1,564,128 | ||
Series 2003-FM1 Class M2, 2.97% 11/25/32 (d) | 955,000 | 955,000 | ||
ACE Securities Corp. NIMS Trust Series 2002-HE1N Class N, 8.85% 7/25/12 | 160,405 | 160,004 | ||
American Express Credit Account Master Trust: | ||||
Series 1999-2 Class B, 6.1% 12/15/06 | 1,100,000 | 1,127,758 | ||
Series 2001-2 Class A, 5.53% 10/15/08 | 1,020,000 | 1,085,372 | ||
AmeriCredit Automobile Receivables Trust: | ||||
Series 2001-C Class A4, 5.01% 7/14/08 | 6,000,000 | 6,203,361 | ||
Series 2002-A Class A4, 4.61% 1/12/09 | 5,800,000 | 6,038,142 | ||
Amortizing Residential Collateral Trust Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 134,581 | 133,572 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2 Class A2, 1.5% 4/15/33 (d) | 2,885,990 | 2,881,061 | ||
Series 2003-HE7 Class A3, 1.53% 12/15/33 (b)(d) | 3,070,000 | 3,070,000 | ||
Associates Automobile Receivables Trust Series 2000-2 Class A4, 6.9% 8/15/05 | 1,457,921 | 1,473,184 | ||
Capital One Master Trust: | ||||
Series 2001-1 Class B, 1.63% 12/15/10 (d) | 2,130,000 | 2,098,050 | ||
Series 2001-5 Class A, 5.3% 6/15/09 | 2,035,000 | 2,158,588 | ||
Series 2001-8A Class B, 1.67% 8/17/09 (d) | 3,015,000 | 2,997,451 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-2B Class B2, 3.5% 2/17/09 | 1,860,000 | 1,871,625 | ||
Series 2003-A1 Class A1, 1.51% 1/15/09 (d) | 8,975,000 | 9,036,317 | ||
Series 2003-A4 Class A4, 3.65% 7/15/11 | 1,140,000 | 1,137,907 | ||
Series 2003-B1 Class B1, 2.29% 2/17/09 (d) | 3,535,000 | 3,574,769 | ||
Series 2003-B4 Class B4, 1.92% 7/15/11 (d) | 1,680,000 | 1,680,000 | ||
CDC Mortgage Capital Trust Series 2003-HE2: | ||||
Class M1, 1.92% 10/25/33 (d) | 339,997 | 340,624 | ||
Class M2, 3.02% 10/25/33 (d) | 824,992 | 829,464 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.47% 2/15/11 (b)(d) | 2,435,000 | 2,433,028 | ||
Chase Manhattan Auto Owner Trust Series 2001-A Class CTFS, 5.06% 2/15/08 | 271,966 | 279,014 | ||
Citibank Credit Card Issuance Trust Series 2001-A8 Class A8, 4.1% 12/7/06 | 5,300,000 | 5,445,606 | ||
Citibank Credit Card Master Trust I Series 1998-9 Class A, 5.3% 1/9/06 | 1,320,000 | 1,329,847 | ||
CS First Boston Mortgage Securities Corp. NIMS Trust Series 2002-H10N Class A, 8% 11/27/32 (a) | 509,203 | 501,565 | ||
Discover Card Master Trust I Series 2001-6 Class A, 5.75% 12/15/08 | 8,000,000 | 8,637,616 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Fieldstone Mortgage Investment Corp. Series 2003-1: | ||||
Class M1, 1.8% 11/25/33 (d) | $ 300,000 | $ 300,000 | ||
Class M2, 2.87% 11/25/33 (d) | 200,000 | 200,000 | ||
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 2,605,000 | 2,656,161 | ||
Ford Credit Auto Owner Trust Series 2001-B Class B, 5.71% 9/15/05 | 560,000 | 574,350 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.5% 8/25/33 (d) | 561,666 | 561,918 | ||
Class M1, 2% 8/25/33 (d) | 765,000 | 768,991 | ||
Series 2003-4: | ||||
Class M1, 1.92% 10/25/33 (d) | 1,045,000 | 1,042,487 | ||
Class M2, 3.02% 10/25/33 (d) | 1,240,000 | 1,239,999 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (a) | 225,000 | 223,976 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (a) | 555,873 | 544,756 | ||
Series 2003-2N Class A, 8% 9/27/33 (a) | 762,143 | 746,138 | ||
Honda Auto Receivables Owner Trust Series 2001-2 Class A3, 4.67% 3/18/05 | 997,315 | 1,005,284 | ||
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 44,268 | 43,825 | ||
Long Beach Mortgage Loan Trust Series 2003-3: | ||||
Class M1, 1.87% 7/25/33 (d) | 2,460,000 | 2,460,000 | ||
Class M2, 2.97% 7/25/33 (d) | 1,260,000 | 1,261,575 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2003-B3 Class B3, 1.495% 1/18/11 (d) | 275,000 | 275,064 | ||
Series 2003-B5 Class B5, 1.49% 2/15/11 (d) | 1,805,000 | 1,805,903 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 311,751 | 311,854 | ||
Series 2003-HE1 Class M2, 3.02% 5/25/33 (d) | 1,450,000 | 1,464,632 | ||
Series 2003-NC8 Class M1, 1.82% 9/25/33 (d) | 665,000 | 665,000 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.12% 1/25/32 (d) | 1,350,000 | 1,362,090 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (a) | 755,415 | 755,721 | ||
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 134,705 | 134,836 | ||
Series 2003-NC2 Class M2, 3.12% 2/25/33 (d) | 710,000 | 716,566 | ||
Morgan Stanley Dean Witter Capital I, Inc.: | ||||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 554,370 | 554,893 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 1,033,048 | 1,032,644 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.55% 1/25/33 (d) | 2,566,717 | 2,573,904 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Nissan Auto Lease Trust Series 2003-A Class A3B, 2.57% 6/15/09 | $ 10,000,000 | $ 10,003,600 | ||
Residential Asset Mortgage Products, Inc. Series 2003-RP2 Class A1, 1.57% 9/25/33 (a)(d) | 2,624,141 | 2,624,141 | ||
Sears Credit Account Master Trust II: | ||||
Series 1996-3 Class A, 7% 7/15/08 | 1,912,500 | 1,951,975 | ||
Series 1999-1 Class A, 5.65% 3/17/09 | 1,416,667 | 1,458,512 | ||
Series 2002-4 Class A, 1.25% 8/18/09 (d) | 2,700,000 | 2,697,092 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 1.57% 3/15/11 (a)(d) | 2,320,000 | 2,320,000 | ||
Toyota Auto Receivables 2000-A Owner Trust Series 2000-A Class A4, 7.21% 4/15/07 | 1,296,290 | 1,314,425 | ||
West Penn Funding LLC Series 1999-A Class A3, 6.81% 9/25/08 | 4,500,000 | 4,811,441 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $119,305,104) | 121,506,806 | |||
Collateralized Mortgage Obligations - 4.1% | ||||
Private Sponsor - 1.7% | ||||
Merrill Lynch Mortgage Investments, Inc. Series 2003-E Class XA1, 1% 10/25/28 (d)(f) | 23,987,880 | 382,369 | ||
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 (b) | 8,200,000 | 8,455,610 | ||
Residential Finance LP/Residential Finance Development Corp. floater: | ||||
Series 2003-B: | ||||
Class B3, 2.67% 7/10/35 (a)(d) | 2,388,249 | 2,397,952 | ||
Class B4, 2.87% 7/10/35 (a)(d) | 1,791,187 | 1,797,904 | ||
Class B5, 3.47% 7/10/35 (a)(d) | 1,691,677 | 1,698,020 | ||
Class B6, 3.97% 7/10/35 (a)(d) | 796,083 | 800,064 | ||
Series 2003-CB1: | ||||
Class B3, 2.57% 6/10/35 (a)(d) | 835,628 | 837,718 | ||
Class B4, 2.77% 6/10/35 (a)(d) | 746,097 | 747,962 | ||
Class B5, 3.37% 6/10/35 (a)(d) | 507,346 | 508,614 | ||
Class B6, 3.87% 6/10/35 (a)(d) | 303,413 | 304,171 | ||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/07 (a)(f) | 88,685,000 | 1,011,009 | ||
WAMU Mortgage pass thru certificates Series 2002-S6 Class A25, 6% 10/25/32 | 2,912,266 | 2,959,742 | ||
TOTAL PRIVATE SPONSOR | 21,901,135 | |||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - 2.4% | ||||
Fannie Mae planned amortization class: | ||||
Series 1994-51 Class PH, 6.5% 1/25/23 | $ 603,539 | $ 611,525 | ||
Series 1994-81 Class PJ, 8% 7/25/23 | 3,210,000 | 3,303,170 | ||
Fannie Mae guaranteed REMIC pass thru certificates planned amortization class Series 2001-53 Class OH, 6.5% 6/25/30 | 444,886 | 454,137 | ||
Freddie Mac planned amortization class Series 2355 Class CD, 6.5% 6/15/30 | 505,570 | 513,168 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 32 Class TH, 7% 9/25/22 | 638,653 | 642,192 | ||
Freddie Mac Multi-class participation certificates guaranteed sequential pay Series 2473 Class VK, 6.5% 10/15/18 | 16,600,000 | 17,448,861 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.86% 10/16/23 (d) | 370,000 | 398,423 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | 2,030,000 | 1,969,405 | ||
Series 2003-59 Class D, 3.654% 10/16/27 | 3,060,000 | 2,862,397 | ||
Series 2001-45 Class GC, 6.5% 10/20/30 | 3,350,000 | 3,439,974 | ||
TOTAL U.S. GOVERNMENT AGENCY | 31,643,252 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $54,229,401) | 53,544,387 | |||
Commercial Mortgage Securities - 8.5% | ||||
Asset Securitization Corp.: | ||||
sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29 | 759,602 | 817,721 | ||
Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 18,943,164 | 1,250,544 | ||
Banc America Commercial Mortgage, Inc. Series 2002-2 Class XP, 1.803% 7/11/43 (a)(d)(f) | 12,355,000 | 1,048,245 | ||
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2003-BA1A Class A1, 1.4% 4/14/15 (a)(d) | 3,763,239 | 3,763,239 | ||
Chase Commercial Mortgage Securities Corp. Series 2001-245 Class A2, 6.275% 2/12/16 (a)(d) | 980,000 | 1,064,537 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
COMM floater: | ||||
Series 2001-FL5A: | ||||
Class A2, 1.67% 11/15/13 (a)(d) | $ 1,180,909 | $ 1,181,379 | ||
Class D, 2.37% 11/15/13 (a)(d) | 2,200,000 | 2,198,222 | ||
Series 2002-FL7 Class A2, 1.47% 11/15/14 (a)(d) | 1,905,000 | 1,904,480 | ||
Commercial Mortgage Asset Trust sequential pay | 2,763,263 | 3,040,775 | ||
Commercial Resecuritization Trust sequential pay | 1,466,848 | 1,549,588 | ||
CS First Boston Mortgage Securities Corp.: | ||||
sequential pay: | ||||
Series 1997-C2 Class A3, 6.55% 1/17/35 | 1,245,000 | 1,375,478 | ||
Series 1998-C1 Class A1B, 6.48% 5/17/40 | 2,885,000 | 3,190,265 | ||
Series 1999-C1 Class A2, 7.29% 9/15/41 | 7,550,000 | 8,637,755 | ||
Series 2000-C1 Class A1, 7.325% 4/14/62 | 1,664,605 | 1,829,797 | ||
Series 2001-CK3 Class A2, 6.04% 6/15/34 | 2,050,000 | 2,203,458 | ||
Series 1997-C2 Class D, 7.27% 1/17/35 | 755,000 | 834,384 | ||
Series 2001-CK6 Class AX, 0.645% 9/15/18 (f) | 35,575,853 | 1,430,950 | ||
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31 | 610,000 | 619,760 | ||
DLJ Commercial Mortgage Corp. sequential pay: | ||||
Series 1998-CF1 Class A1B, 6.41% 2/18/31 | 4,500,000 | 4,961,932 | ||
Series 2000-CF1 Class A1A, 7.45% 6/10/33 | 1,659,586 | 1,828,958 | ||
Equitable Life Assurance Society of the United States: | ||||
sequential pay Series 174 Class A1, 7.24% 5/15/06 (a) | 1,500,000 | 1,653,752 | ||
Series 174 Class C1, 7.52% 5/15/06 (a) | 1,000,000 | 1,106,953 | ||
GE Capital Commercial Mortgage Corp. Series 2001-1 Class X1, 0.791% 5/15/33 (a)(d)(f) | 23,888,411 | 979,759 | ||
GGP Mall Properties Trust sequential pay Series 2001-C1A Class A2, 5.007% 11/15/11 (a) | 4,920,480 | 5,161,327 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-36 Class C, 4.254% 2/16/31 | 1,685,000 | 1,651,219 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 3,015,000 | 2,989,519 | ||
Series 2003-59 Class XA, 0.3% 6/16/34 (d)(f) | 15,384,615 | 1,180,892 | ||
Series 2003-47 Class XA, 0.2917% 6/16/43 (d)(f) | 9,504,691 | 562,117 | ||
Series 2003-64 Class XA, 0.5018% 8/16/43 (d)(f) | 82,838,406 | 5,080,314 | ||
GS Mortgage Securities Corp. II Series 2003-C1 | 1,560,000 | 1,557,781 | ||
Heller Financial Commercial Mortgage Asset Corp. sequential pay Series 2000-PH1 Class A1, 7.715% 1/17/34 | 2,699,836 | 2,978,890 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Hilton Hotel Pool Trust sequential pay Series 2000-HLTA Class A1, 7.055% 10/3/15 (a) | $ 1,584,716 | $ 1,726,960 | ||
J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 2000-C10 Class A1, 7.1075% 8/15/32 | 1,435,291 | 1,569,706 | ||
LB Commercial Conduit Mortgage Trust sequential pay Series 1999-C1 Class A2, 6.78% 6/15/31 | 5,370,000 | 6,050,663 | ||
LB-UBS Commercial Mortgage Trust sequential pay Series 2000-C3 Class A1, 7.95% 7/15/09 | 2,626,945 | 2,920,606 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class B, 4.13% 11/20/37 (a) | 4,000,000 | 3,730,000 | ||
Morgan Stanley Capital I, Inc. sequential pay Series 1997-HF1 Class A2, 7.27% 7/15/29 (a) | 3,355,024 | 3,641,631 | ||
Morgan Stanley Dean Witter Capital I Trust sequential pay Series 2001-PPM Class A2, 6.4% 2/15/31 | 3,214,225 | 3,499,418 | ||
Nationslink Funding Corp. sequential pay Series 1999-2 Class A1C, 7.03% 6/20/31 | 1,604,349 | 1,742,474 | ||
Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A2, 6.602% 11/15/07 (a) | 2,500,000 | 2,751,674 | ||
Trizechahn Office Properties Trust Series 2001-TZHA: | ||||
Class C3, 6.522% 3/15/13 (a) | 3,675,000 | 3,910,992 | ||
Class C4, 6.893% 5/15/16 (a) | 8,000,000 | 8,794,116 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $105,775,063) | 109,972,230 | |||
Municipal Securities - 0.1% | ||||
Illinois Gen. Oblig.: | ||||
3.3% 6/1/10 | 335,000 | 320,434 | ||
3.55% 6/1/11 | 270,000 | 257,696 | ||
3.75% 6/1/12 | 870,000 | 826,500 | ||
TOTAL MUNICIPAL SECURITIES (Cost $1,472,235) | 1,404,630 | |||
Foreign Government and Government Agency Obligations - 1.9% | ||||
Principal | Value | |||
Bahamian Republic 6.625% 5/15/33 (a) | $ 990,000 | $ 1,000,266 | ||
Chilean Republic: | ||||
5.5% 1/15/13 | 1,655,000 | 1,693,562 | ||
5.625% 7/23/07 | 1,210,000 | 1,291,675 | ||
7.125% 1/11/12 | 2,900,000 | 3,291,500 | ||
Ontario Province 5.5% 10/1/08 | 4,000,000 | 4,341,280 | ||
Quebec Province yankee 6.5% 1/17/06 | 2,000,000 | 2,172,900 | ||
State of Israel 4.625% 6/15/13 | 665,000 | 624,269 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 2,470,000 | 2,476,175 | ||
6.375% 1/16/13 | 1,560,000 | 1,605,240 | ||
7.5% 1/14/12 | 3,650,000 | 4,069,750 | ||
8% 9/24/22 | 2,000,000 | 2,175,000 | ||
TOTAL FOREIGN GOVERNMENT AND (Cost $23,046,722) | 24,741,617 | |||
Fixed-Income Funds - 10.3% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 1,345,518 | 133,838,666 | |
Cash Equivalents - 0.6% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 7,639,681 | 7,639,000 | |
TOTAL INVESTMENT PORTFOLIO - 104.4% (Cost $1,322,114,667) | 1,358,586,219 | ||
NET OTHER ASSETS - (4.4)% | (56,773,634) | ||
NET ASSETS - 100% | $ 1,301,812,585 | ||
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
20 Eurodollar 90 Day Index Contracts | March 2005 | $ 19,854,500 | $ 94,380 | ||
20 Eurodollar 90 Day Index Contracts | June 2005 | 19,836,500 | 83,880 | ||
41 Eurodollar 90 Day Index Contracts | Sept. 2005 | 40,632,025 | 103,379 | ||
87 Eurodollar 90 Day Index Contracts | Dec. 2005 | 86,161,538 | 176,878 | ||
57 Eurodollar 90 Day Index Contracts | March 2006 | 56,416,463 | 119,395 | ||
65 Eurodollar 90 Day Index Contracts | June 2006 | 64,298,000 | 65,273 | ||
65 Eurodollar 90 Day Index Contracts | Sept. 2006 | 64,353,875 | 59,910 | ||
95 Eurodollar 90 Day Index Contracts | Dec. 2006 | 93,874,250 | 45,030 | ||
65 Eurodollar 90 Day Index Contracts | March 2007 | 64,201,583 | 39,697 | ||
60 Eurodollar 90 Day Index Contracts | June 2007 | 59,238,000 | 97,140 | ||
884,962 | |||||
Swap Agreements | |||||
Notional | |||||
Credit Default Swap | |||||
Receive quarterly notional amount multiplied by .62% and pay Goldman Sachs upon default of SLM Corp., par value of the notional amount of SLM Corp. 1.1106% 7/25/35 | August 2007 | $ 490,000 | 4,324 | ||
Receive quarterly notional amount multiplied by 1.45% and pay Deutsche Bank upon default event of News America, Inc., par value of the notional amount of News America, Inc. 6.625% 1/9/08 | April 2010 | 2,000,000 | 79,517 | ||
TOTAL CREDIT DEFAULT SWAP | 2,490,000 | 83,841 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.098% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2007 | 14,440,000 | 38,094 | ||
Receive quarterly a fixed rate equal to 3.1422% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2007 | 12,300,000 | 55,400 | ||
TOTAL INTEREST RATE SWAP | 26,740,000 | 93,494 | |||
$ 29,230,000 | $ 177,335 | ||||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $114,681,464 or 8.8% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $659,678. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,606,216,950 and $1,447,360,056, respectively, of which long-term U.S. government and government agency obligations aggregated $1,097,763,153 and $1,071,013,440, respectively. |
The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which the loan was outstanding amounted to $5,814,000. The weighted average interest rate was 1.37%. Interest earned from the interfund lending program amounted to $222 and is included in interest income on the Statement of Operations. At period end there were no interfund loans outstanding. |
Income Tax Information |
The fund hereby designates approximately $3,891,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $7,639,000) (cost $ 1,322,114,667) - - See accompanying schedule | $ 1,358,586,219 | |
Cash | 76,355 | |
Receivable for investments sold | 7,244,573 | |
Delayed delivery | 622,738 | |
Receivable for fund shares sold | 2,688,491 | |
Interest receivable | 13,968,963 | |
Receivable for daily variation on futures contracts | 20,912 | |
Unrealized gain on swap agreements | 177,335 | |
Prepaid expenses | 7,392 | |
Total assets | 1,383,392,978 | |
Liabilities | ||
Payable for investments purchased | $ 16,561,160 | |
Delayed delivery | 58,415,422 | |
Payable for fund shares redeemed | 5,037,045 | |
Distributions payable | 393,980 | |
Accrued management fee | 468,279 | |
Distribution fees payable | 385,364 | |
Other payables and accrued expenses | 319,143 | |
Total liabilities | 81,580,393 | |
Net Assets | $ 1,301,812,585 | |
Net Assets consist of: | ||
Paid in capital | $ 1,245,994,038 | |
Undistributed net investment income | 4,047,313 | |
Accumulated undistributed net realized gain (loss) on investments | 14,237,385 | |
Net unrealized appreciation (depreciation) on investments | 37,533,849 | |
Net Assets | $ 1,301,812,585 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 11.32 | |
Maximum offering price per share (100/96.25 of $11.32) | $ 11.76 | |
Class T: | $ 11.32 | |
Maximum offering price per share (100/97.25 of $11.32) | $ 11.64 | |
Class B: | $ 11.31 | |
Class C: | $ 11.30 | |
Institutional Class: | $ 11.34 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 60,303,095 | |
Security lending | 10,734 | |
Total income | 60,313,829 | |
Expenses | ||
Management fee | $ 5,730,092 | |
Transfer agent fees | 2,684,043 | |
Distribution fees | 4,836,145 | |
Accounting and security lending fees | 302,443 | |
Non-interested trustees' compensation | 5,845 | |
Custodian fees and expenses | 58,215 | |
Registration fees | 149,511 | |
Audit | 56,125 | |
Legal | 11,377 | |
Miscellaneous | 6,252 | |
Total expenses before reductions | 13,840,048 | |
Expense reductions | (4,339) | 13,835,709 |
Net investment income (loss) | 46,478,120 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 23,440,722 | |
Futures contracts | 914,642 | |
Total net realized gain (loss) | 24,355,364 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 2,409,676 | |
Futures contracts | (75,344) | |
Swap agreements | 177,335 | |
Delayed delivery commitments | 60,708 | |
Total change in net unrealized appreciation (depreciation) | 2,572,375 | |
Net gain (loss) | 26,927,739 | |
Net increase (decrease) in net assets resulting from operations | $ 73,405,859 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 46,478,120 | $ 45,482,487 |
Net realized gain (loss) | 24,355,364 | 8,828,632 |
Change in net unrealized appreciation (depreciation) | 2,572,375 | (874,800) |
Net increase (decrease) in net assets resulting | 73,405,859 | 53,436,319 |
Distributions to shareholders from net investment income | (45,500,193) | (45,483,711) |
Share transactions - net increase (decrease) | 65,287,174 | 294,234,320 |
Total increase (decrease) in net assets | 93,192,840 | 302,186,928 |
Net Assets | ||
Beginning of period | 1,208,619,745 | 906,432,817 |
End of period (including undistributed net investment income of $4,047,313 and undistributed net investment income of $3,110,971, respectively) | $ 1,301,812,585 | $ 1,208,619,745 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.06 | $ 11.01 | $ 10.30 | $ 10.30 | $ 10.77 |
Income from Investment Operations | |||||
Net investment income (loss)C | .420 | .521E | .619 | .629 | .580 |
Net realized and unrealized gain (loss) | .254 | .055E | .713 | (.002) | (.474) |
Total from investment operations | .674 | .576 | 1.332 | .627 | .106 |
Distributions from net investment income | (.414) | (.526) | (.622) | (.627) | (.576) |
Net asset value, end of period | $ 11.32 | $ 11.06 | $ 11.01 | $ 10.30 | $ 10.30 |
Total ReturnA,B | 6.16% | 5.44% | 13.28% | 6.32% | 1.00% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .81% | .83% | .83% | .84% | .87% |
Expenses net of voluntary | .81% | .83% | .83% | .84% | .87% |
Expenses net of all reductions | .81% | .82% | .82% | .84% | .86% |
Net investment income (loss) | 3.72% | 4.82%E | 5.82% | 6.20% | 5.58% |
Supplemental Data | |||||
Net assets, end of period | $ 166,701 | $ 133,236 | $ 92,027 | $ 48,177 | $ 22,628 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.06 | $ 11.02 | $ 10.31 | $ 10.31 | $ 10.77 |
Income from Investment Operations | |||||
Net investment income (loss)C | .408 | .508E | .603 | .620 | .576 |
Net realized and unrealized gain (loss) | .253 | .044E | .713 | (.006) | (.473) |
Total from investment operations | .661 | .552 | 1.316 | .614 | .103 |
Distributions from net investment income | (.401) | (.512) | (.606) | (.614) | (.563) |
Net asset value, end of period | $ 11.32 | $ 11.06 | $ 11.02 | $ 10.31 | $ 10.31 |
Total ReturnA,B | 6.03% | 5.21% | 13.11% | 6.18% | .98% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .95% | .97% | .97% | .97% |
Expenses net of voluntary | .93% | .95% | .97% | .97% | .97% |
Expenses net of all reductions | .93% | .95% | .97% | .97% | .97% |
Net investment income (loss) | 3.60% | 4.70%E | 5.67% | 6.07% | 5.48% |
Supplemental Data | |||||
Net assets, end of period | $ 711,263 | $ 684,618 | $ 546,276 | $ 313,887 | $ 315,350 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.05 | $ 11.01 | $ 10.30 | $ 10.30 | $ 10.76 |
Income from Investment Operations | |||||
Net investment income (loss)C | .331 | .436E | .534 | .553 | .506 |
Net realized and unrealized gain (loss) | .253 | .044E | .713 | (.006) | (.467) |
Total from investment operations | .584 | .480 | 1.247 | .547 | .039 |
Distributions from net investment income | (.324) | (.440) | (.537) | (.547) | (.499) |
Net asset value, end of period | $ 11.31 | $ 11.05 | $ 11.01 | $ 10.30 | $ 10.30 |
Total ReturnA,B | 5.32% | 4.52% | 12.40% | 5.50% | .37% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Expenses net of voluntary | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Expenses net of all reductions | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Net investment income (loss) | 2.92% | 4.03%E | 5.02% | 5.42% | 4.83% |
Supplemental Data | |||||
Net assets, end of period | $ 154,697 | $ 178,062 | $ 113,424 | $ 63,584 | $ 64,532 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.04 | $ 11.00 | $ 10.29 | $ 10.29 | $ 10.76 |
Income from Investment Operations | |||||
Net investment income (loss)C | .322 | .428E | .525 | .545 | .492 |
Net realized and unrealized gain (loss) | .254 | .044E | .716 | (.005) | (.472) |
Total from investment operations | .576 | .472 | 1.241 | .540 | .020 |
Distributions from net investment income | (.316) | (.432) | (.531) | (.540) | (.490) |
Net asset value, end of period | $ 11.30 | $ 11.04 | $ 11.00 | $ 10.29 | $ 10.29 |
Total ReturnA,B | 5.26% | 4.45% | 12.34% | 5.42% | .19% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Expenses net of voluntary | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Expenses net of all reductions | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Net investment income (loss) | 2.86% | 3.96%E | 4.96% | 5.35% | 4.73% |
Supplemental Data | |||||
Net assets, end of period | $ 113,849 | $ 98,158 | $ 63,538 | $ 20,530 | $ 17,099 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.08 | $ 11.03 | $ 10.32 | $ 10.31 | $ 10.78 |
Income from Investment Operations | |||||
Net investment income (loss)B | .437 | .539D | .638 | .656 | .610 |
Net realized and unrealized gain (loss) | .254 | .053D | .711 | (.002) | (.485) |
Total from investment operations | .691 | .592 | 1.349 | .654 | .125 |
Distributions from net investment income | (.431) | (.542) | (.639) | (.644) | (.595) |
Net asset value, end of period | $ 11.34 | $ 11.08 | $ 11.03 | $ 10.32 | $ 10.31 |
Total ReturnA | 6.30% | 5.59% | 13.45% | 6.59% | 1.19% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .66% | .67% | .66% | .65% | .66% |
Expenses net of voluntary | .66% | .67% | .66% | .65% | .66% |
Expenses net of all reductions | .66% | .67% | .66% | .65% | .66% |
Net investment income (loss) | 3.87% | 4.97%D | 5.98% | 6.39% | 5.78% |
Supplemental Data | |||||
Net assets, end of period | $ 155,302 | $ 114,546 | $ 91,168 | $ 88,350 | $ 157,131 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 46,053,102 | | |
Unrealized depreciation | (6,296,436) | |
Net unrealized appreciation (depreciation) | 39,756,666 | |
Undistributed ordinary income | 3,629,478 | |
Undistributed long-term capital gain | 10,532,417 | |
Cost for federal income tax purposes | $ 1,318,829,553 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 45,500,193 | $ 45,483,711 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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 any 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 counter-parties 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - continued
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period,
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 248,472 | $ 1,193 |
Class T | 0% | .25% | 1,844,222 | 7,628 |
Class B | .65% | .25% | 1,618,381 | 1,168,552 |
Class C | .75% | .25% | 1,125,070 | 328,737 |
$ 4,836,145 | $ 1,506,110 |
Sales Load. FDC receives a front-end sales charge of up to 3.75% for selling Class A shares, and 2.75% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 126,242 |
Class T | 16,320 |
Class B* | 438,127 |
Class C* | 35,632 |
$ 616,321 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 305,061 | .18 |
Class T | 1,486,781 | .20 |
Class B | 416,951 | .23 |
Class C | 221,722 | .20 |
Institutional Class | 253,528 | .19 |
$ 2,684,043 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,554,824 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $4,090. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | | | |
Class A | $ 249 |
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 6,007,552 | $ 5,125,792 |
Class T | 26,063,302 | 27,140,787 |
Class B | 5,170,345 | 5,289,775 |
Class C | 3,124,274 | 2,853,534 |
Institutional Class | 5,134,720 | 5,073,823 |
Total | $ 45,500,193 | $ 45,483,711 |
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 10,510,963 | 9,771,131 | $ 119,339,179 | $ 106,005,125 |
Reinvestment of distributions | 465,922 | 420,199 | 5,276,440 | 4,558,153 |
Shares redeemed | (8,293,215) | (6,497,238) | (93,804,272) | (70,300,571) |
Net increase (decrease) | 2,683,670 | 3,694,092 | $ 30,811,347 | $ 40,262,707 |
Class T | ||||
Shares sold | 33,381,968 | 38,686,726 | $ 377,422,827 | $ 420,063,872 |
Reinvestment of distributions | 2,175,248 | 2,361,958 | 24,637,768 | 25,618,104 |
Shares redeemed | (34,611,992) | (28,735,485) | (391,598,532) | (311,143,526) |
Net increase (decrease) | 945,224 | 12,313,199 | $ 10,462,063 | $ 134,538,450 |
Class B | ||||
Shares sold | 5,268,992 | 10,678,416 | $ 59,474,046 | $ 115,913,682 |
Reinvestment of distributions | 351,056 | 384,737 | 3,970,085 | 4,171,299 |
Shares redeemed | (8,053,311) | (5,252,751) | (90,955,890) | (56,764,837) |
Net increase (decrease) | (2,433,263) | 5,810,402 | $ (27,511,759) | $ 63,320,144 |
Class C | ||||
Shares sold | 5,050,415 | 6,232,223 | $ 57,002,414 | $ 67,477,314 |
Reinvestment of distributions | 219,498 | 213,210 | 2,481,384 | 2,310,669 |
Shares redeemed | (4,082,715) | (3,332,015) | (46,050,425) | (36,064,636) |
Net increase (decrease) | 1,187,198 | 3,113,418 | $ 13,433,373 | $ 33,723,347 |
Institutional Class | ||||
Shares sold | 6,597,666 | 5,853,822 | $ 74,769,322 | $ 63,463,448 |
Reinvestment of distributions | 328,037 | 317,927 | 3,720,880 | 3,454,065 |
Shares redeemed | (3,566,218) | (4,094,020) | (40,398,052) | (44,527,841) |
Net increase (decrease) | 3,359,485 | 2,077,729 | $ 38,092,150 | $ 22,389,672 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Intermediate Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Intermediate Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Intermediate Bond (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II Trust. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Intermediate Bond. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Intermediate Bond. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Kevin Grant (43) | |
Year of Election or Appointment: 2003 Vice President of Advisor Intermediate Bond. Mr. Grant is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Grant managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Intermediate Bond. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Intermediate Bond. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Intermediate Bond. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Intermediate Bond. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Intermediate Bond. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Intermediate Bond. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Advisor Intermediate Bond. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Intermediate Bond. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Intermediate Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Intermediate Bond. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Intermediate Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Class A | 12/8/03 | 12/5/03 | $0.10 |
Class T | 12/8/03 | 12/5/03 | $0.10 |
Class B | 12/8/03 | 12/5/03 | $0.10 |
Class C | 12/8/03 | 12/5/03 | $0.10 |
A total of 8.14% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Not Part of Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money
Management, Inc.
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
LTB-UANN-1203
1.784752.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Intermediate Bond
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional Class | 6.30% | 6.55% | 6.01% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Intermediate Bond Fund - Institutional Class on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Intermediate Government/Credit Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Kevin Grant, Portfolio Manager of Fidelity® Advisor Intermediate Bond Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Intermediate Bond Fund's Institutional Class shares rose 6.30% during the one-year period ending October 31, 2003. In comparison, the LipperSM Short-Intermediate Investment Grade Debt Funds Average and the Lehman Brothers Intermediate Government/Credit Bond Index returned 4.06% and 5.43%, respectively. It was an ideal time to be in riskier assets, and the fund was rewarded for overweighting corporate bonds, which rebounded sharply from last fall's depressed levels amid improved credit conditions. Security selection and timely trading in corporates further aided performance, particularly among BBB-rated issues that had big recoveries. Another plus was avoiding most major rating downgrades that hampered the index and peer average. That said, we did have a few holdings that faltered, but they were very small positions. Complementing our overweighting in corporates was our continued underweighting in government bonds, most notably Treasuries, which, despite posting positive returns, trailed the overall market by a sizable margin. As a result, we captured the massive performance disparity between the segments, with results benefiting not only from the high coupon income received during the period, but also from the capital appreciation on our investments. Elsewhere, while the mortgage sector struggled against a backdrop of increased volatility, the fund did well by generally owning the right bonds.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| U.S. Government and | | U.S. Government and | ||||
| AAA 15.8% | | AAA 13.7% | ||||
| AA 6.3% | | AA 6.6% | ||||
| A 19.6% | | A 17.5% | ||||
| BBB 23.3% | | BBB 18.0% | ||||
| BB and Below 2.0% | | BB and Below 1.6% | ||||
| Not Rated 1.5% | | Not Rated 0.2% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 4.8 | 4.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 3.9 | 3.5 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Corporate Bonds 42.4% | | Corporate Bonds 36.3% | ||||
| U.S. Government and | | U.S. Government and | ||||
| Asset-Backed | | Asset-Backed | ||||
| CMOs and Other Mortgage Related Securities 10.7% | | CMOs and Other Mortgage Related Securities 8.4% | ||||
| Municipal Bonds 0.1% | | Municipal Bonds 0.0% | ||||
| Other Investments 1.9% | | Other Investments 2.2% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 9.2% | ** Foreign investments | 6.5% | ||||
* Futures and Swaps | 9.2% | ** Futures and Swaps | 7.8% | ||||
(dagger)Short-Term Investments and Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 41.6% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 3.9% | ||||
Auto Components - 0.7% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.75% 1/15/08 | $ 2,400,000 | $ 2,398,034 | ||
6.4% 5/15/06 | 1,000,000 | 1,068,991 | ||
6.9% 9/1/04 | 1,500,000 | 1,554,911 | ||
7.2% 9/1/09 | 680,000 | 738,584 | ||
7.4% 1/20/05 | 800,000 | 845,703 | ||
7.75% 6/15/05 | 2,100,000 | 2,263,181 | ||
8,869,404 | ||||
Media - 3.2% | ||||
AOL Time Warner, Inc.: | ||||
6.125% 4/15/06 | 2,400,000 | 2,581,450 | ||
6.75% 4/15/11 | 1,700,000 | 1,878,418 | ||
6.875% 5/1/12 | 4,300,000 | 4,760,934 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 2,000,000 | 2,215,000 | ||
Clear Channel Communications, Inc.: | ||||
5.75% 1/15/13 | 700,000 | 724,639 | ||
7.65% 9/15/10 | 5,185,000 | 6,039,084 | ||
Continental Cablevision, Inc. 8.3% 5/15/06 | 6,520,000 | 7,301,285 | ||
Cox Communications, Inc.: | ||||
7.125% 10/1/12 | 1,235,000 | 1,401,726 | ||
7.5% 8/15/04 | 1,850,000 | 1,925,406 | ||
7.75% 8/15/06 | 1,450,000 | 1,636,959 | ||
Hearst-Argyle Television, Inc. 7% 11/15/07 | 1,000,000 | 1,089,224 | ||
Liberty Media Corp. 5.7% 5/15/13 | 1,900,000 | 1,857,567 | ||
News America Holdings, Inc. 7.375% 10/17/08 | 2,000,000 | 2,280,114 | ||
News America, Inc.: | ||||
4.75% 3/15/10 | 2,000,000 | 2,033,946 | ||
6.625% 1/9/08 | 1,700,000 | 1,887,513 | ||
Walt Disney Co. 5.375% 6/1/07 | 2,000,000 | 2,135,990 | ||
41,749,255 | ||||
TOTAL CONSUMER DISCRETIONARY | 50,618,659 | |||
CONSUMER STAPLES - 1.2% | ||||
Beverages - 0.3% | ||||
Miller Brewing Co. 4.25% 8/15/08 (a) | 3,740,000 | 3,776,850 | ||
Food & Staples Retailing - 0.1% | ||||
Fred Meyer, Inc. 7.375% 3/1/05 | 985,000 | 1,052,096 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Food Products - 0.0% | ||||
Kraft Foods, Inc. 5.25% 6/1/07 | $ 330,000 | $ 350,185 | ||
Tobacco - 0.8% | ||||
Altria Group, Inc. 7% 11/4/13 | 2,380,000 | 2,379,334 | ||
Philip Morris Companies, Inc.: | ||||
7.2% 2/1/07 | 2,000,000 | 2,122,156 | ||
7.5% 4/1/04 | 750,000 | 764,043 | ||
7.65% 7/1/08 | 4,635,000 | 5,000,270 | ||
10,265,803 | ||||
TOTAL CONSUMER STAPLES | 15,444,934 | |||
ENERGY - 1.2% | ||||
Energy Equipment & Services - 0.6% | ||||
Kinder Morgan, Inc. 6.5% 9/1/12 | 5,730,000 | 6,310,821 | ||
Weatherford International Ltd. 4.95% 10/15/13 | 1,300,000 | 1,274,939 | ||
7,585,760 | ||||
Oil & Gas - 0.6% | ||||
Canada Occidental Petroleum Ltd. yankee 7.125% 2/4/04 | 2,000,000 | 2,027,460 | ||
Duke Energy Field Services LLC 7.875% 8/16/10 | 3,250,000 | 3,797,459 | ||
Union Pacific Resources Group, Inc. 7% 10/15/06 | 2,700,000 | 2,992,942 | ||
8,817,861 | ||||
TOTAL ENERGY | 16,403,621 | |||
FINANCIALS - 21.4% | ||||
Capital Markets - 3.0% | ||||
Amvescap PLC: | ||||
5.9% 1/15/07 | 665,000 | 716,480 | ||
yankee 6.6% 5/15/05 | 4,000,000 | 4,254,804 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (d) | 1,300,000 | 1,271,721 | ||
4.25% 9/4/12 (d) | 1,510,000 | 1,536,803 | ||
Bear Stearns Companies, Inc. 5.7% 1/15/07 | 880,000 | 951,857 | ||
Credit Suisse First Boston (USA), Inc. 6.5% 1/15/12 | 2,460,000 | 2,716,625 | ||
Goldman Sachs Group, Inc. 4.125% 1/15/08 | 4,550,000 | 4,645,373 | ||
J.P. Morgan Chase & Co.: | ||||
4% 2/1/08 | 1,125,000 | 1,141,152 | ||
5.35% 3/1/07 | 3,270,000 | 3,510,522 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Legg Mason, Inc. 6.75% 7/2/08 | $ 3,710,000 | $ 4,131,642 | ||
Lehman Brothers Holdings, Inc.: | ||||
4% 1/22/08 | 1,600,000 | 1,623,267 | ||
6.25% 5/15/06 | 2,400,000 | 2,614,572 | ||
Merrill Lynch & Co., Inc.: | ||||
4% 11/15/07 | 2,000,000 | 2,044,456 | ||
6.15% 1/26/06 | 625,000 | 678,921 | ||
Morgan Stanley: | ||||
5.3% 3/1/13 | 4,760,000 | 4,830,748 | ||
5.8% 4/1/07 | 740,000 | 807,579 | ||
RBSG Capital Corp. 10.125% 3/1/04 | 1,500,000 | 1,540,910 | ||
39,017,432 | ||||
Commercial Banks - 2.2% | ||||
Bank of America Corp.: | ||||
3.875% 1/15/08 | 600,000 | 608,626 | ||
4.75% 10/15/06 | 985,000 | 1,038,880 | ||
6.25% 4/15/12 | 840,000 | 921,658 | ||
7.125% 9/15/06 | 2,000,000 | 2,237,618 | ||
Fleet Financial Group, Inc. 7.125% 4/15/06 | 2,240,000 | 2,471,616 | ||
FleetBoston Financial Corp.: | ||||
3.85% 2/15/08 | 1,000,000 | 1,012,220 | ||
7.25% 9/15/05 | 1,315,000 | 1,436,716 | ||
Korea Development Bank: | ||||
5.75% 9/10/13 | 3,680,000 | 3,764,846 | ||
7.375% 9/17/04 | 1,110,000 | 1,162,549 | ||
Mellon Bank NA, Pittsburgh: | ||||
6.5% 8/1/05 | 2,000,000 | 2,148,140 | ||
7.375% 5/15/07 | 1,800,000 | 2,067,426 | ||
Mercantile Bancorp, Inc. 7.3% 6/15/07 | 835,000 | 958,014 | ||
PNC Funding Corp. 5.75% 8/1/06 | 5,215,000 | 5,608,357 | ||
Popular North America, Inc. 6.125% 10/15/06 | 1,295,000 | 1,408,983 | ||
U.S. Bank NA, Minnesota 5.7% 12/15/08 | 2,000,000 | 2,169,240 | ||
29,014,889 | ||||
Consumer Finance - 5.9% | ||||
American General Finance Corp.: | ||||
2.75% 6/15/08 | 65,000 | 62,097 | ||
5.375% 10/1/12 | 3,050,000 | 3,082,043 | ||
5.875% 7/14/06 | 2,260,000 | 2,440,569 | ||
Associates Corp. of North America 7.75% 2/15/05 | 2,700,000 | 2,884,526 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Consumer Finance - continued | ||||
Capital One Bank: | ||||
4.875% 5/15/08 | $ 2,170,000 | $ 2,225,220 | ||
6.5% 7/30/04 | 2,000,000 | 2,065,102 | ||
6.5% 6/13/13 | 2,315,000 | 2,386,163 | ||
Ford Motor Credit Co.: | ||||
5.8% 1/12/09 | 3,265,000 | 3,180,672 | ||
6.5% 1/25/07 | 300,000 | 309,537 | ||
7.375% 10/28/09 | 8,650,000 | 8,947,283 | ||
General Electric Capital Corp. 3.5% 8/15/07 | 10,000,000 | 10,087,200 | ||
General Motors Acceptance Corp.: | ||||
6.125% 2/1/07 | 910,000 | 955,574 | ||
6.125% 8/28/07 | 910,000 | 958,635 | ||
6.75% 1/15/06 | 8,165,000 | 8,705,548 | ||
6.875% 9/15/11 | 6,415,000 | 6,617,733 | ||
7.5% 7/15/05 | 145,000 | 155,253 | ||
7.75% 1/19/10 | 2,060,000 | 2,240,215 | ||
Household Finance Corp.: | ||||
5.875% 2/1/09 | 1,055,000 | 1,140,899 | ||
6.375% 11/27/12 | 1,595,000 | 1,736,949 | ||
6.5% 1/24/06 | 2,140,000 | 2,328,611 | ||
6.75% 5/15/11 | 3,000,000 | 3,357,258 | ||
Household International, Inc. 8.875% 2/15/08 | 2,550,000 | 2,885,004 | ||
MBNA Corp. 6.25% 1/17/07 | 1,155,000 | 1,251,753 | ||
SLM Corp. 3.625% 3/17/08 | 3,900,000 | 3,898,089 | ||
Wells Fargo Financial, Inc. 5.875% 8/15/08 | 1,900,000 | 2,099,853 | ||
76,001,786 | ||||
Diversified Financial Services - 5.6% | ||||
Alliance Capital Management LP 5.625% 8/15/06 | 1,495,000 | 1,612,094 | ||
Ameritech Capital Funding Corp. euro 6.25% 5/18/09 | 1,100,000 | 1,194,380 | ||
ASIF Global Financing XVIII 3.85% 11/26/07 (a) | 25,000 | 25,236 | ||
Cadbury Schweppes U.S. Finance LLC: | ||||
3.875% 10/1/08 (a) | 1,675,000 | 1,662,020 | ||
5.125% 10/1/13 (a) | 1,055,000 | 1,059,420 | ||
CIT Group, Inc.: | ||||
3.875% 11/3/08 | 740,000 | 733,972 | ||
7.75% 4/2/12 | 2,000,000 | 2,334,124 | ||
Citigroup, Inc.: | ||||
3.5% 2/1/08 | 2,770,000 | 2,767,886 | ||
7.25% 10/1/10 | 700,000 | 814,375 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Delta Air Lines, Inc. pass thru trust certificates: | ||||
7.57% 11/18/10 | $ 2,020,000 | $ 2,079,130 | ||
7.92% 5/18/12 | 4,845,000 | 4,284,445 | ||
Deutsche Telekom International Finance BV: | ||||
5.25% 7/22/13 | 1,635,000 | 1,624,922 | ||
8.5% 6/15/10 | 5,700,000 | 6,860,001 | ||
Monumental Global Funding II 6.05% 1/19/06 (a) | 4,500,000 | 4,876,029 | ||
NiSource Finance Corp.: | ||||
3.2% 11/1/06 | 1,220,000 | 1,218,316 | ||
7.875% 11/15/10 | 4,355,000 | 5,153,010 | ||
Pemex Project Funding Master Trust: | ||||
6.125% 8/15/08 | 1,000,000 | 1,051,000 | ||
7.375% 12/15/14 | 3,000,000 | 3,150,000 | ||
7.875% 2/1/09 (d) | 3,000,000 | 3,360,000 | ||
Petronas Capital Ltd. 7% 5/22/12 (a) | 4,495,000 | 5,004,823 | ||
Salomon Smith Barney Holdings, Inc. 6.5% 2/15/08 | 2,425,000 | 2,697,526 | ||
Sprint Capital Corp. 6.125% 11/15/08 | 2,100,000 | 2,211,754 | ||
Verizon Global Funding Corp.: | ||||
6.125% 6/15/07 | 500,000 | 546,500 | ||
7.25% 12/1/10 | 4,837,000 | 5,524,159 | ||
7.375% 9/1/12 | 7,040,000 | 8,073,585 | ||
7.75% 6/15/32 | 2,000,000 | 2,318,354 | ||
Verizon Wireless Capital LLC 5.375% 12/15/06 | 95,000 | 101,459 | ||
72,338,520 | ||||
Insurance - 1.6% | ||||
Aegon NV 4.75% 6/1/13 | 3,400,000 | 3,284,594 | ||
Allstate Corp. 7.875% 5/1/05 | 2,060,000 | 2,239,519 | ||
Hartford Financial Services Group, Inc.: | ||||
2.375% 6/1/06 | 730,000 | 722,132 | ||
4.625% 7/15/13 (a) | 730,000 | 695,971 | ||
Principal Life Global Funding I: | ||||
5.125% 6/28/07 (a) | 4,000,000 | 4,248,548 | ||
6.25% 2/15/12 (a) | 5,000,000 | 5,422,740 | ||
Prudential Financial, Inc. 3.75% 5/1/08 | 1,640,000 | 1,634,960 | ||
St. Paul Companies, Inc. 8.125% 4/15/10 | 1,750,000 | 2,110,355 | ||
Travelers Property Casualty Corp. 5% 3/15/13 | 835,000 | 828,053 | ||
21,186,872 | ||||
Real Estate - 2.4% | ||||
AMB Property LP 7.2% 12/15/05 | 2,000,000 | 2,194,234 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Real Estate - continued | ||||
Arden Realty LP: | ||||
7% 11/15/07 | $ 3,460,000 | $ 3,806,996 | ||
8.875% 3/1/05 | 2,590,000 | 2,807,770 | ||
AvalonBay Communities, Inc. 5% 8/1/07 | 1,380,000 | 1,446,175 | ||
Boston Properties, Inc. 6.25% 1/15/13 | 2,500,000 | 2,661,303 | ||
BRE Properties, Inc. 5.95% 3/15/07 | 875,000 | 933,569 | ||
Camden Property Trust 5.875% 11/30/12 | 1,700,000 | 1,773,415 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 1,940,000 | 2,004,845 | ||
CenterPoint Properties Trust 6.75% 4/1/05 | 640,000 | 676,587 | ||
Developers Diversified Realty Corp. 4.625% 8/1/10 | 2,325,000 | 2,321,350 | ||
EOP Operating LP: | ||||
6.5% 1/15/04 | 1,675,000 | 1,690,639 | ||
7.75% 11/15/07 | 3,775,000 | 4,323,904 | ||
Gables Realty LP 5.75% 7/15/07 | 1,915,000 | 2,025,779 | ||
ProLogis 6.7% 4/15/04 | 2,790,000 | 2,859,502 | ||
31,526,068 | ||||
Thrifts & Mortgage Finance - 0.7% | ||||
Abbey National PLC 6.69% 10/17/05 | 1,020,000 | 1,109,682 | ||
Countrywide Home Loans, Inc.: | ||||
3.25% 5/21/08 | 3,460,000 | 3,372,739 | ||
5.5% 8/1/06 | 70,000 | 74,677 | ||
6.935% 7/16/07 | 2,450,000 | 2,717,339 | ||
Washington Mutual, Inc.: | ||||
4.375% 1/15/08 | 1,665,000 | 1,704,937 | ||
5.625% 1/15/07 | 175,000 | 188,518 | ||
9,167,892 | ||||
TOTAL FINANCIALS | 278,253,459 | |||
INDUSTRIALS - 2.1% | ||||
Aerospace & Defense - 0.9% | ||||
Bombardier, Inc. 6.75% 5/1/12 (a) | 815,000 | 865,938 | ||
Raytheon Co.: | ||||
4.5% 11/15/07 | 2,000,000 | 2,005,698 | ||
8.2% 3/1/06 | 1,900,000 | 2,124,156 | ||
8.3% 3/1/10 | 5,195,000 | 6,171,800 | ||
11,167,592 | ||||
Commercial Services & Supplies - 0.1% | ||||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 1,830,000 | 1,898,603 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Industrial Conglomerates - 0.6% | ||||
Textron Financial Corp. 2.75% 6/1/06 | $ 1,255,000 | $ 1,246,806 | ||
Tyco International Group SA yankee: | ||||
6.125% 1/15/09 | 2,500,000 | 2,628,125 | ||
6.375% 6/15/05 | 1,750,000 | 1,835,313 | ||
6.75% 2/15/11 | 1,455,000 | 1,547,756 | ||
7,258,000 | ||||
Road & Rail - 0.4% | ||||
Canadian Pacific Railway Co. yankee 6.25% 10/15/11 | 2,700,000 | 2,955,795 | ||
Norfolk Southern Corp. 7.35% 5/15/07 | 1,900,000 | 2,155,276 | ||
5,111,071 | ||||
Transportation Infrastructure - 0.1% | ||||
Korea Highway Corp. 4.9% 7/1/13 (a) | 1,635,000 | 1,565,578 | ||
TOTAL INDUSTRIALS | 27,000,844 | |||
INFORMATION TECHNOLOGY - 1.9% | ||||
Communications Equipment - 1.0% | ||||
Motorola, Inc.: | ||||
7.625% 11/15/10 | 5,000,000 | 5,627,495 | ||
8% 11/1/11 | 6,340,000 | 7,339,799 | ||
12,967,294 | ||||
Computers & Peripherals - 0.6% | ||||
Hewlett-Packard Co.: | ||||
6.5% 7/1/12 | 3,000,000 | 3,335,064 | ||
7.15% 6/15/05 | 2,400,000 | 2,590,474 | ||
NCR Corp. 7.125% 6/15/09 | 2,270,000 | 2,488,261 | ||
8,413,799 | ||||
IT Services - 0.3% | ||||
Electronic Data Systems Corp. 6% 8/1/13 (a) | 4,235,000 | 4,010,134 | ||
TOTAL INFORMATION TECHNOLOGY | 25,391,227 | |||
MATERIALS - 1.5% | ||||
Containers & Packaging - 0.0% | ||||
Sealed Air Corp. 5.625% 7/15/13 (a) | 510,000 | 513,921 | ||
Metals & Mining - 1.3% | ||||
Corporacion Nacional del Cobre (Codelco): | ||||
5.5% 10/15/13 (a) | 2,335,000 | 2,345,274 | ||
6.375% 11/30/12 (a) | 5,580,000 | 5,978,211 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
MATERIALS - continued | ||||
Metals & Mining - continued | ||||
Falconbridge Ltd. yankee 7.35% 6/5/12 | $ 710,000 | $ 799,331 | ||
Noranda, Inc. yankee 6% 10/15/15 | 7,300,000 | 7,392,236 | ||
16,515,052 | ||||
Paper & Forest Products - 0.2% | ||||
Boise Cascade Corp. 7.5% 2/1/08 | 2,175,000 | 2,316,110 | ||
TOTAL MATERIALS | 19,345,083 | |||
TELECOMMUNICATION SERVICES - 4.0% | ||||
Diversified Telecommunication Services - 3.1% | ||||
AT&T Broadband Corp. 8.375% 3/15/13 | 5,046,000 | 6,099,585 | ||
AT&T Corp.: | ||||
6% 3/15/09 | 720,000 | 766,801 | ||
7% 11/15/06 | 710,000 | 786,261 | ||
8.5% 11/15/31 | 2,300,000 | 2,608,103 | ||
British Telecommunications PLC 8.375% 12/15/10 | 2,160,000 | 2,608,546 | ||
Citizens Communications Co. 8.5% 5/15/06 | 1,485,000 | 1,677,417 | ||
France Telecom SA 9% 3/1/11 | 5,600,000 | 6,755,946 | ||
Koninklijke KPN NV yankee 8% 10/1/10 | 5,940,000 | 7,079,518 | ||
Telecom Italia Capital 4% 11/15/08 (a) | 3,000,000 | 2,996,316 | ||
Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06 | 175,000 | 189,290 | ||
TELUS Corp. yankee: | ||||
7.5% 6/1/07 | 1,440,000 | 1,599,225 | ||
8% 6/1/11 | 6,550,000 | 7,530,332 | ||
40,697,340 | ||||
Wireless Telecommunication Services - 0.9% | ||||
AT&T Wireless Services, Inc.: | ||||
7.5% 5/1/07 | 5,000,000 | 5,608,345 | ||
7.875% 3/1/11 | 2,530,000 | 2,890,985 | ||
8.75% 3/1/31 | 540,000 | 649,375 | ||
Cingular Wireless LLC 5.625% 12/15/06 | 2,000,000 | 2,156,650 | ||
11,305,355 | ||||
TOTAL TELECOMMUNICATION SERVICES | 52,002,695 | |||
UTILITIES - 4.4% | ||||
Electric Utilities - 3.4% | ||||
Detroit Edison Co. 6.125% 10/1/10 | 1,440,000 | 1,569,057 | ||
Dominion Resources, Inc. 8.125% 6/15/10 | 1,625,000 | 1,943,011 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
UTILITIES - continued | ||||
Electric Utilities - continued | ||||
DTE Energy Co. 7.05% 6/1/11 | $ 3,320,000 | $ 3,748,745 | ||
Exelon Corp. 6.75% 5/1/11 | 1,735,000 | 1,922,606 | ||
FirstEnergy Corp.: | ||||
5.5% 11/15/06 | 1,500,000 | 1,576,298 | ||
6.45% 11/15/11 | 5,145,000 | 5,465,189 | ||
FPL Group Capital, Inc.: | ||||
1.875% 3/30/05 | 3,095,000 | 3,095,000 | ||
3.25% 4/11/06 | 885,000 | 895,356 | ||
MidAmerican Energy Holdings, Inc. 5.875% 10/1/12 | 4,135,000 | 4,278,389 | ||
Monongahela Power Co. 5% 10/1/06 | 1,370,000 | 1,404,786 | ||
Niagara Mohawk Power Corp. 8.875% 5/15/07 | 400,000 | 469,026 | ||
Oncor Electric Delivery Co.: | ||||
5% 9/1/07 | 2,000,000 | 2,102,440 | ||
6.375% 5/1/12 | 1,155,000 | 1,265,432 | ||
PPL Electric Utilities Corp. 5.875% 8/15/07 | 1,370,000 | 1,488,480 | ||
Progress Energy, Inc. 7.1% 3/1/11 | 1,800,000 | 2,030,283 | ||
PSI Energy, Inc. 6.65% 6/15/06 | 3,775,000 | 4,139,491 | ||
Public Service Co. of Colorado 7.875% 10/1/12 | 1,465,000 | 1,770,032 | ||
TECO Energy, Inc. 7% 5/1/12 | 350,000 | 345,625 | ||
Texas Utilities Electric Co. 8.25% 4/1/04 | 3,000,000 | 3,078,717 | ||
Virginia Electric & Power Co. 5.75% 3/31/06 | 2,000,000 | 2,146,512 | ||
44,734,475 | ||||
Gas Utilities - 0.7% | ||||
Consolidated Natural Gas Co. 5.375% 11/1/06 | 3,330,000 | 3,558,398 | ||
Kinder Morgan Energy Partners LP 5.35% 8/15/07 | 1,070,000 | 1,140,833 | ||
Ras Laffan Liquid Natural Gas Co. Ltd. yankee 8.294% 3/15/14 (a) | 2,100,000 | 2,436,000 | ||
Texas Eastern Transmission Corp. 7.3% 12/1/10 | 1,010,000 | 1,146,505 | ||
Williams Holdings of Delaware, Inc. 6.125% 12/1/03 | 500,000 | 507,500 | ||
8,789,236 | ||||
Multi-Utilities & Unregulated Power - 0.3% | ||||
Constellation Energy Group, Inc. 7% 4/1/12 | 1,000,000 | 1,133,625 | ||
Williams Companies, Inc. 7.125% 9/1/11 | 2,175,000 | 2,229,375 | ||
3,363,000 | ||||
TOTAL UTILITIES | 56,886,711 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $515,589,651) | 541,347,233 | |||
U.S. Government and Government Agency Obligations - 17.4% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 13.2% | ||||
Fannie Mae: | ||||
4.75% 1/2/07 | $ 25,000,000 | $ 26,230,400 | ||
5.5% 7/18/12 | 25,000,000 | 25,479,475 | ||
6.25% 2/1/11 | 975,000 | 1,066,413 | ||
6.25% 3/22/12 | 4,800,000 | 5,015,275 | ||
6.625% 9/15/09 | 37,000,000 | 42,226,210 | ||
7.125% 6/15/10 | 20,230,000 | 23,680,773 | ||
Freddie Mac: | ||||
3.625% 9/15/08 | 5,532,000 | 5,549,763 | ||
4.875% 11/15/13 | 6,510,000 | 6,527,238 | ||
5.25% 11/5/12 | 1,405,000 | 1,408,133 | ||
5.5% 9/15/11 | 17,200,000 | 18,373,694 | ||
5.875% 3/21/11 | 3,170,000 | 3,389,938 | ||
6.625% 9/15/09 | 11,400,000 | 13,003,820 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 171,951,132 | |||
U.S. Treasury Obligations - 4.2% | ||||
U.S. Treasury Bills, yield at date of purchase 0.92% to 0.96% 11/20/03 to 12/11/03 (c) | 660,000 | 659,678 | ||
U.S. Treasury Bonds 11.25% 2/15/15 | 5,325,000 | 8,502,113 | ||
U.S. Treasury Notes: | ||||
2.375% 8/15/06 | 660,000 | 662,063 | ||
4% 11/15/12 | 17,955,000 | 17,683,574 | ||
5% 8/15/11 | 7,470,000 | 7,971,013 | ||
5.625% 5/15/08 | 13,000,000 | 14,389,882 | ||
6.5% 2/15/10 | 4,000,000 | 4,640,156 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 54,508,479 | |||
TOTAL U.S. GOVERNMENT AND (Cost $224,495,405) | 226,459,611 | |||
U.S. Government Agency - Mortgage Securities - 10.6% | ||||
Fannie Mae - 10.2% | ||||
4% 7/1/18 | 4,812,807 | 4,690,620 | ||
4.5% 11/1/18 (b) | 26,000,000 | 25,943,125 | ||
4.5% 8/1/33 to 9/1/33 | 1,994,010 | 1,901,723 | ||
5.5% 9/1/10 to 12/1/14 | 7,873,165 | 8,142,114 | ||
6% 5/1/16 to 4/1/17 | 3,385,037 | 3,521,235 | ||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Fannie Mae - continued | ||||
6.5% 2/1/14 to 5/1/33 | $ 35,166,851 | $ 36,740,747 | ||
6.5% 11/1/18 (b) | 11,929,432 | 12,551,999 | ||
6.5% 11/1/33 (b) | 5,095,479 | 5,292,929 | ||
7% 7/1/09 to 10/1/32 (b) | 28,142,009 | 29,642,402 | ||
7.5% 8/1/17 to 9/1/28 | 2,655,531 | 2,835,031 | ||
8.5% 6/1/11 to 9/1/25 | 310,399 | 338,026 | ||
9.5% 2/1/25 | 341,089 | 380,285 | ||
10% 1/1/20 | 8,914 | 10,123 | ||
10.5% 8/1/20 | 100,379 | 114,832 | ||
11% 8/1/15 | 491,385 | 548,825 | ||
12.5% 12/1/13 to 4/1/15 | 18,689 | 21,575 | ||
TOTAL FANNIE MAE | 132,675,591 | |||
Freddie Mac - 0.0% | ||||
8.5% 9/1/24 to 8/1/27 | 331,830 | 360,307 | ||
9.5% 1/1/17 | 11,587 | 12,932 | ||
10% 4/1/06 to 5/1/09 | 16,922 | 18,294 | ||
10.5% 5/1/21 | 99,406 | 110,218 | ||
11% 12/1/11 | 5,106 | 5,688 | ||
11.5% 10/1/15 | 13,355 | 15,089 | ||
11.75% 10/1/10 | 16,433 | 18,337 | ||
TOTAL FREDDIE MAC | 540,865 | |||
Government National Mortgage Association - 0.4% | ||||
6.5% 2/15/29 | 1,171,125 | 1,227,226 | ||
7% 2/15/28 to 11/15/28 | 2,785,089 | 2,954,694 | ||
7.5% 2/15/28 to 10/15/28 | 42,771 | 45,735 | ||
8% 11/15/05 to 6/15/25 | 384,252 | 409,993 | ||
8.5% 4/15/17 to 12/15/21 | 232,148 | 255,370 | ||
11% 7/20/19 to 8/20/19 | 19,957 | 22,565 | ||
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | 4,915,583 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $137,068,264) | 138,132,039 | |||
Asset-Backed Securities - 9.3% | ||||
Principal | Value | |||
ACE Securities Corp.: | ||||
Series 2002-HE2 Class A2, 1.55% 8/25/32 (d) | $ 1,561,745 | $ 1,564,128 | ||
Series 2003-FM1 Class M2, 2.97% 11/25/32 (d) | 955,000 | 955,000 | ||
ACE Securities Corp. NIMS Trust Series 2002-HE1N Class N, 8.85% 7/25/12 | 160,405 | 160,004 | ||
American Express Credit Account Master Trust: | ||||
Series 1999-2 Class B, 6.1% 12/15/06 | 1,100,000 | 1,127,758 | ||
Series 2001-2 Class A, 5.53% 10/15/08 | 1,020,000 | 1,085,372 | ||
AmeriCredit Automobile Receivables Trust: | ||||
Series 2001-C Class A4, 5.01% 7/14/08 | 6,000,000 | 6,203,361 | ||
Series 2002-A Class A4, 4.61% 1/12/09 | 5,800,000 | 6,038,142 | ||
Amortizing Residential Collateral Trust Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 134,581 | 133,572 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2003-HE2 Class A2, 1.5% 4/15/33 (d) | 2,885,990 | 2,881,061 | ||
Series 2003-HE7 Class A3, 1.53% 12/15/33 (b)(d) | 3,070,000 | 3,070,000 | ||
Associates Automobile Receivables Trust Series 2000-2 Class A4, 6.9% 8/15/05 | 1,457,921 | 1,473,184 | ||
Capital One Master Trust: | ||||
Series 2001-1 Class B, 1.63% 12/15/10 (d) | 2,130,000 | 2,098,050 | ||
Series 2001-5 Class A, 5.3% 6/15/09 | 2,035,000 | 2,158,588 | ||
Series 2001-8A Class B, 1.67% 8/17/09 (d) | 3,015,000 | 2,997,451 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2003-2B Class B2, 3.5% 2/17/09 | 1,860,000 | 1,871,625 | ||
Series 2003-A1 Class A1, 1.51% 1/15/09 (d) | 8,975,000 | 9,036,317 | ||
Series 2003-A4 Class A4, 3.65% 7/15/11 | 1,140,000 | 1,137,907 | ||
Series 2003-B1 Class B1, 2.29% 2/17/09 (d) | 3,535,000 | 3,574,769 | ||
Series 2003-B4 Class B4, 1.92% 7/15/11 (d) | 1,680,000 | 1,680,000 | ||
CDC Mortgage Capital Trust Series 2003-HE2: | ||||
Class M1, 1.92% 10/25/33 (d) | 339,997 | 340,624 | ||
Class M2, 3.02% 10/25/33 (d) | 824,992 | 829,464 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.47% 2/15/11 (b)(d) | 2,435,000 | 2,433,028 | ||
Chase Manhattan Auto Owner Trust Series 2001-A Class CTFS, 5.06% 2/15/08 | 271,966 | 279,014 | ||
Citibank Credit Card Issuance Trust Series 2001-A8 Class A8, 4.1% 12/7/06 | 5,300,000 | 5,445,606 | ||
Citibank Credit Card Master Trust I Series 1998-9 Class A, 5.3% 1/9/06 | 1,320,000 | 1,329,847 | ||
CS First Boston Mortgage Securities Corp. NIMS Trust Series 2002-H10N Class A, 8% 11/27/32 (a) | 509,203 | 501,565 | ||
Discover Card Master Trust I Series 2001-6 Class A, 5.75% 12/15/08 | 8,000,000 | 8,637,616 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Fieldstone Mortgage Investment Corp. Series 2003-1: | ||||
Class M1, 1.8% 11/25/33 (d) | $ 300,000 | $ 300,000 | ||
Class M2, 2.87% 11/25/33 (d) | 200,000 | 200,000 | ||
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 2,605,000 | 2,656,161 | ||
Ford Credit Auto Owner Trust Series 2001-B Class B, 5.71% 9/15/05 | 560,000 | 574,350 | ||
Home Equity Asset Trust: | ||||
Series 2003-2: | ||||
Class A2, 1.5% 8/25/33 (d) | 561,666 | 561,918 | ||
Class M1, 2% 8/25/33 (d) | 765,000 | 768,991 | ||
Series 2003-4: | ||||
Class M1, 1.92% 10/25/33 (d) | 1,045,000 | 1,042,487 | ||
Class M2, 3.02% 10/25/33 (d) | 1,240,000 | 1,239,999 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (a) | 225,000 | 223,976 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-4N Class A, 8% 5/27/33 (a) | 555,873 | 544,756 | ||
Series 2003-2N Class A, 8% 9/27/33 (a) | 762,143 | 746,138 | ||
Honda Auto Receivables Owner Trust Series 2001-2 Class A3, 4.67% 3/18/05 | 997,315 | 1,005,284 | ||
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 44,268 | 43,825 | ||
Long Beach Mortgage Loan Trust Series 2003-3: | ||||
Class M1, 1.87% 7/25/33 (d) | 2,460,000 | 2,460,000 | ||
Class M2, 2.97% 7/25/33 (d) | 1,260,000 | 1,261,575 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2003-B3 Class B3, 1.495% 1/18/11 (d) | 275,000 | 275,064 | ||
Series 2003-B5 Class B5, 1.49% 2/15/11 (d) | 1,805,000 | 1,805,903 | ||
Morgan Stanley ABS Capital I, Inc.: | ||||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 311,751 | 311,854 | ||
Series 2003-HE1 Class M2, 3.02% 5/25/33 (d) | 1,450,000 | 1,464,632 | ||
Series 2003-NC8 Class M1, 1.82% 9/25/33 (d) | 665,000 | 665,000 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4 Class M1, 2.12% 1/25/32 (d) | 1,350,000 | 1,362,090 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (a) | 755,415 | 755,721 | ||
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 134,705 | 134,836 | ||
Series 2003-NC2 Class M2, 3.12% 2/25/33 (d) | 710,000 | 716,566 | ||
Morgan Stanley Dean Witter Capital I, Inc.: | ||||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 554,370 | 554,893 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 1,033,048 | 1,032,644 | ||
New Century Home Equity Loan Trust Series 2003-2 Class A2, 1.55% 1/25/33 (d) | 2,566,717 | 2,573,904 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Nissan Auto Lease Trust Series 2003-A Class A3B, 2.57% 6/15/09 | $ 10,000,000 | $ 10,003,600 | ||
Residential Asset Mortgage Products, Inc. Series 2003-RP2 Class A1, 1.57% 9/25/33 (a)(d) | 2,624,141 | 2,624,141 | ||
Sears Credit Account Master Trust II: | ||||
Series 1996-3 Class A, 7% 7/15/08 | 1,912,500 | 1,951,975 | ||
Series 1999-1 Class A, 5.65% 3/17/09 | 1,416,667 | 1,458,512 | ||
Series 2002-4 Class A, 1.25% 8/18/09 (d) | 2,700,000 | 2,697,092 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 1.57% 3/15/11 (a)(d) | 2,320,000 | 2,320,000 | ||
Toyota Auto Receivables 2000-A Owner Trust Series 2000-A Class A4, 7.21% 4/15/07 | 1,296,290 | 1,314,425 | ||
West Penn Funding LLC Series 1999-A Class A3, 6.81% 9/25/08 | 4,500,000 | 4,811,441 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $119,305,104) | 121,506,806 | |||
Collateralized Mortgage Obligations - 4.1% | ||||
Private Sponsor - 1.7% | ||||
Merrill Lynch Mortgage Investments, Inc. Series 2003-E Class XA1, 1% 10/25/28 (d)(f) | 23,987,880 | 382,369 | ||
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 (b) | 8,200,000 | 8,455,610 | ||
Residential Finance LP/Residential Finance Development Corp. floater: | ||||
Series 2003-B: | ||||
Class B3, 2.67% 7/10/35 (a)(d) | 2,388,249 | 2,397,952 | ||
Class B4, 2.87% 7/10/35 (a)(d) | 1,791,187 | 1,797,904 | ||
Class B5, 3.47% 7/10/35 (a)(d) | 1,691,677 | 1,698,020 | ||
Class B6, 3.97% 7/10/35 (a)(d) | 796,083 | 800,064 | ||
Series 2003-CB1: | ||||
Class B3, 2.57% 6/10/35 (a)(d) | 835,628 | 837,718 | ||
Class B4, 2.77% 6/10/35 (a)(d) | 746,097 | 747,962 | ||
Class B5, 3.37% 6/10/35 (a)(d) | 507,346 | 508,614 | ||
Class B6, 3.87% 6/10/35 (a)(d) | 303,413 | 304,171 | ||
Sequoia Mortgage Funding Trust Series 2003-A Class AX1, 0.8% 10/21/07 (a)(f) | 88,685,000 | 1,011,009 | ||
WAMU Mortgage pass thru certificates Series 2002-S6 Class A25, 6% 10/25/32 | 2,912,266 | 2,959,742 | ||
TOTAL PRIVATE SPONSOR | 21,901,135 | |||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - 2.4% | ||||
Fannie Mae planned amortization class: | ||||
Series 1994-51 Class PH, 6.5% 1/25/23 | $ 603,539 | $ 611,525 | ||
Series 1994-81 Class PJ, 8% 7/25/23 | 3,210,000 | 3,303,170 | ||
Fannie Mae guaranteed REMIC pass thru certificates planned amortization class Series 2001-53 Class OH, 6.5% 6/25/30 | 444,886 | 454,137 | ||
Freddie Mac planned amortization class Series 2355 Class CD, 6.5% 6/15/30 | 505,570 | 513,168 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 32 Class TH, 7% 9/25/22 | 638,653 | 642,192 | ||
Freddie Mac Multi-class participation certificates guaranteed sequential pay Series 2473 Class VK, 6.5% 10/15/18 | 16,600,000 | 17,448,861 | ||
Ginnie Mae guaranteed Multi-family pass thru securities sequential pay Series 2002-35 Class C, 5.86% 10/16/23 (d) | 370,000 | 398,423 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-22 Class B, 3.963% 5/16/32 | 2,030,000 | 1,969,405 | ||
Series 2003-59 Class D, 3.654% 10/16/27 | 3,060,000 | 2,862,397 | ||
Series 2001-45 Class GC, 6.5% 10/20/30 | 3,350,000 | 3,439,974 | ||
TOTAL U.S. GOVERNMENT AGENCY | 31,643,252 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $54,229,401) | 53,544,387 | |||
Commercial Mortgage Securities - 8.5% | ||||
Asset Securitization Corp.: | ||||
sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29 | 759,602 | 817,721 | ||
Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 18,943,164 | 1,250,544 | ||
Banc America Commercial Mortgage, Inc. Series 2002-2 Class XP, 1.803% 7/11/43 (a)(d)(f) | 12,355,000 | 1,048,245 | ||
Bear Stearns Commercial Mortgage Securities, Inc. floater Series 2003-BA1A Class A1, 1.4% 4/14/15 (a)(d) | 3,763,239 | 3,763,239 | ||
Chase Commercial Mortgage Securities Corp. Series 2001-245 Class A2, 6.275% 2/12/16 (a)(d) | 980,000 | 1,064,537 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
COMM floater: | ||||
Series 2001-FL5A: | ||||
Class A2, 1.67% 11/15/13 (a)(d) | $ 1,180,909 | $ 1,181,379 | ||
Class D, 2.37% 11/15/13 (a)(d) | 2,200,000 | 2,198,222 | ||
Series 2002-FL7 Class A2, 1.47% 11/15/14 (a)(d) | 1,905,000 | 1,904,480 | ||
Commercial Mortgage Asset Trust sequential pay | 2,763,263 | 3,040,775 | ||
Commercial Resecuritization Trust sequential pay | 1,466,848 | 1,549,588 | ||
CS First Boston Mortgage Securities Corp.: | ||||
sequential pay: | ||||
Series 1997-C2 Class A3, 6.55% 1/17/35 | 1,245,000 | 1,375,478 | ||
Series 1998-C1 Class A1B, 6.48% 5/17/40 | 2,885,000 | 3,190,265 | ||
Series 1999-C1 Class A2, 7.29% 9/15/41 | 7,550,000 | 8,637,755 | ||
Series 2000-C1 Class A1, 7.325% 4/14/62 | 1,664,605 | 1,829,797 | ||
Series 2001-CK3 Class A2, 6.04% 6/15/34 | 2,050,000 | 2,203,458 | ||
Series 1997-C2 Class D, 7.27% 1/17/35 | 755,000 | 834,384 | ||
Series 2001-CK6 Class AX, 0.645% 9/15/18 (f) | 35,575,853 | 1,430,950 | ||
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31 | 610,000 | 619,760 | ||
DLJ Commercial Mortgage Corp. sequential pay: | ||||
Series 1998-CF1 Class A1B, 6.41% 2/18/31 | 4,500,000 | 4,961,932 | ||
Series 2000-CF1 Class A1A, 7.45% 6/10/33 | 1,659,586 | 1,828,958 | ||
Equitable Life Assurance Society of the United States: | ||||
sequential pay Series 174 Class A1, 7.24% 5/15/06 (a) | 1,500,000 | 1,653,752 | ||
Series 174 Class C1, 7.52% 5/15/06 (a) | 1,000,000 | 1,106,953 | ||
GE Capital Commercial Mortgage Corp. Series 2001-1 Class X1, 0.791% 5/15/33 (a)(d)(f) | 23,888,411 | 979,759 | ||
GGP Mall Properties Trust sequential pay Series 2001-C1A Class A2, 5.007% 11/15/11 (a) | 4,920,480 | 5,161,327 | ||
Ginnie Mae guaranteed REMIC pass thru securities: | ||||
sequential pay: | ||||
Series 2003-36 Class C, 4.254% 2/16/31 | 1,685,000 | 1,651,219 | ||
Series 2003-47 Class C, 4.227% 10/16/27 | 3,015,000 | 2,989,519 | ||
Series 2003-59 Class XA, 0.3% 6/16/34 (d)(f) | 15,384,615 | 1,180,892 | ||
Series 2003-47 Class XA, 0.2917% 6/16/43 (d)(f) | 9,504,691 | 562,117 | ||
Series 2003-64 Class XA, 0.5018% 8/16/43 (d)(f) | 82,838,406 | 5,080,314 | ||
GS Mortgage Securities Corp. II Series 2003-C1 | 1,560,000 | 1,557,781 | ||
Heller Financial Commercial Mortgage Asset Corp. sequential pay Series 2000-PH1 Class A1, 7.715% 1/17/34 | 2,699,836 | 2,978,890 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Hilton Hotel Pool Trust sequential pay Series 2000-HLTA Class A1, 7.055% 10/3/15 (a) | $ 1,584,716 | $ 1,726,960 | ||
J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 2000-C10 Class A1, 7.1075% 8/15/32 | 1,435,291 | 1,569,706 | ||
LB Commercial Conduit Mortgage Trust sequential pay Series 1999-C1 Class A2, 6.78% 6/15/31 | 5,370,000 | 6,050,663 | ||
LB-UBS Commercial Mortgage Trust sequential pay Series 2000-C3 Class A1, 7.95% 7/15/09 | 2,626,945 | 2,920,606 | ||
Leafs CMBS I Ltd./Leafs CMBS I Corp. Series 2002-1A Class B, 4.13% 11/20/37 (a) | 4,000,000 | 3,730,000 | ||
Morgan Stanley Capital I, Inc. sequential pay Series 1997-HF1 Class A2, 7.27% 7/15/29 (a) | 3,355,024 | 3,641,631 | ||
Morgan Stanley Dean Witter Capital I Trust sequential pay Series 2001-PPM Class A2, 6.4% 2/15/31 | 3,214,225 | 3,499,418 | ||
Nationslink Funding Corp. sequential pay Series 1999-2 Class A1C, 7.03% 6/20/31 | 1,604,349 | 1,742,474 | ||
Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A2, 6.602% 11/15/07 (a) | 2,500,000 | 2,751,674 | ||
Trizechahn Office Properties Trust Series 2001-TZHA: | ||||
Class C3, 6.522% 3/15/13 (a) | 3,675,000 | 3,910,992 | ||
Class C4, 6.893% 5/15/16 (a) | 8,000,000 | 8,794,116 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $105,775,063) | 109,972,230 | |||
Municipal Securities - 0.1% | ||||
Illinois Gen. Oblig.: | ||||
3.3% 6/1/10 | 335,000 | 320,434 | ||
3.55% 6/1/11 | 270,000 | 257,696 | ||
3.75% 6/1/12 | 870,000 | 826,500 | ||
TOTAL MUNICIPAL SECURITIES (Cost $1,472,235) | 1,404,630 | |||
Foreign Government and Government Agency Obligations - 1.9% | ||||
Principal | Value | |||
Bahamian Republic 6.625% 5/15/33 (a) | $ 990,000 | $ 1,000,266 | ||
Chilean Republic: | ||||
5.5% 1/15/13 | 1,655,000 | 1,693,562 | ||
5.625% 7/23/07 | 1,210,000 | 1,291,675 | ||
7.125% 1/11/12 | 2,900,000 | 3,291,500 | ||
Ontario Province 5.5% 10/1/08 | 4,000,000 | 4,341,280 | ||
Quebec Province yankee 6.5% 1/17/06 | 2,000,000 | 2,172,900 | ||
State of Israel 4.625% 6/15/13 | 665,000 | 624,269 | ||
United Mexican States: | ||||
4.625% 10/8/08 | 2,470,000 | 2,476,175 | ||
6.375% 1/16/13 | 1,560,000 | 1,605,240 | ||
7.5% 1/14/12 | 3,650,000 | 4,069,750 | ||
8% 9/24/22 | 2,000,000 | 2,175,000 | ||
TOTAL FOREIGN GOVERNMENT AND (Cost $23,046,722) | 24,741,617 | |||
Fixed-Income Funds - 10.3% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 1,345,518 | 133,838,666 | |
Cash Equivalents - 0.6% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 7,639,681 | 7,639,000 | |
TOTAL INVESTMENT PORTFOLIO - 104.4% (Cost $1,322,114,667) | 1,358,586,219 | ||
NET OTHER ASSETS - (4.4)% | (56,773,634) | ||
NET ASSETS - 100% | $ 1,301,812,585 | ||
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
20 Eurodollar 90 Day Index Contracts | March 2005 | $ 19,854,500 | $ 94,380 | ||
20 Eurodollar 90 Day Index Contracts | June 2005 | 19,836,500 | 83,880 | ||
41 Eurodollar 90 Day Index Contracts | Sept. 2005 | 40,632,025 | 103,379 | ||
87 Eurodollar 90 Day Index Contracts | Dec. 2005 | 86,161,538 | 176,878 | ||
57 Eurodollar 90 Day Index Contracts | March 2006 | 56,416,463 | 119,395 | ||
65 Eurodollar 90 Day Index Contracts | June 2006 | 64,298,000 | 65,273 | ||
65 Eurodollar 90 Day Index Contracts | Sept. 2006 | 64,353,875 | 59,910 | ||
95 Eurodollar 90 Day Index Contracts | Dec. 2006 | 93,874,250 | 45,030 | ||
65 Eurodollar 90 Day Index Contracts | March 2007 | 64,201,583 | 39,697 | ||
60 Eurodollar 90 Day Index Contracts | June 2007 | 59,238,000 | 97,140 | ||
884,962 | |||||
Swap Agreements | |||||
Notional | |||||
Credit Default Swap | |||||
Receive quarterly notional amount multiplied by .62% and pay Goldman Sachs upon default of SLM Corp., par value of the notional amount of SLM Corp. 1.1106% 7/25/35 | August 2007 | $ 490,000 | 4,324 | ||
Receive quarterly notional amount multiplied by 1.45% and pay Deutsche Bank upon default event of News America, Inc., par value of the notional amount of News America, Inc. 6.625% 1/9/08 | April 2010 | 2,000,000 | 79,517 | ||
TOTAL CREDIT DEFAULT SWAP | 2,490,000 | 83,841 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 3.098% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2007 | 14,440,000 | 38,094 | ||
Receive quarterly a fixed rate equal to 3.1422% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2007 | 12,300,000 | 55,400 | ||
TOTAL INTEREST RATE SWAP | 26,740,000 | 93,494 | |||
$ 29,230,000 | $ 177,335 | ||||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $114,681,464 or 8.8% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $659,678. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,606,216,950 and $1,447,360,056, respectively, of which long-term U.S. government and government agency obligations aggregated $1,097,763,153 and $1,071,013,440, respectively. |
The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which the loan was outstanding amounted to $5,814,000. The weighted average interest rate was 1.37%. Interest earned from the interfund lending program amounted to $222 and is included in interest income on the Statement of Operations. At period end there were no interfund loans outstanding. |
Income Tax Information |
The fund hereby designates approximately $3,891,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $7,639,000) (cost $ 1,322,114,667) - - See accompanying schedule | $ 1,358,586,219 | |
Cash | 76,355 | |
Receivable for investments sold | 7,244,573 | |
Delayed delivery | 622,738 | |
Receivable for fund shares sold | 2,688,491 | |
Interest receivable | 13,968,963 | |
Receivable for daily variation on futures contracts | 20,912 | |
Unrealized gain on swap agreements | 177,335 | |
Prepaid expenses | 7,392 | |
Total assets | 1,383,392,978 | |
Liabilities | ||
Payable for investments purchased | $ 16,561,160 | |
Delayed delivery | 58,415,422 | |
Payable for fund shares redeemed | 5,037,045 | |
Distributions payable | 393,980 | |
Accrued management fee | 468,279 | |
Distribution fees payable | 385,364 | |
Other payables and accrued expenses | 319,143 | |
Total liabilities | 81,580,393 | |
Net Assets | $ 1,301,812,585 | |
Net Assets consist of: | ||
Paid in capital | $ 1,245,994,038 | |
Undistributed net investment income | 4,047,313 | |
Accumulated undistributed net realized gain (loss) on investments | 14,237,385 | |
Net unrealized appreciation (depreciation) on investments | 37,533,849 | |
Net Assets | $ 1,301,812,585 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 11.32 | |
Maximum offering price per share (100/96.25 of $11.32) | $ 11.76 | |
Class T: | $ 11.32 | |
Maximum offering price per share (100/97.25 of $11.32) | $ 11.64 | |
Class B: | $ 11.31 | |
Class C: | $ 11.30 | |
Institutional Class: | $ 11.34 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 60,303,095 | |
Security lending | 10,734 | |
Total income | 60,313,829 | |
Expenses | ||
Management fee | $ 5,730,092 | |
Transfer agent fees | 2,684,043 | |
Distribution fees | 4,836,145 | |
Accounting and security lending fees | 302,443 | |
Non-interested trustees' compensation | 5,845 | |
Custodian fees and expenses | 58,215 | |
Registration fees | 149,511 | |
Audit | 56,125 | |
Legal | 11,377 | |
Miscellaneous | 6,252 | |
Total expenses before reductions | 13,840,048 | |
Expense reductions | (4,339) | 13,835,709 |
Net investment income (loss) | 46,478,120 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 23,440,722 | |
Futures contracts | 914,642 | |
Total net realized gain (loss) | 24,355,364 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 2,409,676 | |
Futures contracts | (75,344) | |
Swap agreements | 177,335 | |
Delayed delivery commitments | 60,708 | |
Total change in net unrealized appreciation (depreciation) | 2,572,375 | |
Net gain (loss) | 26,927,739 | |
Net increase (decrease) in net assets resulting from operations | $ 73,405,859 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 46,478,120 | $ 45,482,487 |
Net realized gain (loss) | 24,355,364 | 8,828,632 |
Change in net unrealized appreciation (depreciation) | 2,572,375 | (874,800) |
Net increase (decrease) in net assets resulting | 73,405,859 | 53,436,319 |
Distributions to shareholders from net investment income | (45,500,193) | (45,483,711) |
Share transactions - net increase (decrease) | 65,287,174 | 294,234,320 |
Total increase (decrease) in net assets | 93,192,840 | 302,186,928 |
Net Assets | ||
Beginning of period | 1,208,619,745 | 906,432,817 |
End of period (including undistributed net investment income of $4,047,313 and undistributed net investment income of $3,110,971, respectively) | $ 1,301,812,585 | $ 1,208,619,745 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.06 | $ 11.01 | $ 10.30 | $ 10.30 | $ 10.77 |
Income from Investment Operations | |||||
Net investment income (loss)C | .420 | .521E | .619 | .629 | .580 |
Net realized and unrealized gain (loss) | .254 | .055E | .713 | (.002) | (.474) |
Total from investment operations | .674 | .576 | 1.332 | .627 | .106 |
Distributions from net investment income | (.414) | (.526) | (.622) | (.627) | (.576) |
Net asset value, end of period | $ 11.32 | $ 11.06 | $ 11.01 | $ 10.30 | $ 10.30 |
Total ReturnA,B | 6.16% | 5.44% | 13.28% | 6.32% | 1.00% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .81% | .83% | .83% | .84% | .87% |
Expenses net of voluntary | .81% | .83% | .83% | .84% | .87% |
Expenses net of all reductions | .81% | .82% | .82% | .84% | .86% |
Net investment income (loss) | 3.72% | 4.82%E | 5.82% | 6.20% | 5.58% |
Supplemental Data | |||||
Net assets, end of period | $ 166,701 | $ 133,236 | $ 92,027 | $ 48,177 | $ 22,628 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.06 | $ 11.02 | $ 10.31 | $ 10.31 | $ 10.77 |
Income from Investment Operations | |||||
Net investment income (loss)C | .408 | .508E | .603 | .620 | .576 |
Net realized and unrealized gain (loss) | .253 | .044E | .713 | (.006) | (.473) |
Total from investment operations | .661 | .552 | 1.316 | .614 | .103 |
Distributions from net investment income | (.401) | (.512) | (.606) | (.614) | (.563) |
Net asset value, end of period | $ 11.32 | $ 11.06 | $ 11.02 | $ 10.31 | $ 10.31 |
Total ReturnA,B | 6.03% | 5.21% | 13.11% | 6.18% | .98% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .95% | .97% | .97% | .97% |
Expenses net of voluntary | .93% | .95% | .97% | .97% | .97% |
Expenses net of all reductions | .93% | .95% | .97% | .97% | .97% |
Net investment income (loss) | 3.60% | 4.70%E | 5.67% | 6.07% | 5.48% |
Supplemental Data | |||||
Net assets, end of period | $ 711,263 | $ 684,618 | $ 546,276 | $ 313,887 | $ 315,350 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.05 | $ 11.01 | $ 10.30 | $ 10.30 | $ 10.76 |
Income from Investment Operations | |||||
Net investment income (loss)C | .331 | .436E | .534 | .553 | .506 |
Net realized and unrealized gain (loss) | .253 | .044E | .713 | (.006) | (.467) |
Total from investment operations | .584 | .480 | 1.247 | .547 | .039 |
Distributions from net investment income | (.324) | (.440) | (.537) | (.547) | (.499) |
Net asset value, end of period | $ 11.31 | $ 11.05 | $ 11.01 | $ 10.30 | $ 10.30 |
Total ReturnA,B | 5.32% | 4.52% | 12.40% | 5.50% | .37% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Expenses net of voluntary | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Expenses net of all reductions | 1.60% | 1.61% | 1.62% | 1.62% | 1.61% |
Net investment income (loss) | 2.92% | 4.03%E | 5.02% | 5.42% | 4.83% |
Supplemental Data | |||||
Net assets, end of period | $ 154,697 | $ 178,062 | $ 113,424 | $ 63,584 | $ 64,532 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.04 | $ 11.00 | $ 10.29 | $ 10.29 | $ 10.76 |
Income from Investment Operations | |||||
Net investment income (loss)C | .322 | .428E | .525 | .545 | .492 |
Net realized and unrealized gain (loss) | .254 | .044E | .716 | (.005) | (.472) |
Total from investment operations | .576 | .472 | 1.241 | .540 | .020 |
Distributions from net investment income | (.316) | (.432) | (.531) | (.540) | (.490) |
Net asset value, end of period | $ 11.30 | $ 11.04 | $ 11.00 | $ 10.29 | $ 10.29 |
Total ReturnA,B | 5.26% | 4.45% | 12.34% | 5.42% | .19% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Expenses net of voluntary | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Expenses net of all reductions | 1.67% | 1.68% | 1.69% | 1.69% | 1.71% |
Net investment income (loss) | 2.86% | 3.96%E | 4.96% | 5.35% | 4.73% |
Supplemental Data | |||||
Net assets, end of period | $ 113,849 | $ 98,158 | $ 63,538 | $ 20,530 | $ 17,099 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.08 | $ 11.03 | $ 10.32 | $ 10.31 | $ 10.78 |
Income from Investment Operations | |||||
Net investment income (loss)B | .437 | .539D | .638 | .656 | .610 |
Net realized and unrealized gain (loss) | .254 | .053D | .711 | (.002) | (.485) |
Total from investment operations | .691 | .592 | 1.349 | .654 | .125 |
Distributions from net investment income | (.431) | (.542) | (.639) | (.644) | (.595) |
Net asset value, end of period | $ 11.34 | $ 11.08 | $ 11.03 | $ 10.32 | $ 10.31 |
Total ReturnA | 6.30% | 5.59% | 13.45% | 6.59% | 1.19% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .66% | .67% | .66% | .65% | .66% |
Expenses net of voluntary | .66% | .67% | .66% | .65% | .66% |
Expenses net of all reductions | .66% | .67% | .66% | .65% | .66% |
Net investment income (loss) | 3.87% | 4.97%D | 5.98% | 6.39% | 5.78% |
Supplemental Data | |||||
Net assets, end of period | $ 155,302 | $ 114,546 | $ 91,168 | $ 88,350 | $ 157,131 |
Portfolio turnover rate | 108% | 121% | 112% | 153% | 138% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Intermediate Bond Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 46,053,102 | | |
Unrealized depreciation | (6,296,436) | |
Net unrealized appreciation (depreciation) | 39,756,666 | |
Undistributed ordinary income | 3,629,478 | |
Undistributed long-term capital gain | 10,532,417 | |
Cost for federal income tax purposes | $ 1,318,829,553 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 45,500,193 | $ 45,483,711 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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 any 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 counter-parties 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - continued
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period,
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 248,472 | $ 1,193 |
Class T | 0% | .25% | 1,844,222 | 7,628 |
Class B | .65% | .25% | 1,618,381 | 1,168,552 |
Class C | .75% | .25% | 1,125,070 | 328,737 |
$ 4,836,145 | $ 1,506,110 |
Sales Load. FDC receives a front-end sales charge of up to 3.75% for selling Class A shares, and 2.75% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 126,242 |
Class T | 16,320 |
Class B* | 438,127 |
Class C* | 35,632 |
$ 616,321 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 305,061 | .18 |
Class T | 1,486,781 | .20 |
Class B | 416,951 | .23 |
Class C | 221,722 | .20 |
Institutional Class | 253,528 | .19 |
$ 2,684,043 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,554,824 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian and each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $4,090. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | | | |
Class A | $ 249 |
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 6,007,552 | $ 5,125,792 |
Class T | 26,063,302 | 27,140,787 |
Class B | 5,170,345 | 5,289,775 |
Class C | 3,124,274 | 2,853,534 |
Institutional Class | 5,134,720 | 5,073,823 |
Total | $ 45,500,193 | $ 45,483,711 |
Annual Report
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 10,510,963 | 9,771,131 | $ 119,339,179 | $ 106,005,125 |
Reinvestment of distributions | 465,922 | 420,199 | 5,276,440 | 4,558,153 |
Shares redeemed | (8,293,215) | (6,497,238) | (93,804,272) | (70,300,571) |
Net increase (decrease) | 2,683,670 | 3,694,092 | $ 30,811,347 | $ 40,262,707 |
Class T | ||||
Shares sold | 33,381,968 | 38,686,726 | $ 377,422,827 | $ 420,063,872 |
Reinvestment of distributions | 2,175,248 | 2,361,958 | 24,637,768 | 25,618,104 |
Shares redeemed | (34,611,992) | (28,735,485) | (391,598,532) | (311,143,526) |
Net increase (decrease) | 945,224 | 12,313,199 | $ 10,462,063 | $ 134,538,450 |
Class B | ||||
Shares sold | 5,268,992 | 10,678,416 | $ 59,474,046 | $ 115,913,682 |
Reinvestment of distributions | 351,056 | 384,737 | 3,970,085 | 4,171,299 |
Shares redeemed | (8,053,311) | (5,252,751) | (90,955,890) | (56,764,837) |
Net increase (decrease) | (2,433,263) | 5,810,402 | $ (27,511,759) | $ 63,320,144 |
Class C | ||||
Shares sold | 5,050,415 | 6,232,223 | $ 57,002,414 | $ 67,477,314 |
Reinvestment of distributions | 219,498 | 213,210 | 2,481,384 | 2,310,669 |
Shares redeemed | (4,082,715) | (3,332,015) | (46,050,425) | (36,064,636) |
Net increase (decrease) | 1,187,198 | 3,113,418 | $ 13,433,373 | $ 33,723,347 |
Institutional Class | ||||
Shares sold | 6,597,666 | 5,853,822 | $ 74,769,322 | $ 63,463,448 |
Reinvestment of distributions | 328,037 | 317,927 | 3,720,880 | 3,454,065 |
Shares redeemed | (3,566,218) | (4,094,020) | (40,398,052) | (44,527,841) |
Net increase (decrease) | 3,359,485 | 2,077,729 | $ 38,092,150 | $ 22,389,672 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Intermediate Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Intermediate Bond Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Intermediate Bond Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Intermediate Bond (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II Trust. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II Trust. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Intermediate Bond. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Intermediate Bond. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Kevin Grant (43) | |
Year of Election or Appointment: 2003 Vice President of Advisor Intermediate Bond. Mr. Grant is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Grant managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Intermediate Bond. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Intermediate Bond. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Intermediate Bond. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Intermediate Bond. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Intermediate Bond. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Intermediate Bond. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of Advisor Intermediate Bond. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Intermediate Bond. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Intermediate Bond. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Intermediate Bond. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Intermediate Bond Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Institutional Class | 12/8/03 | 12/5/03 | $0.10 |
A total of 8.14% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Money
Management, Inc.
Fidelity Investments Japan Limited
Fidelity International
Investment Advisors
Fidelity International Investment
Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
LTBI-UANN-1203
1.784753.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Mortgage Securities
Fund - Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or
send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Class A (incl. 4.75% | -1.36% | 5.40% | 6.49% | |
Class T (incl. 3.50% | -0.27% | 5.56% | 6.56% | |
Class B (incl. contingent deferred sales charge) C | -2.22% | 5.34% | 6.49% | |
Class C (incl. contingent deferred sales charge) D | 1.71% | 5.66% | 6.49% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Fidelity Mortgage Securities Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class A shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower.
B Class T shares bear a 0.25% 12b-1 fee. The initial offering of Class T shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Fidelity Mortgage Securities Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class T shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower.
C Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Fidelity Mortgage Securities Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in past one year, past five year and past 10 year total return figures are 5%, 2% and 0%, respectively.
D Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on August 16, 2001. Returns from March 3, 1997 through August 16, 2001 are those of Class B, and reflect Class B shares' 0.90% 12b-1 fee. Returns prior to March 3, 1997 are those of Fidelity Mortgage Securities Fund, the original class of the fund, which does not bear a 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to August 16, 2001 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five year and past 10 year total return figures are 1%, 0% and 0%, respectively.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Mortgage Securities Fund - Class T on October 31, 1993, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® Mortgage-Backed Securities Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from George Fischer, Portfolio Manager of Fidelity® Advisor Mortgage Securities Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Mortgage Securities Fund's Class A, Class T, Class B and Class C shares returned 3.56%, 3.34%, 2.78% and 2.71%, respectively. Those returns outpaced the fund's peer group as measured by the LipperSM U.S. Mortgage Funds Average, which returned 2.40%. Additionally, the fund's benchmark - the Lehman Brothers Mortgage-Backed Securities Index - returned 2.75%. The key contributor to the fund's outperformance of its peer group average was the ability to provide some measure of insulation from mortgage security prepayments, which occur when homeowners sell their homes or refinance, and, thus, pay off their mortgage before maturity. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Detracting from performance was a dearth of attractively priced prepayment-resistant mortgage securities, which hampered the manager's ability to add more prepayment protection.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of October 31, 2003 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.4 | 0.6 |
Less than 1% | 0.2 | 0.3 |
1 - 1.99% | 11.9 | 11.9 |
2 - 2.99% | 2.3 | 3.3 |
3 - 3.99% | 1.5 | 0.6 |
4 - 4.99% | 8.3 | 0.4 |
5 - 5.99% | 24.7 | 19.4 |
6 - 6.99% | 24.3 | 27.5 |
7 - 7.99% | 9.3 | 20.0 |
8% and over | 1.7 | 3.0 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 2.1 | 1.9 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 3.7 | 1.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Corporate Bonds 1.6% | | Corporate Bonds 2.3% | ||||
| Mortgage | | Mortgage | ||||
| CMOs and Other Mortgage Related Securities 19.7% | | CMOs and Other Mortgage Related Securities 20.9% | ||||
| U.S. Government and | | U.S. Government and | ||||
| Asset-Backed | | Asset-Backed | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 0.4% | ** Foreign investments | 0.3% | ||||
* Futures and Swaps | (0.3)% | ** Futures and Swaps | (1.1)% | ||||
(dagger) Short-Term Investments and Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 83.6% | |||
Principal | Value | ||
Fannie Mae - 62.5% | |||
4% 11/1/18 (b) | $ 6,966,640 | $ 6,764,172 | |
4.5% 11/1/18 to 11/1/33 (b) | 165,500,000 | 162,190,469 | |
4.5% 9/1/31 (c) | 18,327,816 | 17,476,404 | |
5% 9/1/16 to 9/1/18 | 126,371,946 | 128,438,470 | |
5.5% 7/1/16 to 5/1/33 | 81,965,181 | 84,413,417 | |
5.5% 11/1/33 to 11/13/33 (b)(c) | 341,288,210 | 344,274,478 | |
6% 2/1/14 to 9/1/17 | 27,074,971 | 28,160,964 | |
6% 11/1/33 (b) | 78,470,400 | 80,530,248 | |
6.5% 12/1/09 to 4/1/33 | 139,184,636 | 144,876,583 | |
6.5% 11/1/33 (b) | 102,990,374 | 106,981,251 | |
7% 3/1/17 to 7/1/32 | 15,780,580 | 16,678,719 | |
7.5% 4/1/22 to 9/1/32 | 12,020,323 | 12,812,343 | |
8% 9/1/07 to 12/1/29 | 164,553 | 177,238 | |
8.25% 1/1/13 | 10,539 | 11,147 | |
8.5% 1/1/16 to 7/1/31 | 1,913,827 | 2,055,657 | |
8.75% 11/1/08 | 10,220 | 10,721 | |
9% 1/1/08 to 10/1/30 | 2,125,933 | 2,311,982 | |
9.5% 11/1/06 to 8/1/22 | 425,538 | 466,518 | |
11% 8/1/10 | 254,096 | 284,154 | |
12.25% 5/1/13 to 5/1/15 | 59,025 | 67,733 | |
12.5% 8/1/15 to 3/1/16 | 109,507 | 126,281 | |
12.75% 2/1/15 | 5,511 | 6,363 | |
13.5% 9/1/14 to 12/1/14 | 37,635 | 43,964 | |
14% 11/1/14 | 37,510 | 44,137 | |
1,139,203,413 | |||
Freddie Mac - 8.3% | |||
5% 11/1/33 (b) | 99,000,000 | 97,422,188 | |
5.5% 3/1/29 to 7/1/29 | 202,944 | 205,493 | |
6% 5/1/16 to 7/1/29 | 3,655,477 | 3,785,358 | |
6.5% 1/1/24 to 9/1/24 | 4,868,419 | 5,086,180 | |
7.5% 11/1/07 to 7/1/32 | 38,893,113 | 41,496,442 | |
8% 10/1/07 to 4/1/21 | 174,348 | 188,648 | |
8.5% 11/1/03 to 9/1/20 | 447,265 | 487,202 | |
9% 9/1/08 to 5/1/21 | 1,215,962 | 1,343,795 | |
10% 1/1/09 to 5/1/19 | 417,553 | 462,702 | |
10.5% 8/1/10 to 2/1/16 | 28,313 | 31,430 | |
12.25% 6/1/14 | 16,720 | 19,181 | |
12.5% 5/1/12 to 12/1/14 | 176,126 | 201,284 | |
12.75% 6/1/05 to 1/1/14 | 14,689 | 16,579 | |
13% 10/1/13 to 6/1/15 | 404,772 | 467,310 | |
151,213,792 | |||
U.S. Government Agency - Mortgage Securities - continued | |||
Principal | Value | ||
Government National Mortgage Association - 12.8% | |||
6% 11/1/33 (b) | $ 100,000,000 | $ 103,000,000 | |
6.5% 5/15/28 to 8/15/32 | 8,460,104 | 8,857,540 | |
7% 2/15/24 to 5/15/33 | 102,660,923 | 108,762,118 | |
7.5% 7/15/05 to 4/15/32 | 6,018,787 | 6,443,793 | |
8% 2/15/06 to 12/15/25 | 1,943,729 | 2,105,756 | |
8.5% 7/15/16 to 10/15/28 | 3,678,249 | 4,026,787 | |
9% 9/20/16 to 4/20/18 | 26,392 | 28,882 | |
9.5% 12/15/24 | 17,079 | 18,950 | |
10.5% 6/15/04 to 2/20/18 | 156,469 | 175,428 | |
13% 10/15/13 | 33,975 | 39,557 | |
13.5% 7/15/11 to 10/15/14 | 21,067 | 24,558 | |
233,483,369 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,517,440,062) | 1,523,900,574 | ||
Asset-Backed Securities - 2.6% | |||
ABSC NIMS Trust Series 2002-HE3 Class A, 7% 10/17/32 (a) | 543,918 | 545,108 | |
ACE Securities Corp. Series 2003-FM1 Class M2, 2.97% 11/25/32 (d) | 1,450,000 | 1,450,000 | |
ACE Securities Corp. NIMS Trust Series 2002-HE1N | 458,225 | 457,079 | |
Amortizing Residential Collateral Trust Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 108,533 | 107,719 | |
BankAmerica Manufactured Housing Contract Trust V | 551,858 | 555,460 | |
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.02% 10/25/33 (d) | 1,264,987 | 1,271,845 | |
CDC Mortgage Capital, Inc. NIMS Trust Series 2002-HE2N Class NOTE, 10% 1/25/33 (a) | 577,513 | 578,106 | |
Countrywide Home Loans, Inc. Series 2002-3NIM Class NOTE, 9% 9/25/32 (a) | 246,796 | 248,035 | |
CS First Boston Mortgage Securities Corp. NIMS Trust: | |||
Series 2001-H30N Class A, 8% 7/27/32 (a) | 437,625 | 434,343 | |
Series 2001-HE22N Class A, 8% 3/27/32 | 95,486 | 95,247 | |
Series 2002-H10N Class A, 8% 11/27/32 (a) | 936,849 | 922,796 | |
Series 2002-H16N Class A, 8% 11/27/32 (a) | 1,152,926 | 1,135,632 | |
Series 2002-H1N Class A, 8% 8/27/32 (a) | 78,565 | 77,780 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP NIMS Trust Series 2002-HE2N Class NOTE, 8.25% 10/20/32 (a) | $ 635,933 | $ 637,145 | |
Home Equity Asset Trust NIMS Trust: | |||
Series 2002-2N Class A, 8% 1/27/33 (a) | 325,313 | 322,060 | |
Series 2002-3N Class A, 8% 3/25/33 (a) | 2,568,298 | 2,516,932 | |
Series 2002-4N Class A, 8% 5/27/33 (a) | 871,710 | 854,276 | |
Series 2003-2N Class A, 8% 9/27/33 (a) | 1,152,789 | 1,128,581 | |
Home Equity Residual Distributions Trust Series 2002-1 Class A, 12.25% 11/25/05 (a) | 3,150,000 | 3,150,000 | |
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 106,243 | 105,180 | |
Long Beach Asset Holdings Corp. NIMS Trust Series 2002-1 Class N1, 9.05% 5/25/32 (a) | 86,210 | 84,270 | |
Long Beach Mortgage Loan Trust Series 2003-3: | |||
Class M1, 1.87% 7/25/33 (d) | 3,770,000 | 3,770,000 | |
Class M2, 2.97% 7/25/33 (d) | 2,600,000 | 2,603,250 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 467,627 | 467,781 | |
Series 2003-NC6 Class M2, 3.07% 6/27/33 (d) | 6,165,000 | 6,190,745 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-NC4N Class NOTE, 8.5% 1/25/32 (a) | 45,688 | 45,715 | |
Series 2002-HE2N Class NOTE, 9.5% 8/25/32 (a) | 1,524,893 | 1,525,579 | |
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (a) | 458,277 | 458,595 | |
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 203,515 | 203,714 | |
Morgan Stanley Dean Witter Capital I, Inc.: | |||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 848,922 | 849,723 | |
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 3,068,151 | 3,066,952 | |
New Century Home Equity Loan Trust Series 2000-NC1 Class M3, 3.22% 4/25/30 (d) | 4,170,000 | 3,992,775 | |
NovaStar CAPS Trust Series 2002-C1 Class A, 7.15% 9/25/31 (a) | 1,105,853 | 1,105,853 | |
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 Class A1, 3.6% 4/25/33 | 4,117,895 | 4,066,099 | |
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (a) | 3,185,504 | 3,169,131 | |
TOTAL ASSET-BACKED SECURITIES (Cost $48,191,409) | 48,193,506 | ||
Collateralized Mortgage Obligations - 10.5% | |||
Principal | Value | ||
Private Sponsor - 4.1% | |||
Countrywide Home Loans, Inc. sequential pay: | |||
Series 2002-25 Class 2A1, 5.5% 11/27/17 | $ 2,731,791 | $ 2,775,595 | |
Series 2002-5 Class 2A1, 6% 4/25/17 | 4,447,863 | 4,482,836 | |
Credit Suisse First Boston Mortgage Acceptance Corp. sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 15,140,000 | 15,367,100 | |
CS First Boston Mortgage Securities Corp.: | |||
sequential pay Series 2001-26 Class 3A1, 7.5% 11/25/31 | 2,342,367 | 2,394,340 | |
Series 2002-15R Class A1, 6.7651% 1/28/32 (a)(d) | 4,379,210 | 4,391,529 | |
Series 2003-TFLA Class F, 1.9633% 4/15/13 (a)(d) | 1,400,000 | 1,369,494 | |
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% 4/25/18 | 32,637,236 | 33,432,769 | |
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 | 5,810,000 | 5,991,109 | |
WAMU Mortgage pass thru certificates Series 2002-S6 Class A25, 6% 10/25/32 | 4,054,029 | 4,120,118 | |
Wells Fargo Mortgage Back Securities Series 2001-6 Class A12, 7% 4/25/31 | 87,491 | 87,389 | |
TOTAL PRIVATE SPONSOR | 74,412,279 | ||
U.S. Government Agency - 6.4% | |||
Fannie Mae: | |||
planned amortization class: | |||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049,260 | 10,534,093 | |
Series 1999-15 Class PC, 6% 9/25/18 | 9,567,000 | 10,055,388 | |
Series 1993-187 Class L, 6.5% 7/25/23 | 4,187,000 | 4,471,484 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
planned amortization class: | |||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000,000 | 10,541,728 | |
Series 2002-9 Class C, 6.5% 6/25/30 | 5,000,000 | 5,248,358 | |
Series 2001-82 Class VB, 6.5% 3/25/16 | 16,356,920 | 17,154,531 | |
Series 2003-77 Class WZ, 4.5% 8/25/18 | 16,227,459 | 15,740,635 | |
Series 2003-88 Class WZ, 4.5% 9/25/18 | 1,251,891 | 1,254,485 | |
Freddie Mac planned amortization class: | |||
Series 2343 Class GD, 6.5% 1/15/30 | 3,763,643 | 3,798,990 | |
Series 70 Class C, 9% 9/15/20 | 482,779 | 483,258 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
planned amortization class Series 2568 Class KQ, 5% 2/15/23 | 1,325,093 | 1,328,998 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2303 Class VT, 6% 2/15/12 | $ 3,468,184 | $ 3,514,134 | |
Series 2414 Class SM, 15.48% 12/15/29 (d) | 122,081 | 123,351 | |
Series 1658 Class GZ, 7% 1/15/24 | 6,003,692 | 6,409,624 | |
Series 2303 Class ZC, 6% 4/15/31 | 5,035,831 | 5,041,460 | |
Series 2550 Class PO, 1/15/33 (g) | 2,579,236 | 2,560,144 | |
Series 2568 Class SA, 10.528% 9/15/28 (d) | 3,376,078 | 3,475,036 | |
Series 2581 Class PO, 3/15/33 (g) | 2,320,093 | 2,292,917 | |
Series 2609 Class SD, 19.59% 2/15/33 (d) | 903,361 | 916,326 | |
Series 2628 Class AZ, 4.5% 6/15/18 | 4,101,557 | 4,101,557 | |
Series 2663 Class ZM, 5% 8/15/18 | 999,144 | 998,529 | |
Series 2664 Class EZ, 5.5% 8/15/33 | 4,369,904 | 4,355,555 | |
Ginnie Mae guaranteed REMIC pass thru securities | 2,739,483 | 2,802,093 | |
TOTAL U.S. GOVERNMENT AGENCY | 117,202,674 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $189,529,076) | 191,614,953 | ||
Commercial Mortgage Securities - 6.3% | |||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 43,397,311 | 2,864,900 | |
Banc America Commercial Mortgage, Inc. Series 2003-1 Class XP1, 1.475% 9/11/36 (a)(d)(f) | 103,390,000 | 3,731,738 | |
Chase Commercial Mortgage Securities Corp. Series 1999-2: | |||
Class E, 7.734% 1/15/32 | 1,110,000 | 1,263,910 | |
Class F, 7.734% 1/15/32 | 600,000 | 666,056 | |
COMM floater Series 2001-FL5A: | |||
Class D, 2.37% 11/15/13 (a)(d) | 9,000,000 | 8,992,725 | |
Class E, 2.62% 11/15/13 (a)(d) | 5,000,000 | 4,991,733 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175,000 | 5,719,125 | |
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360,000 | 3,551,443 | |
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31 | 935,000 | 949,960 | |
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5024% 2/17/24 (d) | 15,813,253 | 17,475,905 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Fannie Mae guaranteed REMIC pass thru certificates Series 1998-49 Class MI, 0.8691% 6/17/38 (d)(f) | $ 132,032,346 | $ 5,719,641 | |
Ginnie Mae guaranteed REMIC pass thru securities | 143,571,730 | 10,257,482 | |
Greenwich Capital Commercial Funding Corp.: | |||
Series 2002-C1 Class SWDB 5.857% 11/11/19 (a) | 2,600,000 | 2,612,188 | |
Series 2003-FL1 Class MCH, 4.3261% 7/5/18 (a)(d) | 1,458,095 | 1,458,095 | |
GS Mortgage Securities Corp. II Series 1998-GLII Class E, 7.1905% 4/13/31 (d) | 390,000 | 388,327 | |
GS Mortgage Trust II floater Series 2001-FL4A Class D, 2.03% 12/15/10 (a)(d) | 882,716 | 880,585 | |
Kansas Mortgage Capital LP Series 1995-1 Class E, 8.2532% 2/20/30 (a)(d) | 3,766,184 | 3,760,931 | |
Leafs CMBS I Ltd. Series 2002 1A Class D, 4.13% 11/20/37 (a) | 10,815,000 | 8,681,150 | |
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, 7.4389% 4/30/39 (a)(d) | 2,760,143 | 2,903,613 | |
Thirteen Affiliates of General Growth Properties, Inc. Series 1 Class D1, 6.917% 11/15/04 (a) | 18,200,000 | 19,055,720 | |
Trizechahn Office Properties Trust Series 2001-TZHA | 7,895,000 | 8,258,739 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $118,596,577) | 114,183,966 | ||
Fixed-Income Funds - 23.2% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 4,246,960 | 422,445,141 | |
Cash Equivalents - 24.0% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 437,339,998 | 437,301,000 | |
TOTAL INVESTMENT PORTFOLIO - 150.2% (Cost $2,732,580,126) | 2,737,639,140 | ||
NET OTHER ASSETS - (50.2)% | (915,351,880) | ||
NET ASSETS - 100% | $ 1,822,287,260 | ||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $94,829,246 or 5.2% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) A portion of the security is subject to a forward commitment to sell. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $8,477,775,382 and $8,224,353,989, respectively, of which long-term U.S. government and government agency obligations aggregated $7,997,925,580 and $8,030,569,074, respectively. |
Income Tax Information |
The fund hereby designates approximately $1,618,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $437,301,000) (cost $2,732,580,126) - See accompanying schedule | $ 2,737,639,140 | |
Commitment to sell securities on a delayed delivery basis | $ (108,223,969) | |
Receivable for securities sold on a delayed delivery basis | 107,958,000 | (265,969) |
Cash | 3,628,138 | |
Receivable for fund shares sold | 5,388,047 | |
Interest receivable | 7,064,466 | |
Prepaid expenses | 10,782 | |
Total assets | 2,753,464,604 | |
Liabilities | ||
Payable for investments purchased | $ 24,595,763 | |
Delayed delivery | 900,239,308 | |
Payable for fund shares redeemed | 4,816,953 | |
Distributions payable | 212,162 | |
Accrued management fee | 653,523 | |
Distribution fees payable | 265,113 | |
Other payables and accrued expenses | 394,522 | |
Total liabilities | 931,177,344 | |
Net Assets | $ 1,822,287,260 | |
Net Assets consist of: | ||
Paid in capital | $ 1,784,095,902 | |
Undistributed net investment income | 2,808,597 | |
Accumulated undistributed net realized gain (loss) on investments | 30,589,716 | |
Net unrealized appreciation (depreciation) on investments | 4,793,045 | |
Net Assets | $ 1,822,287,260 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 11.30 | |
Maximum offering price per share (100/95.25 of $11.30) | $ 11.86 | |
Class T: | $ 11.31 | |
Maximum offering price per share (100/96.50 of $11.31) | $ 11.72 | |
Class B: | $ 11.30 | |
Fidelity Mortgage Securities Fund: | $ 11.31 | |
Class C: | $ 11.29 | |
Institutional Class: | $ 11.29 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 66,018,325 | |
Expenses | ||
Management fee | $ 8,561,527 | |
Transfer agent fees | 2,917,547 | |
Distribution fees | 3,499,392 | |
Accounting fees and expenses | 443,203 | |
Non-interested trustees' compensation | 8,588 | |
Custodian fees and expenses | 159,262 | |
Registration fees | 202,971 | |
Audit | 74,980 | |
Legal | 25,707 | |
Miscellaneous | 1,857 | |
Total expenses before reductions | 15,895,034 | |
Expense reductions | (15,143) | 15,879,891 |
Net investment income (loss) | 50,138,434 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 24,691,070 | |
Swap agreements | 6,336,890 | |
Total net realized gain (loss) | 31,027,960 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (15,447,760) | |
Delayed delivery commitments | (199,563) | |
Total change in net unrealized appreciation (depreciation) | (15,647,323) | |
Net gain (loss) | 15,380,637 | |
Net increase (decrease) in net assets resulting from operations | $ 65,519,071 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 50,138,434 | $ 42,354,803 |
Net realized gain (loss) | 31,027,960 | 17,253,296 |
Change in net unrealized appreciation (depreciation) | (15,647,323) | 1,788,844 |
Net increase (decrease) in net assets resulting | 65,519,071 | 61,396,943 |
Distributions to shareholders from net investment income | (48,528,197) | (42,887,318) |
Distributions to shareholders from net realized gain | (12,938,149) | - |
Total distributions | (61,466,346) | (42,887,318) |
Share transactions - net increase (decrease) | 89,912,217 | 1,091,658,653 |
Total increase (decrease) in net assets | 93,964,942 | 1,110,168,278 |
Net Assets | ||
Beginning of period | 1,728,322,318 | 618,154,040 |
End of period (including undistributed net investment income of $2,808,597 and undistributed net | $ 1,822,287,260 | $ 1,728,322,318 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .282 | .502E | .630 | .665 | .646 |
Net realized and unrealized gain (loss) | .112 | .172E | .613 | .086 | (.336) |
Total from investment operations | .394 | .674 | 1.243 | .751 | .310 |
Distributions from net investment income | (.274) | (.534) | (.653) | (.701) | (.640) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.354) | (.534) | (.653) | (.701) | (.790) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 3.56% | 6.26% | 12.15% | 7.49% | 2.93% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .81% | .84% | .85% | .88% | .99% |
Expenses net of voluntary | .81% | .84% | .85% | .88% | .90% |
Expenses net of all reductions | .81% | .84% | .85% | .88% | .90% |
Net investment income (loss) | 2.51% | 4.55%E | 5.86% | 6.44% | 6.09% |
Supplemental Data | |||||
Net assets, end of period | $ 68,939 | $ 63,201 | $ 15,318 | $ 4,610 | $ 3,090 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .270 | .492E | .622 | .653 | .637 |
Net realized and unrealized gain (loss) | .101 | .171E | .617 | .092 | (.338) |
Total from investment operations | .371 | .663 | 1.239 | .745 | .299 |
Distributions from net investment income | (.261) | (.523) | (.639) | (.685) | (.629) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.341) | (.523) | (.639) | (.685) | (.779) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 |
Total ReturnA,B | 3.34% | 6.15% | 12.09% | 7.42% | 2.82% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .94% | .96% | 1.00% | 1.06% |
Expenses net of voluntary | .93% | .94% | .96% | 1.00% | 1.00% |
Expenses net of all reductions | .93% | .94% | .96% | 1.00% | 1.00% |
Net investment income (loss) | 2.39% | 4.45%E | 5.75% | 6.33% | 5.99% |
Supplemental Data | |||||
Net assets, end of period | $ 154,810 | $ 195,002 | $ 106,167 | $ 61,359 | $ 29,052 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)C | .197 | .421E | .551 | .593 | .567 |
Net realized and unrealized gain (loss) | .112 | .171E | .611 | .081 | (.324) |
Total from investment operations | .309 | .592 | 1.162 | .674 | .243 |
Distributions from net investment income | (.189) | (.452) | (.572) | (.624) | (.563) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.269) | (.452) | (.572) | (.624) | (.713) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 2.78% | 5.48% | 11.32% | 6.70% | 2.29% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of voluntary | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of all reductions | 1.57% | 1.57% | 1.60% | 1.60% | 1.62% |
Net investment income (loss) | 1.75% | 3.82%E | 5.11% | 5.73% | 5.37% |
Supplemental Data | |||||
Net assets, end of period | $ 181,666 | $ 176,245 | $ 57,034 | $ 19,911 | $ 19,101 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001F |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 11.25 | $ 11.10 | $ 10.89 |
Income from Investment Operations | |||
Net investment income (loss)E | .189 | .413H | .112 |
Net realized and unrealized gain (loss) | .112 | .173H | .238 |
Total from investment operations | .301 | .586 | .350 |
Distributions from net investment income | (.181) | (.436) | (.140) |
Distributions from net realized gain | (.080) | - | - |
Total distributions | (.261) | (.436) | (.140) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.10 |
Total ReturnB,C,D | 2.71% | 5.43% | 3.22% |
Ratios to Average Net AssetsG | |||
Expenses before expense reductions | 1.64% | 1.64% | 1.60%A |
Expenses net of voluntary waivers, if any | 1.64% | 1.64% | 1.60%A |
Expenses net of all reductions | 1.64% | 1.64% | 1.60%A |
Net investment income (loss) | 1.68% | 3.75%H | 4.87%A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 99,237 | $ 73,747 | $ 2,632 |
Portfolio turnover rate | 356% | 231% | 194% |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Mortgage Securities Fund
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 | $ 10.97 |
Income from Investment Operations | |||||
Net investment | .306 | .526D | .654 | .690 | .674 |
Net realized and unrealized gain (loss) | .102 | .170D | .619 | .078 | (.342) |
Total from investment operations | .408 | .696 | 1.273 | .768 | .332 |
Distributions from net investment income | (.298) | (.556) | (.673) | (.718) | (.662) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.378) | (.556) | (.673) | (.718) | (.812) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 |
Total ReturnA | 3.68% | 6.47% | 12.44% | 7.66% | 3.14% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .60% | .63% | .66% | .67% | .70% |
Expenses net of voluntary | .60% | .63% | .66% | .67% | .70% |
Expenses net of all | .60% | .63% | .66% | .67% | .70% |
Net investment income (loss) | 2.72% | 4.76%D | 6.04% | 6.65% | 6.29% |
Supplemental Data | |||||
Net assets, end of period | $ 1,301,599 | $ 1,207,967 | $ 429,684 | $ 371,107 | $ 406,839 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)B | .302 | .513D | .644 | .684 | .669 |
Net realized and unrealized gain (loss) | .112 | .171D | .610 | .080 | (.343) |
Total from investment operations | .414 | .684 | 1.254 | .764 | .326 |
Distributions from net investment income | (.294) | (.544) | (.664) | (.714) | (.656) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.374) | (.544) | (.664) | (.714) | (.806) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 |
Total ReturnA | 3.75% | 6.36% | 12.27% | 7.64% | 3.09% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .63% | .75% | .76% | .73% | .75% |
Expenses net of voluntary | .63% | .75% | .75% | .73% | .75% |
Expenses net of all reductions | .63% | .75% | .75% | .72% | .75% |
Net investment income (loss) | 2.69% | 4.65%D | 5.95% | 6.60% | 6.24% |
Supplemental Data | |||||
Net assets, end of period | $ 16,036 | $ 12,162 | $ 7,319 | $ 9,038 | $ 15,422 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity® Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Fidelity Mortgage Securities Fund (the original class), Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method..
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, financing transactions and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 15,314,250 | | |
Unrealized depreciation | (10,414,073) | |
Net unrealized appreciation (depreciation) | 4,900,177 | |
Undistributed ordinary income | 23,252,637 | |
Undistributed long-term capital gain | 2,759,607 | |
Cost for federal income tax purposes | $ 2,732,738,963 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 59,849,077 | $ 42,887,318 |
Long-term Capital Gains | 1,617,269 | - |
Total | $ 61,466,346 | $ 42,887,318 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
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Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
Annual Report
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 113,498 | $ 300 |
Class T | 0% | .25% | 476,495 | 14,193 |
Class B | .65% | .25% | 1,814,812 | 1,309,989 |
Class C | .75% | .25% | 1,094,587 | 763,152 |
$ 3,499,392 | $ 2,087,634 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 79,523 |
Class T | 68,487 |
Class B* | 687,163 |
Class C* | 116,425 |
$ 951,598 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 141,882 | .19 |
Class T | 391,242 | .21 |
Class B | 399,327 | .20 |
Fidelity Mortgage Securities Fund | 1,774,295 | .13 |
Class C | 177,789 | .16 |
Institutional Class | 33,012 | .16 |
$ 2,917,547 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
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4. Fees and Other Transactions with Affiliates - continued
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $8,140,493 for the period.
5. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $15,143.
6. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 1,812,935 | $ 1,576,709 |
Class T | 4,490,594 | 6,458,762 |
Class B | 3,348,473 | 3,776,918 |
Fidelity Mortgage Securities Fund | 36,645,682 | 29,741,839 |
Class C | 1,676,928 | 937,646 |
Institutional Class | 553,585 | 395,444 |
Total | $ 48,528,197 | $ 42,887,318 |
From net realized gain | ||
Class A | $ 479,109 | $ - |
Class T | 1,375,548 | - |
Class B | 1,317,977 | - |
Fidelity Mortgage Securities Fund | 9,053,280 | - |
Class C | 596,490 | - |
Institutional Class | 115,745 | - |
Total | $ 12,938,149 | $ - |
Annual Report
Notes to Financial Statements - continued
7. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 4,143,379 | 5,131,070 | $ 46,659,814 | $ 56,862,939 |
Reinvestment of distributions | 170,427 | 114,758 | 1,915,973 | 1,274,024 |
Shares redeemed | (3,823,033) | (1,011,719) | (42,999,421) | (11,214,145) |
Net increase (decrease) | 490,773 | 4,234,109 | $ 5,576,366 | $ 46,922,818 |
Class T | ||||
Shares sold | 9,900,926 | 14,584,865 | $ 111,507,763 | $ 162,139,047 |
Reinvestment of distributions | 461,144 | 452,163 | 5,189,781 | 5,016,690 |
Shares redeemed | (13,969,922) | (7,276,438) | (157,166,356) | (80,821,265) |
Net increase (decrease) | (3,607,852) | 7,760,590 | $ (40,468,812) | $ 86,334,472 |
Class B | ||||
Shares sold | 7,431,196 | 12,678,205 | $ 83,615,486 | $ 140,867,935 |
Reinvestment of distributions | 324,294 | 247,280 | 3,643,707 | 2,742,793 |
Shares redeemed | (7,323,983) | (2,403,597) | (82,328,932) | (26,617,789) |
Net increase (decrease) | 431,507 | 10,521,888 | $ 4,930,261 | $ 116,992,939 |
Fidelity Mortgage Securities Fund | ||||
Shares sold | 74,892,943 | 83,922,639 | $ 844,372,051 | $ 938,553,642 |
Reinvestment of distributions | 3,676,167 | 2,309,030 | 41,396,427 | 25,670,173 |
Shares redeemed | (70,626,654) | (17,719,111) | (794,954,735) | (197,753,645) |
Net increase (decrease) | 7,942,456 | 68,512,558 | $ 90,813,743 | $ 766,470,170 |
Class C | ||||
Shares sold | 7,174,688 | 6,878,721 | $ 80,647,975 | $ 76,443,117 |
Reinvestment of distributions | 158,593 | 67,542 | 1,780,642 | 752,106 |
Shares redeemed | (5,094,649) | (629,234) | (57,171,194) | (6,967,364) |
Net increase (decrease) | 2,238,632 | 6,317,029 | $ 25,257,423 | $ 70,227,859 |
Institutional Class | ||||
Shares sold | 2,242,760 | 805,931 | $ 25,207,417 | $ 8,949,120 |
Reinvestment of distributions | 42,862 | 21,939 | 481,820 | 242,677 |
Shares redeemed | (1,945,702) | (405,826) | (21,886,001) | (4,481,402) |
Net increase (decrease) | 339,920 | 422,044 | $ 3,803,236 | $ 4,710,395 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Mortgage Securities Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Mortgage Securities Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of the Fidelity Advisor Mortgage Securities Fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of the Fidelity Advisor Mortgage Securities Fund. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of the Fidelity Advisor Mortgage Securities Fund. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
George A. Fischer (42) | |
Year of Election or Appointment: 2003 Vice President of the Fidelity Advisor Mortgage Securities Fund. Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer worked as an research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of the Fidelity Advisor Mortgage Securities Fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the Fidelity Advisor Mortgage Securities Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of the Fidelity Advisor Mortgage Securities Fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the Fidelity Advisor Mortgage Securities Fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of the Fidelity Advisor Mortgage Securities Fund. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Mortgage Securities Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Class A | 12/8/03 | 12/5/03 | $0.15 |
Class T | 12/8/03 | 12/5/03 | $0.15 |
Class B | 12/8/03 | 12/5/03 | $0.15 |
Class C | 12/8/03 | 12/5/03 | $0.15 |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AMOR-UANN-1203
1.784762.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Mortgage Securities
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional Class A | 3.75% | 6.57% | 7.10% |
A Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. The initial offering of Institutional Class shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Fidelity Mortgage Securities Fund, the original class of the fund.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Mortgage Securities Fund - Institutional Class on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® Mortgage-Backed Securities Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from George Fischer, Portfolio Manager of Fidelity® Advisor Mortgage Securities Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Advisor Mortgage Securities Fund's Institutional Class shares had a total return of 3.75%, outpacing the fund's peer group as measured by the LipperSM U.S. Mortgage Funds Average, which returned 2.40%. Additionally, the fund's benchmark - the Lehman Brothers Mortgage-Backed Securities Index - returned 2.75%. The key contributor to the fund's outperformance of its peer group average was the ability to provide some measure of insulation from mortgage security prepayments, which occur when homeowners sell their homes or refinance, and, thus, pay off their mortgage before maturity. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Detracting from performance was a dearth of attractively priced prepayment-resistant mortgage securities, which hampered the manager's ability to add more prepayment protection.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of October 31, 2003 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.4 | 0.6 |
Less than 1% | 0.2 | 0.3 |
1 - 1.99% | 11.9 | 11.9 |
2 - 2.99% | 2.3 | 3.3 |
3 - 3.99% | 1.5 | 0.6 |
4 - 4.99% | 8.3 | 0.4 |
5 - 5.99% | 24.7 | 19.4 |
6 - 6.99% | 24.3 | 27.5 |
7 - 7.99% | 9.3 | 20.0 |
8% and over | 1.7 | 3.0 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 2.1 | 1.9 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 3.7 | 1.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Corporate Bonds 1.6% | | Corporate Bonds 2.3% | ||||
| Mortgage | | Mortgage | ||||
| CMOs and Other Mortgage Related Securities 19.7% | | CMOs and Other Mortgage Related Securities 20.9% | ||||
| U.S. Government and | | U.S. Government and | ||||
| Asset-Backed | | Asset-Backed | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 0.4% | ** Foreign investments | 0.3% | ||||
* Futures and Swaps | (0.3)% | ** Futures and Swaps | (1.1)% | ||||
(dagger) Short-Term Investments and Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 83.6% | |||
Principal | Value | ||
Fannie Mae - 62.5% | |||
4% 11/1/18 (b) | $ 6,966,640 | $ 6,764,172 | |
4.5% 11/1/18 to 11/1/33 (b) | 165,500,000 | 162,190,469 | |
4.5% 9/1/31 (c) | 18,327,816 | 17,476,404 | |
5% 9/1/16 to 9/1/18 | 126,371,946 | 128,438,470 | |
5.5% 7/1/16 to 5/1/33 | 81,965,181 | 84,413,417 | |
5.5% 11/1/33 to 11/13/33 (b)(c) | 341,288,210 | 344,274,478 | |
6% 2/1/14 to 9/1/17 | 27,074,971 | 28,160,964 | |
6% 11/1/33 (b) | 78,470,400 | 80,530,248 | |
6.5% 12/1/09 to 4/1/33 | 139,184,636 | 144,876,583 | |
6.5% 11/1/33 (b) | 102,990,374 | 106,981,251 | |
7% 3/1/17 to 7/1/32 | 15,780,580 | 16,678,719 | |
7.5% 4/1/22 to 9/1/32 | 12,020,323 | 12,812,343 | |
8% 9/1/07 to 12/1/29 | 164,553 | 177,238 | |
8.25% 1/1/13 | 10,539 | 11,147 | |
8.5% 1/1/16 to 7/1/31 | 1,913,827 | 2,055,657 | |
8.75% 11/1/08 | 10,220 | 10,721 | |
9% 1/1/08 to 10/1/30 | 2,125,933 | 2,311,982 | |
9.5% 11/1/06 to 8/1/22 | 425,538 | 466,518 | |
11% 8/1/10 | 254,096 | 284,154 | |
12.25% 5/1/13 to 5/1/15 | 59,025 | 67,733 | |
12.5% 8/1/15 to 3/1/16 | 109,507 | 126,281 | |
12.75% 2/1/15 | 5,511 | 6,363 | |
13.5% 9/1/14 to 12/1/14 | 37,635 | 43,964 | |
14% 11/1/14 | 37,510 | 44,137 | |
1,139,203,413 | |||
Freddie Mac - 8.3% | |||
5% 11/1/33 (b) | 99,000,000 | 97,422,188 | |
5.5% 3/1/29 to 7/1/29 | 202,944 | 205,493 | |
6% 5/1/16 to 7/1/29 | 3,655,477 | 3,785,358 | |
6.5% 1/1/24 to 9/1/24 | 4,868,419 | 5,086,180 | |
7.5% 11/1/07 to 7/1/32 | 38,893,113 | 41,496,442 | |
8% 10/1/07 to 4/1/21 | 174,348 | 188,648 | |
8.5% 11/1/03 to 9/1/20 | 447,265 | 487,202 | |
9% 9/1/08 to 5/1/21 | 1,215,962 | 1,343,795 | |
10% 1/1/09 to 5/1/19 | 417,553 | 462,702 | |
10.5% 8/1/10 to 2/1/16 | 28,313 | 31,430 | |
12.25% 6/1/14 | 16,720 | 19,181 | |
12.5% 5/1/12 to 12/1/14 | 176,126 | 201,284 | |
12.75% 6/1/05 to 1/1/14 | 14,689 | 16,579 | |
13% 10/1/13 to 6/1/15 | 404,772 | 467,310 | |
151,213,792 | |||
U.S. Government Agency - Mortgage Securities - continued | |||
Principal | Value | ||
Government National Mortgage Association - 12.8% | |||
6% 11/1/33 (b) | $ 100,000,000 | $ 103,000,000 | |
6.5% 5/15/28 to 8/15/32 | 8,460,104 | 8,857,540 | |
7% 2/15/24 to 5/15/33 | 102,660,923 | 108,762,118 | |
7.5% 7/15/05 to 4/15/32 | 6,018,787 | 6,443,793 | |
8% 2/15/06 to 12/15/25 | 1,943,729 | 2,105,756 | |
8.5% 7/15/16 to 10/15/28 | 3,678,249 | 4,026,787 | |
9% 9/20/16 to 4/20/18 | 26,392 | 28,882 | |
9.5% 12/15/24 | 17,079 | 18,950 | |
10.5% 6/15/04 to 2/20/18 | 156,469 | 175,428 | |
13% 10/15/13 | 33,975 | 39,557 | |
13.5% 7/15/11 to 10/15/14 | 21,067 | 24,558 | |
233,483,369 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,517,440,062) | 1,523,900,574 | ||
Asset-Backed Securities - 2.6% | |||
ABSC NIMS Trust Series 2002-HE3 Class A, 7% 10/17/32 (a) | 543,918 | 545,108 | |
ACE Securities Corp. Series 2003-FM1 Class M2, 2.97% 11/25/32 (d) | 1,450,000 | 1,450,000 | |
ACE Securities Corp. NIMS Trust Series 2002-HE1N | 458,225 | 457,079 | |
Amortizing Residential Collateral Trust Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 108,533 | 107,719 | |
BankAmerica Manufactured Housing Contract Trust V | 551,858 | 555,460 | |
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.02% 10/25/33 (d) | 1,264,987 | 1,271,845 | |
CDC Mortgage Capital, Inc. NIMS Trust Series 2002-HE2N Class NOTE, 10% 1/25/33 (a) | 577,513 | 578,106 | |
Countrywide Home Loans, Inc. Series 2002-3NIM Class NOTE, 9% 9/25/32 (a) | 246,796 | 248,035 | |
CS First Boston Mortgage Securities Corp. NIMS Trust: | |||
Series 2001-H30N Class A, 8% 7/27/32 (a) | 437,625 | 434,343 | |
Series 2001-HE22N Class A, 8% 3/27/32 | 95,486 | 95,247 | |
Series 2002-H10N Class A, 8% 11/27/32 (a) | 936,849 | 922,796 | |
Series 2002-H16N Class A, 8% 11/27/32 (a) | 1,152,926 | 1,135,632 | |
Series 2002-H1N Class A, 8% 8/27/32 (a) | 78,565 | 77,780 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP NIMS Trust Series 2002-HE2N Class NOTE, 8.25% 10/20/32 (a) | $ 635,933 | $ 637,145 | |
Home Equity Asset Trust NIMS Trust: | |||
Series 2002-2N Class A, 8% 1/27/33 (a) | 325,313 | 322,060 | |
Series 2002-3N Class A, 8% 3/25/33 (a) | 2,568,298 | 2,516,932 | |
Series 2002-4N Class A, 8% 5/27/33 (a) | 871,710 | 854,276 | |
Series 2003-2N Class A, 8% 9/27/33 (a) | 1,152,789 | 1,128,581 | |
Home Equity Residual Distributions Trust Series 2002-1 Class A, 12.25% 11/25/05 (a) | 3,150,000 | 3,150,000 | |
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 106,243 | 105,180 | |
Long Beach Asset Holdings Corp. NIMS Trust Series 2002-1 Class N1, 9.05% 5/25/32 (a) | 86,210 | 84,270 | |
Long Beach Mortgage Loan Trust Series 2003-3: | |||
Class M1, 1.87% 7/25/33 (d) | 3,770,000 | 3,770,000 | |
Class M2, 2.97% 7/25/33 (d) | 2,600,000 | 2,603,250 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 467,627 | 467,781 | |
Series 2003-NC6 Class M2, 3.07% 6/27/33 (d) | 6,165,000 | 6,190,745 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-NC4N Class NOTE, 8.5% 1/25/32 (a) | 45,688 | 45,715 | |
Series 2002-HE2N Class NOTE, 9.5% 8/25/32 (a) | 1,524,893 | 1,525,579 | |
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (a) | 458,277 | 458,595 | |
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 203,515 | 203,714 | |
Morgan Stanley Dean Witter Capital I, Inc.: | |||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 848,922 | 849,723 | |
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 3,068,151 | 3,066,952 | |
New Century Home Equity Loan Trust Series 2000-NC1 Class M3, 3.22% 4/25/30 (d) | 4,170,000 | 3,992,775 | |
NovaStar CAPS Trust Series 2002-C1 Class A, 7.15% 9/25/31 (a) | 1,105,853 | 1,105,853 | |
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 Class A1, 3.6% 4/25/33 | 4,117,895 | 4,066,099 | |
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (a) | 3,185,504 | 3,169,131 | |
TOTAL ASSET-BACKED SECURITIES (Cost $48,191,409) | 48,193,506 | ||
Collateralized Mortgage Obligations - 10.5% | |||
Principal | Value | ||
Private Sponsor - 4.1% | |||
Countrywide Home Loans, Inc. sequential pay: | |||
Series 2002-25 Class 2A1, 5.5% 11/27/17 | $ 2,731,791 | $ 2,775,595 | |
Series 2002-5 Class 2A1, 6% 4/25/17 | 4,447,863 | 4,482,836 | |
Credit Suisse First Boston Mortgage Acceptance Corp. sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 15,140,000 | 15,367,100 | |
CS First Boston Mortgage Securities Corp.: | |||
sequential pay Series 2001-26 Class 3A1, 7.5% 11/25/31 | 2,342,367 | 2,394,340 | |
Series 2002-15R Class A1, 6.7651% 1/28/32 (a)(d) | 4,379,210 | 4,391,529 | |
Series 2003-TFLA Class F, 1.9633% 4/15/13 (a)(d) | 1,400,000 | 1,369,494 | |
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% 4/25/18 | 32,637,236 | 33,432,769 | |
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 | 5,810,000 | 5,991,109 | |
WAMU Mortgage pass thru certificates Series 2002-S6 Class A25, 6% 10/25/32 | 4,054,029 | 4,120,118 | |
Wells Fargo Mortgage Back Securities Series 2001-6 Class A12, 7% 4/25/31 | 87,491 | 87,389 | |
TOTAL PRIVATE SPONSOR | 74,412,279 | ||
U.S. Government Agency - 6.4% | |||
Fannie Mae: | |||
planned amortization class: | |||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049,260 | 10,534,093 | |
Series 1999-15 Class PC, 6% 9/25/18 | 9,567,000 | 10,055,388 | |
Series 1993-187 Class L, 6.5% 7/25/23 | 4,187,000 | 4,471,484 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
planned amortization class: | |||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000,000 | 10,541,728 | |
Series 2002-9 Class C, 6.5% 6/25/30 | 5,000,000 | 5,248,358 | |
Series 2001-82 Class VB, 6.5% 3/25/16 | 16,356,920 | 17,154,531 | |
Series 2003-77 Class WZ, 4.5% 8/25/18 | 16,227,459 | 15,740,635 | |
Series 2003-88 Class WZ, 4.5% 9/25/18 | 1,251,891 | 1,254,485 | |
Freddie Mac planned amortization class: | |||
Series 2343 Class GD, 6.5% 1/15/30 | 3,763,643 | 3,798,990 | |
Series 70 Class C, 9% 9/15/20 | 482,779 | 483,258 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
planned amortization class Series 2568 Class KQ, 5% 2/15/23 | 1,325,093 | 1,328,998 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2303 Class VT, 6% 2/15/12 | $ 3,468,184 | $ 3,514,134 | |
Series 2414 Class SM, 15.48% 12/15/29 (d) | 122,081 | 123,351 | |
Series 1658 Class GZ, 7% 1/15/24 | 6,003,692 | 6,409,624 | |
Series 2303 Class ZC, 6% 4/15/31 | 5,035,831 | 5,041,460 | |
Series 2550 Class PO, 1/15/33 (g) | 2,579,236 | 2,560,144 | |
Series 2568 Class SA, 10.528% 9/15/28 (d) | 3,376,078 | 3,475,036 | |
Series 2581 Class PO, 3/15/33 (g) | 2,320,093 | 2,292,917 | |
Series 2609 Class SD, 19.59% 2/15/33 (d) | 903,361 | 916,326 | |
Series 2628 Class AZ, 4.5% 6/15/18 | 4,101,557 | 4,101,557 | |
Series 2663 Class ZM, 5% 8/15/18 | 999,144 | 998,529 | |
Series 2664 Class EZ, 5.5% 8/15/33 | 4,369,904 | 4,355,555 | |
Ginnie Mae guaranteed REMIC pass thru securities | 2,739,483 | 2,802,093 | |
TOTAL U.S. GOVERNMENT AGENCY | 117,202,674 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $189,529,076) | 191,614,953 | ||
Commercial Mortgage Securities - 6.3% | |||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 43,397,311 | 2,864,900 | |
Banc America Commercial Mortgage, Inc. Series 2003-1 Class XP1, 1.475% 9/11/36 (a)(d)(f) | 103,390,000 | 3,731,738 | |
Chase Commercial Mortgage Securities Corp. Series 1999-2: | |||
Class E, 7.734% 1/15/32 | 1,110,000 | 1,263,910 | |
Class F, 7.734% 1/15/32 | 600,000 | 666,056 | |
COMM floater Series 2001-FL5A: | |||
Class D, 2.37% 11/15/13 (a)(d) | 9,000,000 | 8,992,725 | |
Class E, 2.62% 11/15/13 (a)(d) | 5,000,000 | 4,991,733 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175,000 | 5,719,125 | |
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360,000 | 3,551,443 | |
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31 | 935,000 | 949,960 | |
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5024% 2/17/24 (d) | 15,813,253 | 17,475,905 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Fannie Mae guaranteed REMIC pass thru certificates Series 1998-49 Class MI, 0.8691% 6/17/38 (d)(f) | $ 132,032,346 | $ 5,719,641 | |
Ginnie Mae guaranteed REMIC pass thru securities | 143,571,730 | 10,257,482 | |
Greenwich Capital Commercial Funding Corp.: | |||
Series 2002-C1 Class SWDB 5.857% 11/11/19 (a) | 2,600,000 | 2,612,188 | |
Series 2003-FL1 Class MCH, 4.3261% 7/5/18 (a)(d) | 1,458,095 | 1,458,095 | |
GS Mortgage Securities Corp. II Series 1998-GLII Class E, 7.1905% 4/13/31 (d) | 390,000 | 388,327 | |
GS Mortgage Trust II floater Series 2001-FL4A Class D, 2.03% 12/15/10 (a)(d) | 882,716 | 880,585 | |
Kansas Mortgage Capital LP Series 1995-1 Class E, 8.2532% 2/20/30 (a)(d) | 3,766,184 | 3,760,931 | |
Leafs CMBS I Ltd. Series 2002 1A Class D, 4.13% 11/20/37 (a) | 10,815,000 | 8,681,150 | |
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, 7.4389% 4/30/39 (a)(d) | 2,760,143 | 2,903,613 | |
Thirteen Affiliates of General Growth Properties, Inc. Series 1 Class D1, 6.917% 11/15/04 (a) | 18,200,000 | 19,055,720 | |
Trizechahn Office Properties Trust Series 2001-TZHA | 7,895,000 | 8,258,739 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $118,596,577) | 114,183,966 | ||
Fixed-Income Funds - 23.2% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 4,246,960 | 422,445,141 | |
Cash Equivalents - 24.0% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 437,339,998 | 437,301,000 | |
TOTAL INVESTMENT PORTFOLIO - 150.2% (Cost $2,732,580,126) | 2,737,639,140 | ||
NET OTHER ASSETS - (50.2)% | (915,351,880) | ||
NET ASSETS - 100% | $ 1,822,287,260 | ||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $94,829,246 or 5.2% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) A portion of the security is subject to a forward commitment to sell. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $8,477,775,382 and $8,224,353,989, respectively, of which long-term U.S. government and government agency obligations aggregated $7,997,925,580 and $8,030,569,074, respectively. |
Income Tax Information |
The fund hereby designates approximately $1,618,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $437,301,000) (cost $2,732,580,126) - See accompanying schedule | $ 2,737,639,140 | |
Commitment to sell securities on a delayed delivery basis | $ (108,223,969) | |
Receivable for securities sold on a delayed delivery basis | 107,958,000 | (265,969) |
Cash | 3,628,138 | |
Receivable for fund shares sold | 5,388,047 | |
Interest receivable | 7,064,466 | |
Prepaid expenses | 10,782 | |
Total assets | 2,753,464,604 | |
Liabilities | ||
Payable for investments purchased | $ 24,595,763 | |
Delayed delivery | 900,239,308 | |
Payable for fund shares redeemed | 4,816,953 | |
Distributions payable | 212,162 | |
Accrued management fee | 653,523 | |
Distribution fees payable | 265,113 | |
Other payables and accrued expenses | 394,522 | |
Total liabilities | 931,177,344 | |
Net Assets | $ 1,822,287,260 | |
Net Assets consist of: | ||
Paid in capital | $ 1,784,095,902 | |
Undistributed net investment income | 2,808,597 | |
Accumulated undistributed net realized gain (loss) on investments | 30,589,716 | |
Net unrealized appreciation (depreciation) on investments | 4,793,045 | |
Net Assets | $ 1,822,287,260 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 11.30 | |
Maximum offering price per share (100/95.25 of $11.30) | $ 11.86 | |
Class T: | $ 11.31 | |
Maximum offering price per share (100/96.50 of $11.31) | $ 11.72 | |
Class B: | $ 11.30 | |
Fidelity Mortgage Securities Fund: | $ 11.31 | |
Class C: | $ 11.29 | |
Institutional Class: | $ 11.29 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 66,018,325 | |
Expenses | ||
Management fee | $ 8,561,527 | |
Transfer agent fees | 2,917,547 | |
Distribution fees | 3,499,392 | |
Accounting fees and expenses | 443,203 | |
Non-interested trustees' compensation | 8,588 | |
Custodian fees and expenses | 159,262 | |
Registration fees | 202,971 | |
Audit | 74,980 | |
Legal | 25,707 | |
Miscellaneous | 1,857 | |
Total expenses before reductions | 15,895,034 | |
Expense reductions | (15,143) | 15,879,891 |
Net investment income (loss) | 50,138,434 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 24,691,070 | |
Swap agreements | 6,336,890 | |
Total net realized gain (loss) | 31,027,960 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (15,447,760) | |
Delayed delivery commitments | (199,563) | |
Total change in net unrealized appreciation (depreciation) | (15,647,323) | |
Net gain (loss) | 15,380,637 | |
Net increase (decrease) in net assets resulting from operations | $ 65,519,071 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 50,138,434 | $ 42,354,803 |
Net realized gain (loss) | 31,027,960 | 17,253,296 |
Change in net unrealized appreciation (depreciation) | (15,647,323) | 1,788,844 |
Net increase (decrease) in net assets resulting | 65,519,071 | 61,396,943 |
Distributions to shareholders from net investment income | (48,528,197) | (42,887,318) |
Distributions to shareholders from net realized gain | (12,938,149) | - |
Total distributions | (61,466,346) | (42,887,318) |
Share transactions - net increase (decrease) | 89,912,217 | 1,091,658,653 |
Total increase (decrease) in net assets | 93,964,942 | 1,110,168,278 |
Net Assets | ||
Beginning of period | 1,728,322,318 | 618,154,040 |
End of period (including undistributed net investment income of $2,808,597 and undistributed net | $ 1,822,287,260 | $ 1,728,322,318 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .282 | .502E | .630 | .665 | .646 |
Net realized and unrealized gain (loss) | .112 | .172E | .613 | .086 | (.336) |
Total from investment operations | .394 | .674 | 1.243 | .751 | .310 |
Distributions from net investment income | (.274) | (.534) | (.653) | (.701) | (.640) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.354) | (.534) | (.653) | (.701) | (.790) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 3.56% | 6.26% | 12.15% | 7.49% | 2.93% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .81% | .84% | .85% | .88% | .99% |
Expenses net of voluntary | .81% | .84% | .85% | .88% | .90% |
Expenses net of all reductions | .81% | .84% | .85% | .88% | .90% |
Net investment income (loss) | 2.51% | 4.55%E | 5.86% | 6.44% | 6.09% |
Supplemental Data | |||||
Net assets, end of period | $ 68,939 | $ 63,201 | $ 15,318 | $ 4,610 | $ 3,090 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .270 | .492E | .622 | .653 | .637 |
Net realized and unrealized gain (loss) | .101 | .171E | .617 | .092 | (.338) |
Total from investment operations | .371 | .663 | 1.239 | .745 | .299 |
Distributions from net investment income | (.261) | (.523) | (.639) | (.685) | (.629) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.341) | (.523) | (.639) | (.685) | (.779) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 |
Total ReturnA,B | 3.34% | 6.15% | 12.09% | 7.42% | 2.82% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .94% | .96% | 1.00% | 1.06% |
Expenses net of voluntary | .93% | .94% | .96% | 1.00% | 1.00% |
Expenses net of all reductions | .93% | .94% | .96% | 1.00% | 1.00% |
Net investment income (loss) | 2.39% | 4.45%E | 5.75% | 6.33% | 5.99% |
Supplemental Data | |||||
Net assets, end of period | $ 154,810 | $ 195,002 | $ 106,167 | $ 61,359 | $ 29,052 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)C | .197 | .421E | .551 | .593 | .567 |
Net realized and unrealized gain (loss) | .112 | .171E | .611 | .081 | (.324) |
Total from investment operations | .309 | .592 | 1.162 | .674 | .243 |
Distributions from net investment income | (.189) | (.452) | (.572) | (.624) | (.563) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.269) | (.452) | (.572) | (.624) | (.713) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 2.78% | 5.48% | 11.32% | 6.70% | 2.29% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of voluntary | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of all reductions | 1.57% | 1.57% | 1.60% | 1.60% | 1.62% |
Net investment income (loss) | 1.75% | 3.82%E | 5.11% | 5.73% | 5.37% |
Supplemental Data | |||||
Net assets, end of period | $ 181,666 | $ 176,245 | $ 57,034 | $ 19,911 | $ 19,101 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001F |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 11.25 | $ 11.10 | $ 10.89 |
Income from Investment Operations | |||
Net investment income (loss)E | .189 | .413H | .112 |
Net realized and unrealized gain (loss) | .112 | .173H | .238 |
Total from investment operations | .301 | .586 | .350 |
Distributions from net investment income | (.181) | (.436) | (.140) |
Distributions from net realized gain | (.080) | - | - |
Total distributions | (.261) | (.436) | (.140) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.10 |
Total ReturnB,C,D | 2.71% | 5.43% | 3.22% |
Ratios to Average Net AssetsG | |||
Expenses before expense reductions | 1.64% | 1.64% | 1.60%A |
Expenses net of voluntary waivers, if any | 1.64% | 1.64% | 1.60%A |
Expenses net of all reductions | 1.64% | 1.64% | 1.60%A |
Net investment income (loss) | 1.68% | 3.75%H | 4.87%A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 99,237 | $ 73,747 | $ 2,632 |
Portfolio turnover rate | 356% | 231% | 194% |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Mortgage Securities Fund
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 | $ 10.97 |
Income from Investment Operations | |||||
Net investment | .306 | .526D | .654 | .690 | .674 |
Net realized and unrealized gain (loss) | .102 | .170D | .619 | .078 | (.342) |
Total from investment operations | .408 | .696 | 1.273 | .768 | .332 |
Distributions from net investment income | (.298) | (.556) | (.673) | (.718) | (.662) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.378) | (.556) | (.673) | (.718) | (.812) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 |
Total ReturnA | 3.68% | 6.47% | 12.44% | 7.66% | 3.14% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .60% | .63% | .66% | .67% | .70% |
Expenses net of voluntary | .60% | .63% | .66% | .67% | .70% |
Expenses net of all | .60% | .63% | .66% | .67% | .70% |
Net investment income (loss) | 2.72% | 4.76%D | 6.04% | 6.65% | 6.29% |
Supplemental Data | |||||
Net assets, end of period | $ 1,301,599 | $ 1,207,967 | $ 429,684 | $ 371,107 | $ 406,839 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)B | .302 | .513D | .644 | .684 | .669 |
Net realized and unrealized gain (loss) | .112 | .171D | .610 | .080 | (.343) |
Total from investment operations | .414 | .684 | 1.254 | .764 | .326 |
Distributions from net investment income | (.294) | (.544) | (.664) | (.714) | (.656) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.374) | (.544) | (.664) | (.714) | (.806) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 |
Total ReturnA | 3.75% | 6.36% | 12.27% | 7.64% | 3.09% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .63% | .75% | .76% | .73% | .75% |
Expenses net of voluntary | .63% | .75% | .75% | .73% | .75% |
Expenses net of all reductions | .63% | .75% | .75% | .72% | .75% |
Net investment income (loss) | 2.69% | 4.65%D | 5.95% | 6.60% | 6.24% |
Supplemental Data | |||||
Net assets, end of period | $ 16,036 | $ 12,162 | $ 7,319 | $ 9,038 | $ 15,422 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity® Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Fidelity Mortgage Securities Fund (the original class), Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method..
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, financing transactions and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 15,314,250 | | |
Unrealized depreciation | (10,414,073) | |
Net unrealized appreciation (depreciation) | 4,900,177 | |
Undistributed ordinary income | 23,252,637 | |
Undistributed long-term capital gain | 2,759,607 | |
Cost for federal income tax purposes | $ 2,732,738,963 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 59,849,077 | $ 42,887,318 |
Long-term Capital Gains | 1,617,269 | - |
Total | $ 61,466,346 | $ 42,887,318 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
Annual Report
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 113,498 | $ 300 |
Class T | 0% | .25% | 476,495 | 14,193 |
Class B | .65% | .25% | 1,814,812 | 1,309,989 |
Class C | .75% | .25% | 1,094,587 | 763,152 |
$ 3,499,392 | $ 2,087,634 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 79,523 |
Class T | 68,487 |
Class B* | 687,163 |
Class C* | 116,425 |
$ 951,598 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 141,882 | .19 |
Class T | 391,242 | .21 |
Class B | 399,327 | .20 |
Fidelity Mortgage Securities Fund | 1,774,295 | .13 |
Class C | 177,789 | .16 |
Institutional Class | 33,012 | .16 |
$ 2,917,547 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $8,140,493 for the period.
5. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $15,143.
6. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 1,812,935 | $ 1,576,709 |
Class T | 4,490,594 | 6,458,762 |
Class B | 3,348,473 | 3,776,918 |
Fidelity Mortgage Securities Fund | 36,645,682 | 29,741,839 |
Class C | 1,676,928 | 937,646 |
Institutional Class | 553,585 | 395,444 |
Total | $ 48,528,197 | $ 42,887,318 |
From net realized gain | ||
Class A | $ 479,109 | $ - |
Class T | 1,375,548 | - |
Class B | 1,317,977 | - |
Fidelity Mortgage Securities Fund | 9,053,280 | - |
Class C | 596,490 | - |
Institutional Class | 115,745 | - |
Total | $ 12,938,149 | $ - |
Annual Report
Notes to Financial Statements - continued
7. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 4,143,379 | 5,131,070 | $ 46,659,814 | $ 56,862,939 |
Reinvestment of distributions | 170,427 | 114,758 | 1,915,973 | 1,274,024 |
Shares redeemed | (3,823,033) | (1,011,719) | (42,999,421) | (11,214,145) |
Net increase (decrease) | 490,773 | 4,234,109 | $ 5,576,366 | $ 46,922,818 |
Class T | ||||
Shares sold | 9,900,926 | 14,584,865 | $ 111,507,763 | $ 162,139,047 |
Reinvestment of distributions | 461,144 | 452,163 | 5,189,781 | 5,016,690 |
Shares redeemed | (13,969,922) | (7,276,438) | (157,166,356) | (80,821,265) |
Net increase (decrease) | (3,607,852) | 7,760,590 | $ (40,468,812) | $ 86,334,472 |
Class B | ||||
Shares sold | 7,431,196 | 12,678,205 | $ 83,615,486 | $ 140,867,935 |
Reinvestment of distributions | 324,294 | 247,280 | 3,643,707 | 2,742,793 |
Shares redeemed | (7,323,983) | (2,403,597) | (82,328,932) | (26,617,789) |
Net increase (decrease) | 431,507 | 10,521,888 | $ 4,930,261 | $ 116,992,939 |
Fidelity Mortgage Securities Fund | ||||
Shares sold | 74,892,943 | 83,922,639 | $ 844,372,051 | $ 938,553,642 |
Reinvestment of distributions | 3,676,167 | 2,309,030 | 41,396,427 | 25,670,173 |
Shares redeemed | (70,626,654) | (17,719,111) | (794,954,735) | (197,753,645) |
Net increase (decrease) | 7,942,456 | 68,512,558 | $ 90,813,743 | $ 766,470,170 |
Class C | ||||
Shares sold | 7,174,688 | 6,878,721 | $ 80,647,975 | $ 76,443,117 |
Reinvestment of distributions | 158,593 | 67,542 | 1,780,642 | 752,106 |
Shares redeemed | (5,094,649) | (629,234) | (57,171,194) | (6,967,364) |
Net increase (decrease) | 2,238,632 | 6,317,029 | $ 25,257,423 | $ 70,227,859 |
Institutional Class | ||||
Shares sold | 2,242,760 | 805,931 | $ 25,207,417 | $ 8,949,120 |
Reinvestment of distributions | 42,862 | 21,939 | 481,820 | 242,677 |
Shares redeemed | (1,945,702) | (405,826) | (21,886,001) | (4,481,402) |
Net increase (decrease) | 339,920 | 422,044 | $ 3,803,236 | $ 4,710,395 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Mortgage Securities Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Mortgage Securities Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of the Fidelity Advisor Mortgage Securities Fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of the Fidelity Advisor Mortgage Securities Fund. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of the Fidelity Advisor Mortgage Securities Fund. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
George A. Fischer (42) | |
Year of Election or Appointment: 2003 Vice President of the Fidelity Advisor Mortgage Securities Fund. Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer worked as an research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of the Fidelity Advisor Mortgage Securities Fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the Fidelity Advisor Mortgage Securities Fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of the Fidelity Advisor Mortgage Securities Fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the Fidelity Advisor Mortgage Securities Fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of the Fidelity Advisor Mortgage Securities Fund. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of the Fidelity Advisor Mortgage Securities Fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Mortgage Securities Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Institutional Class | 12/8/03 | 12/5/03 | $0.15 |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investments Money Management, Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
AMORI-UANN-1203
1.784763.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity
Mortgage Securities
Fund
(A Class of Fidelity® Advisor Mortgage
Securities Fund)
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy, and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines visit www.fidelity.com/goto/proxyguidelines, call 1-800-544-8544, or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity fund, including charges and expenses, call 1-800-544-6666 for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 |
Fidelity Mortgage Securities Fund | 3.68% | 6.63% | 7.15% |
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Mortgage Securities Fund on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers® Mortgage-Backed Securities Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from George Fischer, Portfolio Manager of Fidelity Mortgage Securities Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers U.S. Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
Fidelity Mortgage Securities Fund returned 3.68%, outpacing the fund's peer group as measured by the LipperSM U.S. Mortgage Funds Average, which returned 2.40%. Additionally, the fund's benchmark - the Lehman Brothers Mortgage-Backed Securities Index - returned 2.75%. The key contributor to the fund's outperformance of its peer group average was the ability to provide some measure of insulation from mortgage security prepayments, which occur when homeowners sell their homes or refinance, and, thus, pay off their mortgage before maturity. Prepayments can mean that bondholders lose out on expected income and may be forced to reinvest at lower, prevailing interest rates. Detracting from performance was a dearth of attractively priced prepayment-resistant mortgage securities, which hampered the manager's ability to add more prepayment protection.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Coupon Distribution as of October 31, 2003 | ||
% of fund's | % of fund's investments | |
Zero coupon bonds | 0.4 | 0.6 |
Less than 1% | 0.2 | 0.3 |
1 - 1.99% | 11.9 | 11.9 |
2 - 2.99% | 2.3 | 3.3 |
3 - 3.99% | 1.5 | 0.6 |
4 - 4.99% | 8.3 | 0.4 |
5 - 5.99% | 24.7 | 19.4 |
6 - 6.99% | 24.3 | 27.5 |
7 - 7.99% | 9.3 | 20.0 |
8% and over | 1.7 | 3.0 |
Coupon distribution shows the range of stated interest rates on the fund's investments, excluding short-term investments. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 2.1 | 1.9 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 3.7 | 1.4 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003* | As of April 30, 2003** | ||||||
| Corporate Bonds 1.6% | | Corporate Bonds 2.3% | ||||
| Mortgage | | Mortgage | ||||
| CMOs and Other Mortgage Related Securities 19.7% | | CMOs and Other Mortgage Related Securities 20.9% | ||||
| U.S. Government and | | U.S. Government and | ||||
| Asset-Backed | | Asset-Backed | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 0.4% | ** Foreign investments | 0.3% | ||||
* Futures and Swaps | (0.3)% | ** Futures and Swaps | (1.1)% | ||||
(dagger) Short-Term Investments and Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
U.S. Government Agency - Mortgage Securities - 83.6% | |||
Principal | Value | ||
Fannie Mae - 62.5% | |||
4% 11/1/18 (b) | $ 6,966,640 | $ 6,764,172 | |
4.5% 11/1/18 to 11/1/33 (b) | 165,500,000 | 162,190,469 | |
4.5% 9/1/31 (c) | 18,327,816 | 17,476,404 | |
5% 9/1/16 to 9/1/18 | 126,371,946 | 128,438,470 | |
5.5% 7/1/16 to 5/1/33 | 81,965,181 | 84,413,417 | |
5.5% 11/1/33 to 11/13/33 (b)(c) | 341,288,210 | 344,274,478 | |
6% 2/1/14 to 9/1/17 | 27,074,971 | 28,160,964 | |
6% 11/1/33 (b) | 78,470,400 | 80,530,248 | |
6.5% 12/1/09 to 4/1/33 | 139,184,636 | 144,876,583 | |
6.5% 11/1/33 (b) | 102,990,374 | 106,981,251 | |
7% 3/1/17 to 7/1/32 | 15,780,580 | 16,678,719 | |
7.5% 4/1/22 to 9/1/32 | 12,020,323 | 12,812,343 | |
8% 9/1/07 to 12/1/29 | 164,553 | 177,238 | |
8.25% 1/1/13 | 10,539 | 11,147 | |
8.5% 1/1/16 to 7/1/31 | 1,913,827 | 2,055,657 | |
8.75% 11/1/08 | 10,220 | 10,721 | |
9% 1/1/08 to 10/1/30 | 2,125,933 | 2,311,982 | |
9.5% 11/1/06 to 8/1/22 | 425,538 | 466,518 | |
11% 8/1/10 | 254,096 | 284,154 | |
12.25% 5/1/13 to 5/1/15 | 59,025 | 67,733 | |
12.5% 8/1/15 to 3/1/16 | 109,507 | 126,281 | |
12.75% 2/1/15 | 5,511 | 6,363 | |
13.5% 9/1/14 to 12/1/14 | 37,635 | 43,964 | |
14% 11/1/14 | 37,510 | 44,137 | |
1,139,203,413 | |||
Freddie Mac - 8.3% | |||
5% 11/1/33 (b) | 99,000,000 | 97,422,188 | |
5.5% 3/1/29 to 7/1/29 | 202,944 | 205,493 | |
6% 5/1/16 to 7/1/29 | 3,655,477 | 3,785,358 | |
6.5% 1/1/24 to 9/1/24 | 4,868,419 | 5,086,180 | |
7.5% 11/1/07 to 7/1/32 | 38,893,113 | 41,496,442 | |
8% 10/1/07 to 4/1/21 | 174,348 | 188,648 | |
8.5% 11/1/03 to 9/1/20 | 447,265 | 487,202 | |
9% 9/1/08 to 5/1/21 | 1,215,962 | 1,343,795 | |
10% 1/1/09 to 5/1/19 | 417,553 | 462,702 | |
10.5% 8/1/10 to 2/1/16 | 28,313 | 31,430 | |
12.25% 6/1/14 | 16,720 | 19,181 | |
12.5% 5/1/12 to 12/1/14 | 176,126 | 201,284 | |
12.75% 6/1/05 to 1/1/14 | 14,689 | 16,579 | |
13% 10/1/13 to 6/1/15 | 404,772 | 467,310 | |
151,213,792 | |||
U.S. Government Agency - Mortgage Securities - continued | |||
Principal | Value | ||
Government National Mortgage Association - 12.8% | |||
6% 11/1/33 (b) | $ 100,000,000 | $ 103,000,000 | |
6.5% 5/15/28 to 8/15/32 | 8,460,104 | 8,857,540 | |
7% 2/15/24 to 5/15/33 | 102,660,923 | 108,762,118 | |
7.5% 7/15/05 to 4/15/32 | 6,018,787 | 6,443,793 | |
8% 2/15/06 to 12/15/25 | 1,943,729 | 2,105,756 | |
8.5% 7/15/16 to 10/15/28 | 3,678,249 | 4,026,787 | |
9% 9/20/16 to 4/20/18 | 26,392 | 28,882 | |
9.5% 12/15/24 | 17,079 | 18,950 | |
10.5% 6/15/04 to 2/20/18 | 156,469 | 175,428 | |
13% 10/15/13 | 33,975 | 39,557 | |
13.5% 7/15/11 to 10/15/14 | 21,067 | 24,558 | |
233,483,369 | |||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $1,517,440,062) | 1,523,900,574 | ||
Asset-Backed Securities - 2.6% | |||
ABSC NIMS Trust Series 2002-HE3 Class A, 7% 10/17/32 (a) | 543,918 | 545,108 | |
ACE Securities Corp. Series 2003-FM1 Class M2, 2.97% 11/25/32 (d) | 1,450,000 | 1,450,000 | |
ACE Securities Corp. NIMS Trust Series 2002-HE1N | 458,225 | 457,079 | |
Amortizing Residential Collateral Trust Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 108,533 | 107,719 | |
BankAmerica Manufactured Housing Contract Trust V | 551,858 | 555,460 | |
CDC Mortgage Capital Trust Series 2003-HE2 Class M2, 3.02% 10/25/33 (d) | 1,264,987 | 1,271,845 | |
CDC Mortgage Capital, Inc. NIMS Trust Series 2002-HE2N Class NOTE, 10% 1/25/33 (a) | 577,513 | 578,106 | |
Countrywide Home Loans, Inc. Series 2002-3NIM Class NOTE, 9% 9/25/32 (a) | 246,796 | 248,035 | |
CS First Boston Mortgage Securities Corp. NIMS Trust: | |||
Series 2001-H30N Class A, 8% 7/27/32 (a) | 437,625 | 434,343 | |
Series 2001-HE22N Class A, 8% 3/27/32 | 95,486 | 95,247 | |
Series 2002-H10N Class A, 8% 11/27/32 (a) | 936,849 | 922,796 | |
Series 2002-H16N Class A, 8% 11/27/32 (a) | 1,152,926 | 1,135,632 | |
Series 2002-H1N Class A, 8% 8/27/32 (a) | 78,565 | 77,780 | |
Asset-Backed Securities - continued | |||
Principal | Value | ||
GSAMP NIMS Trust Series 2002-HE2N Class NOTE, 8.25% 10/20/32 (a) | $ 635,933 | $ 637,145 | |
Home Equity Asset Trust NIMS Trust: | |||
Series 2002-2N Class A, 8% 1/27/33 (a) | 325,313 | 322,060 | |
Series 2002-3N Class A, 8% 3/25/33 (a) | 2,568,298 | 2,516,932 | |
Series 2002-4N Class A, 8% 5/27/33 (a) | 871,710 | 854,276 | |
Series 2003-2N Class A, 8% 9/27/33 (a) | 1,152,789 | 1,128,581 | |
Home Equity Residual Distributions Trust Series 2002-1 Class A, 12.25% 11/25/05 (a) | 3,150,000 | 3,150,000 | |
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 106,243 | 105,180 | |
Long Beach Asset Holdings Corp. NIMS Trust Series 2002-1 Class N1, 9.05% 5/25/32 (a) | 86,210 | 84,270 | |
Long Beach Mortgage Loan Trust Series 2003-3: | |||
Class M1, 1.87% 7/25/33 (d) | 3,770,000 | 3,770,000 | |
Class M2, 2.97% 7/25/33 (d) | 2,600,000 | 2,603,250 | |
Morgan Stanley ABS Capital I, Inc.: | |||
Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 467,627 | 467,781 | |
Series 2003-NC6 Class M2, 3.07% 6/27/33 (d) | 6,165,000 | 6,190,745 | |
Morgan Stanley Dean Witter Capital I Trust: | |||
Series 2001-NC4N Class NOTE, 8.5% 1/25/32 (a) | 45,688 | 45,715 | |
Series 2002-HE2N Class NOTE, 9.5% 8/25/32 (a) | 1,524,893 | 1,525,579 | |
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (a) | 458,277 | 458,595 | |
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 203,515 | 203,714 | |
Morgan Stanley Dean Witter Capital I, Inc.: | |||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 848,922 | 849,723 | |
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 3,068,151 | 3,066,952 | |
New Century Home Equity Loan Trust Series 2000-NC1 Class M3, 3.22% 4/25/30 (d) | 4,170,000 | 3,992,775 | |
NovaStar CAPS Trust Series 2002-C1 Class A, 7.15% 9/25/31 (a) | 1,105,853 | 1,105,853 | |
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 Class A1, 3.6% 4/25/33 | 4,117,895 | 4,066,099 | |
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (a) | 3,185,504 | 3,169,131 | |
TOTAL ASSET-BACKED SECURITIES (Cost $48,191,409) | 48,193,506 | ||
Collateralized Mortgage Obligations - 10.5% | |||
Principal | Value | ||
Private Sponsor - 4.1% | |||
Countrywide Home Loans, Inc. sequential pay: | |||
Series 2002-25 Class 2A1, 5.5% 11/27/17 | $ 2,731,791 | $ 2,775,595 | |
Series 2002-5 Class 2A1, 6% 4/25/17 | 4,447,863 | 4,482,836 | |
Credit Suisse First Boston Mortgage Acceptance Corp. sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 15,140,000 | 15,367,100 | |
CS First Boston Mortgage Securities Corp.: | |||
sequential pay Series 2001-26 Class 3A1, 7.5% 11/25/31 | 2,342,367 | 2,394,340 | |
Series 2002-15R Class A1, 6.7651% 1/28/32 (a)(d) | 4,379,210 | 4,391,529 | |
Series 2003-TFLA Class F, 1.9633% 4/15/13 (a)(d) | 1,400,000 | 1,369,494 | |
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% 4/25/18 | 32,637,236 | 33,432,769 | |
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 | 5,810,000 | 5,991,109 | |
WAMU Mortgage pass thru certificates Series 2002-S6 Class A25, 6% 10/25/32 | 4,054,029 | 4,120,118 | |
Wells Fargo Mortgage Back Securities Series 2001-6 Class A12, 7% 4/25/31 | 87,491 | 87,389 | |
TOTAL PRIVATE SPONSOR | 74,412,279 | ||
U.S. Government Agency - 6.4% | |||
Fannie Mae: | |||
planned amortization class: | |||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049,260 | 10,534,093 | |
Series 1999-15 Class PC, 6% 9/25/18 | 9,567,000 | 10,055,388 | |
Series 1993-187 Class L, 6.5% 7/25/23 | 4,187,000 | 4,471,484 | |
Fannie Mae guaranteed REMIC pass thru certificates: | |||
planned amortization class: | |||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000,000 | 10,541,728 | |
Series 2002-9 Class C, 6.5% 6/25/30 | 5,000,000 | 5,248,358 | |
Series 2001-82 Class VB, 6.5% 3/25/16 | 16,356,920 | 17,154,531 | |
Series 2003-77 Class WZ, 4.5% 8/25/18 | 16,227,459 | 15,740,635 | |
Series 2003-88 Class WZ, 4.5% 9/25/18 | 1,251,891 | 1,254,485 | |
Freddie Mac planned amortization class: | |||
Series 2343 Class GD, 6.5% 1/15/30 | 3,763,643 | 3,798,990 | |
Series 70 Class C, 9% 9/15/20 | 482,779 | 483,258 | |
Freddie Mac Multi-class participation certificates guaranteed: | |||
planned amortization class Series 2568 Class KQ, 5% 2/15/23 | 1,325,093 | 1,328,998 | |
Collateralized Mortgage Obligations - continued | |||
Principal | Value | ||
U.S. Government Agency - continued | |||
Freddie Mac Multi-class participation certificates guaranteed: - continued | |||
sequential pay: | |||
Series 2303 Class VT, 6% 2/15/12 | $ 3,468,184 | $ 3,514,134 | |
Series 2414 Class SM, 15.48% 12/15/29 (d) | 122,081 | 123,351 | |
Series 1658 Class GZ, 7% 1/15/24 | 6,003,692 | 6,409,624 | |
Series 2303 Class ZC, 6% 4/15/31 | 5,035,831 | 5,041,460 | |
Series 2550 Class PO, 1/15/33 (g) | 2,579,236 | 2,560,144 | |
Series 2568 Class SA, 10.528% 9/15/28 (d) | 3,376,078 | 3,475,036 | |
Series 2581 Class PO, 3/15/33 (g) | 2,320,093 | 2,292,917 | |
Series 2609 Class SD, 19.59% 2/15/33 (d) | 903,361 | 916,326 | |
Series 2628 Class AZ, 4.5% 6/15/18 | 4,101,557 | 4,101,557 | |
Series 2663 Class ZM, 5% 8/15/18 | 999,144 | 998,529 | |
Series 2664 Class EZ, 5.5% 8/15/33 | 4,369,904 | 4,355,555 | |
Ginnie Mae guaranteed REMIC pass thru securities | 2,739,483 | 2,802,093 | |
TOTAL U.S. GOVERNMENT AGENCY | 117,202,674 | ||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $189,529,076) | 191,614,953 | ||
Commercial Mortgage Securities - 6.3% | |||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 43,397,311 | 2,864,900 | |
Banc America Commercial Mortgage, Inc. Series 2003-1 Class XP1, 1.475% 9/11/36 (a)(d)(f) | 103,390,000 | 3,731,738 | |
Chase Commercial Mortgage Securities Corp. Series 1999-2: | |||
Class E, 7.734% 1/15/32 | 1,110,000 | 1,263,910 | |
Class F, 7.734% 1/15/32 | 600,000 | 666,056 | |
COMM floater Series 2001-FL5A: | |||
Class D, 2.37% 11/15/13 (a)(d) | 9,000,000 | 8,992,725 | |
Class E, 2.62% 11/15/13 (a)(d) | 5,000,000 | 4,991,733 | |
CS First Boston Mortgage Securities Corp.: | |||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175,000 | 5,719,125 | |
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360,000 | 3,551,443 | |
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1 Class D, 7.231% 6/15/31 | 935,000 | 949,960 | |
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5024% 2/17/24 (d) | 15,813,253 | 17,475,905 | |
Commercial Mortgage Securities - continued | |||
Principal | Value | ||
Fannie Mae guaranteed REMIC pass thru certificates Series 1998-49 Class MI, 0.8691% 6/17/38 (d)(f) | $ 132,032,346 | $ 5,719,641 | |
Ginnie Mae guaranteed REMIC pass thru securities | 143,571,730 | 10,257,482 | |
Greenwich Capital Commercial Funding Corp.: | |||
Series 2002-C1 Class SWDB 5.857% 11/11/19 (a) | 2,600,000 | 2,612,188 | |
Series 2003-FL1 Class MCH, 4.3261% 7/5/18 (a)(d) | 1,458,095 | 1,458,095 | |
GS Mortgage Securities Corp. II Series 1998-GLII Class E, 7.1905% 4/13/31 (d) | 390,000 | 388,327 | |
GS Mortgage Trust II floater Series 2001-FL4A Class D, 2.03% 12/15/10 (a)(d) | 882,716 | 880,585 | |
Kansas Mortgage Capital LP Series 1995-1 Class E, 8.2532% 2/20/30 (a)(d) | 3,766,184 | 3,760,931 | |
Leafs CMBS I Ltd. Series 2002 1A Class D, 4.13% 11/20/37 (a) | 10,815,000 | 8,681,150 | |
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, 7.4389% 4/30/39 (a)(d) | 2,760,143 | 2,903,613 | |
Thirteen Affiliates of General Growth Properties, Inc. Series 1 Class D1, 6.917% 11/15/04 (a) | 18,200,000 | 19,055,720 | |
Trizechahn Office Properties Trust Series 2001-TZHA | 7,895,000 | 8,258,739 | |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $118,596,577) | 114,183,966 | ||
Fixed-Income Funds - 23.2% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 4,246,960 | 422,445,141 | |
Cash Equivalents - 24.0% | |||
Maturity | |||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 437,339,998 | 437,301,000 | |
TOTAL INVESTMENT PORTFOLIO - 150.2% (Cost $2,732,580,126) | 2,737,639,140 | ||
NET OTHER ASSETS - (50.2)% | (915,351,880) | ||
NET ASSETS - 100% | $ 1,822,287,260 | ||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $94,829,246 or 5.2% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) A portion of the security is subject to a forward commitment to sell. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
(g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $8,477,775,382 and $8,224,353,989, respectively, of which long-term U.S. government and government agency obligations aggregated $7,997,925,580 and $8,030,569,074, respectively. |
Income Tax Information |
The fund hereby designates approximately $1,618,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $437,301,000) (cost $2,732,580,126) - See accompanying schedule | $ 2,737,639,140 | |
Commitment to sell securities on a delayed delivery basis | $ (108,223,969) | |
Receivable for securities sold on a delayed delivery basis | 107,958,000 | (265,969) |
Cash | 3,628,138 | |
Receivable for fund shares sold | 5,388,047 | |
Interest receivable | 7,064,466 | |
Prepaid expenses | 10,782 | |
Total assets | 2,753,464,604 | |
Liabilities | ||
Payable for investments purchased | $ 24,595,763 | |
Delayed delivery | 900,239,308 | |
Payable for fund shares redeemed | 4,816,953 | |
Distributions payable | 212,162 | |
Accrued management fee | 653,523 | |
Distribution fees payable | 265,113 | |
Other payables and accrued expenses | 394,522 | |
Total liabilities | 931,177,344 | |
Net Assets | $ 1,822,287,260 | |
Net Assets consist of: | ||
Paid in capital | $ 1,784,095,902 | |
Undistributed net investment income | 2,808,597 | |
Accumulated undistributed net realized gain (loss) on investments | 30,589,716 | |
Net unrealized appreciation (depreciation) on investments | 4,793,045 | |
Net Assets | $ 1,822,287,260 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 11.30 | |
Maximum offering price per share (100/95.25 of $11.30) | $ 11.86 | |
Class T: | $ 11.31 | |
Maximum offering price per share (100/96.50 of $11.31) | $ 11.72 | |
Class B: | $ 11.30 | |
Fidelity Mortgage Securities Fund: | $ 11.31 | |
Class C: | $ 11.29 | |
Institutional Class: | $ 11.29 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 66,018,325 | |
Expenses | ||
Management fee | $ 8,561,527 | |
Transfer agent fees | 2,917,547 | |
Distribution fees | 3,499,392 | |
Accounting fees and expenses | 443,203 | |
Non-interested trustees' compensation | 8,588 | |
Custodian fees and expenses | 159,262 | |
Registration fees | 202,971 | |
Audit | 74,980 | |
Legal | 25,707 | |
Miscellaneous | 1,857 | |
Total expenses before reductions | 15,895,034 | |
Expense reductions | (15,143) | 15,879,891 |
Net investment income (loss) | 50,138,434 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 24,691,070 | |
Swap agreements | 6,336,890 | |
Total net realized gain (loss) | 31,027,960 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (15,447,760) | |
Delayed delivery commitments | (199,563) | |
Total change in net unrealized appreciation (depreciation) | (15,647,323) | |
Net gain (loss) | 15,380,637 | |
Net increase (decrease) in net assets resulting from operations | $ 65,519,071 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 50,138,434 | $ 42,354,803 |
Net realized gain (loss) | 31,027,960 | 17,253,296 |
Change in net unrealized appreciation (depreciation) | (15,647,323) | 1,788,844 |
Net increase (decrease) in net assets resulting | 65,519,071 | 61,396,943 |
Distributions to shareholders from net investment income | (48,528,197) | (42,887,318) |
Distributions to shareholders from net realized gain | (12,938,149) | - |
Total distributions | (61,466,346) | (42,887,318) |
Share transactions - net increase (decrease) | 89,912,217 | 1,091,658,653 |
Total increase (decrease) in net assets | 93,964,942 | 1,110,168,278 |
Net Assets | ||
Beginning of period | 1,728,322,318 | 618,154,040 |
End of period (including undistributed net investment income of $2,808,597 and undistributed net | $ 1,822,287,260 | $ 1,728,322,318 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .282 | .502E | .630 | .665 | .646 |
Net realized and unrealized gain (loss) | .112 | .172E | .613 | .086 | (.336) |
Total from investment operations | .394 | .674 | 1.243 | .751 | .310 |
Distributions from net investment income | (.274) | (.534) | (.653) | (.701) | (.640) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.354) | (.534) | (.653) | (.701) | (.790) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 3.56% | 6.26% | 12.15% | 7.49% | 2.93% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .81% | .84% | .85% | .88% | .99% |
Expenses net of voluntary | .81% | .84% | .85% | .88% | .90% |
Expenses net of all reductions | .81% | .84% | .85% | .88% | .90% |
Net investment income (loss) | 2.51% | 4.55%E | 5.86% | 6.44% | 6.09% |
Supplemental Data | |||||
Net assets, end of period | $ 68,939 | $ 63,201 | $ 15,318 | $ 4,610 | $ 3,090 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 | $ 10.96 |
Income from Investment Operations | |||||
Net investment income (loss)C | .270 | .492E | .622 | .653 | .637 |
Net realized and unrealized gain (loss) | .101 | .171E | .617 | .092 | (.338) |
Total from investment operations | .371 | .663 | 1.239 | .745 | .299 |
Distributions from net investment income | (.261) | (.523) | (.639) | (.685) | (.629) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.341) | (.523) | (.639) | (.685) | (.779) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.48 |
Total ReturnA,B | 3.34% | 6.15% | 12.09% | 7.42% | 2.82% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .93% | .94% | .96% | 1.00% | 1.06% |
Expenses net of voluntary | .93% | .94% | .96% | 1.00% | 1.00% |
Expenses net of all reductions | .93% | .94% | .96% | 1.00% | 1.00% |
Net investment income (loss) | 2.39% | 4.45%E | 5.75% | 6.33% | 5.99% |
Supplemental Data | |||||
Net assets, end of period | $ 154,810 | $ 195,002 | $ 106,167 | $ 61,359 | $ 29,052 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)C | .197 | .421E | .551 | .593 | .567 |
Net realized and unrealized gain (loss) | .112 | .171E | .611 | .081 | (.324) |
Total from investment operations | .309 | .592 | 1.162 | .674 | .243 |
Distributions from net investment income | (.189) | (.452) | (.572) | (.624) | (.563) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.269) | (.452) | (.572) | (.624) | (.713) |
Net asset value, end of period | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | $ 10.48 |
Total ReturnA,B | 2.78% | 5.48% | 11.32% | 6.70% | 2.29% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of voluntary | 1.57% | 1.58% | 1.60% | 1.60% | 1.62% |
Expenses net of all reductions | 1.57% | 1.57% | 1.60% | 1.60% | 1.62% |
Net investment income (loss) | 1.75% | 3.82%E | 5.11% | 5.73% | 5.37% |
Supplemental Data | |||||
Net assets, end of period | $ 181,666 | $ 176,245 | $ 57,034 | $ 19,911 | $ 19,101 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001F |
Selected Per-Share Data | |||
Net asset value, beginning of period | $ 11.25 | $ 11.10 | $ 10.89 |
Income from Investment Operations | |||
Net investment income (loss)E | .189 | .413H | .112 |
Net realized and unrealized gain (loss) | .112 | .173H | .238 |
Total from investment operations | .301 | .586 | .350 |
Distributions from net investment income | (.181) | (.436) | (.140) |
Distributions from net realized gain | (.080) | - | - |
Total distributions | (.261) | (.436) | (.140) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.10 |
Total ReturnB,C,D | 2.71% | 5.43% | 3.22% |
Ratios to Average Net AssetsG | |||
Expenses before expense reductions | 1.64% | 1.64% | 1.60%A |
Expenses net of voluntary waivers, if any | 1.64% | 1.64% | 1.60%A |
Expenses net of all reductions | 1.64% | 1.64% | 1.60%A |
Net investment income (loss) | 1.68% | 3.75%H | 4.87%A |
Supplemental Data | |||
Net assets, end of period (000 omitted) | $ 99,237 | $ 73,747 | $ 2,632 |
Portfolio turnover rate | 356% | 231% | 194% |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Fidelity Mortgage Securities Fund
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 | $ 10.97 |
Income from Investment Operations | |||||
Net investment | .306 | .526D | .654 | .690 | .674 |
Net realized and unrealized gain (loss) | .102 | .170D | .619 | .078 | (.342) |
Total from investment operations | .408 | .696 | 1.273 | .768 | .332 |
Distributions from net investment income | (.298) | (.556) | (.673) | (.718) | (.662) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.378) | (.556) | (.673) | (.718) | (.812) |
Net asset value, end of period | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | $ 10.49 |
Total ReturnA | 3.68% | 6.47% | 12.44% | 7.66% | 3.14% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .60% | .63% | .66% | .67% | .70% |
Expenses net of voluntary | .60% | .63% | .66% | .67% | .70% |
Expenses net of all | .60% | .63% | .66% | .67% | .70% |
Net investment income (loss) | 2.72% | 4.76%D | 6.04% | 6.65% | 6.29% |
Supplemental Data | |||||
Net assets, end of period | $ 1,301,599 | $ 1,207,967 | $ 429,684 | $ 371,107 | $ 406,839 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 | $ 10.95 |
Income from Investment Operations | |||||
Net investment income (loss)B | .302 | .513D | .644 | .684 | .669 |
Net realized and unrealized gain (loss) | .112 | .171D | .610 | .080 | (.343) |
Total from investment operations | .414 | .684 | 1.254 | .764 | .326 |
Distributions from net investment income | (.294) | (.544) | (.664) | (.714) | (.656) |
Distributions from net realized gain | (.080) | - | - | - | (.150) |
Total distributions | (.374) | (.544) | (.664) | (.714) | (.806) |
Net asset value, end of period | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | $ 10.47 |
Total ReturnA | 3.75% | 6.36% | 12.27% | 7.64% | 3.09% |
Ratios to Average Net AssetsC | |||||
Expenses before expense | .63% | .75% | .76% | .73% | .75% |
Expenses net of voluntary | .63% | .75% | .75% | .73% | .75% |
Expenses net of all reductions | .63% | .75% | .75% | .72% | .75% |
Net investment income (loss) | 2.69% | 4.65%D | 5.95% | 6.60% | 6.24% |
Supplemental Data | |||||
Net assets, end of period | $ 16,036 | $ 12,162 | $ 7,319 | $ 9,038 | $ 15,422 |
Portfolio turnover rate | 356% | 231% | 194% | 99% | 183% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity® Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Fidelity Mortgage Securities Fund (the original class), Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method..
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to prior period premium and discount on debt securities, market discount, financing transactions and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 15,314,250 | | |
Unrealized depreciation | (10,414,073) | |
Net unrealized appreciation (depreciation) | 4,900,177 | |
Undistributed ordinary income | 23,252,637 | |
Undistributed long-term capital gain | 2,759,607 | |
Cost for federal income tax purposes | $ 2,732,738,963 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 59,849,077 | $ 42,887,318 |
Long-term Capital Gains | 1,617,269 | - |
Total | $ 61,466,346 | $ 42,887,318 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the fund's Statement of Assets and Liabilities under the caption "Delayed delivery." Losses may arise due to changes in the value of the underlying securities or 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.
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
Annual Report
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 113,498 | $ 300 |
Class T | 0% | .25% | 476,495 | 14,193 |
Class B | .65% | .25% | 1,814,812 | 1,309,989 |
Class C | .75% | .25% | 1,094,587 | 763,152 |
$ 3,499,392 | $ 2,087,634 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 79,523 |
Class T | 68,487 |
Class B* | 687,163 |
Class C* | 116,425 |
$ 951,598 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC and FSC receive account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC and FSC pay for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC or FSC:
Amount | % of | |
Class A | $ 141,882 | .19 |
Class T | 391,242 | .21 |
Class B | 399,327 | .20 |
Fidelity Mortgage Securities Fund | 1,774,295 | .13 |
Class C | 177,789 | .16 |
Institutional Class | 33,012 | .16 |
$ 2,917,547 |
Accounting Fees. FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $8,140,493 for the period.
5. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $15,143.
6. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 1,812,935 | $ 1,576,709 |
Class T | 4,490,594 | 6,458,762 |
Class B | 3,348,473 | 3,776,918 |
Fidelity Mortgage Securities Fund | 36,645,682 | 29,741,839 |
Class C | 1,676,928 | 937,646 |
Institutional Class | 553,585 | 395,444 |
Total | $ 48,528,197 | $ 42,887,318 |
From net realized gain | ||
Class A | $ 479,109 | $ - |
Class T | 1,375,548 | - |
Class B | 1,317,977 | - |
Fidelity Mortgage Securities Fund | 9,053,280 | - |
Class C | 596,490 | - |
Institutional Class | 115,745 | - |
Total | $ 12,938,149 | $ - |
Annual Report
Notes to Financial Statements - continued
7. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 4,143,379 | 5,131,070 | $ 46,659,814 | $ 56,862,939 |
Reinvestment of distributions | 170,427 | 114,758 | 1,915,973 | 1,274,024 |
Shares redeemed | (3,823,033) | (1,011,719) | (42,999,421) | (11,214,145) |
Net increase (decrease) | 490,773 | 4,234,109 | $ 5,576,366 | $ 46,922,818 |
Class T | ||||
Shares sold | 9,900,926 | 14,584,865 | $ 111,507,763 | $ 162,139,047 |
Reinvestment of distributions | 461,144 | 452,163 | 5,189,781 | 5,016,690 |
Shares redeemed | (13,969,922) | (7,276,438) | (157,166,356) | (80,821,265) |
Net increase (decrease) | (3,607,852) | 7,760,590 | $ (40,468,812) | $ 86,334,472 |
Class B | ||||
Shares sold | 7,431,196 | 12,678,205 | $ 83,615,486 | $ 140,867,935 |
Reinvestment of distributions | 324,294 | 247,280 | 3,643,707 | 2,742,793 |
Shares redeemed | (7,323,983) | (2,403,597) | (82,328,932) | (26,617,789) |
Net increase (decrease) | 431,507 | 10,521,888 | $ 4,930,261 | $ 116,992,939 |
Fidelity Mortgage Securities Fund | ||||
Shares sold | 74,892,943 | 83,922,639 | $ 844,372,051 | $ 938,553,642 |
Reinvestment of distributions | 3,676,167 | 2,309,030 | 41,396,427 | 25,670,173 |
Shares redeemed | (70,626,654) | (17,719,111) | (794,954,735) | (197,753,645) |
Net increase (decrease) | 7,942,456 | 68,512,558 | $ 90,813,743 | $ 766,470,170 |
Class C | ||||
Shares sold | 7,174,688 | 6,878,721 | $ 80,647,975 | $ 76,443,117 |
Reinvestment of distributions | 158,593 | 67,542 | 1,780,642 | 752,106 |
Shares redeemed | (5,094,649) | (629,234) | (57,171,194) | (6,967,364) |
Net increase (decrease) | 2,238,632 | 6,317,029 | $ 25,257,423 | $ 70,227,859 |
Institutional Class | ||||
Shares sold | 2,242,760 | 805,931 | $ 25,207,417 | $ 8,949,120 |
Reinvestment of distributions | 42,862 | 21,939 | 481,820 | 242,677 |
Shares redeemed | (1,945,702) | (405,826) | (21,886,001) | (4,481,402) |
Net increase (decrease) | 339,920 | 422,044 | $ 3,803,236 | $ 4,710,395 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Mortgage Securities Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Mortgage Securities Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Mortgage Securities Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of the fund (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of the fund. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of the fund. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
George A. Fischer (42) | |
Year of Election or Appointment: 2003 Vice President of the fund. Mr. Fischer also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Fischer worked as an research analyst and manager. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of the fund. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of the fund. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of the fund. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of the fund. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of the fund. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of the fund. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1986 Assistant Treasurer of the fund. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of the fund. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of the fund. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Mortgage Securities Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Fidelity Mortgage Securities Fund | 12/8/03 | 12/5/03 | $0.15 |
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Managing Your Investments
Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day.
By Phone
Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security.
(phone_graphic)
Fidelity Automated
Service Telephone (FAST®)
1-800-544-5555
Press
1 For mutual fund and brokerage trading.
2 For quotes.*
3 For account balances and holdings.
4 To review orders and mutual
fund activity.
5 To change your PIN.
*0 To speak to a Fidelity representative.
By PC
Fidelity's web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services.
(computer_graphic)
Fidelity's Web Site
www.fidelity.com
* When you call the quotes line, please remember that a fund's yield and return will vary and, except for money market funds, share price will also vary. This means that you may have a gain or loss when you sell your shares. There is no assurance that money market funds will be able to maintain a stable $1 share price; an investment in a money market fund is not insured or guaranteed by the U.S. government. Total returns are historical and include changes in share price, reinvestment of dividends and capital gains, and the effects of any sales charges.
Annual Report
To Write Fidelity
We'll give your correspondence immediate attention and send you written confirmation upon completion of your request.
(letter_graphic)
Making Changes
To Your Account
(such as changing name, address, bank, etc.)
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0002
(letter_graphic)
For Non-Retirement
Accounts
Buying shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
General Correspondence
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
(letter_graphic)
For Retirement
Accounts
Buying shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0003
Selling shares
Fidelity Investments
P.O. Box 770001
Cincinnati, OH 45277-0035
Overnight Express
Fidelity Investments
Attn: Distribution Services
100 Crosby Parkway - KC1H
Covington, KY 41015
General Correspondence
Fidelity Investments
P.O. Box 500
Merrimack, NH 03054-0500
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
Fidelity Investment Money
Management Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Management & Research
(Far East) Inc.
Fidelity Investment Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agent
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Fidelity's Taxable Bond Funds
Capital & Income
Floating Rate High Income
Ginnie Mae
Government Income
High Income
Inflation-Protected Bond
Intermediate Bond
Intermediate Government Income
Investment Grade Bond
Mortgage Securities
New Markets Income
Short-Term Bond
Spartan® Government Income
Spartan Investment Grade Bond
Strategic Income
Total Bond
Ultra-Short Bond
U.S. Bond Index
The Fidelity Telephone Connection
Mutual Fund 24-Hour Service
Exchanges/Redemptions
and Account Assistance 1-800-544-6666
Product Information 1-800-544-6666
Retirement Accounts 1-800-544-4774
(8 a.m. - 9 p.m.)
TDD Service 1-800-544-0118
for the deaf and hearing impaired
(9 a.m. - 9 p.m. Eastern time)
Fidelity Automated Service
Telephone (FAST®) (automated graphic) 1-800-544-5555
(automated graphic) Automated line for quickest service
MOR-UANN-1203
1.784764.100
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Municipal Income Fund -
Class A, Class T, Class B
and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Class A (incl. 4.75% | 0.33% | 4.43% | 4.92% | |
Class T (incl. 3.50% | 1.62% | 4.61% | 5.02% | |
Class B (incl. contingent | -0.44% | 4.33% | 4.89% | |
Class C (incl. contingent | 3.44% | 4.56% | 4.63% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on September 3, 1996. Returns prior to September 3, 1996 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
B Class B shares bear a 0.90% 12b-1 fee (1.00% prior to January 1, 1996). The initial offering of Class B shares took place on June 30, 1994. Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to June 30, 1994 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five year and past 10 year total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between June 30, 1994 and November 3, 1997 are those of Class B shares and reflect Class B shares' 0.90% 12b-1 fee (1.00% prior to January 1, 1996). Returns prior to June 30, 1994 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns between November 3, 1997 and January 1, 1996 and prior to June 30, 1994 would have been lower. Class C shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$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, 1993, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Municipal Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Christine Thompson, Portfolio Manager of Fidelity® Advisor Municipal Income Fund
Despite late-period obstacles such as higher longer-term yields and downgrades in public finance debt, tax-exempt municipal bonds fared better than most investment-grade taxable bond sectors for the year ending October 31, 2003. In that time, the Lehman Brothers® Municipal Bond Index advanced 5.11%. That return far outdistanced Treasury, agency, mortgage- and asset-backed securities, a gap made even wider considering the tax-equivalent yield advantage munis offer. On an absolute basis, munis fared better than all the spread sectors except corporates. Munis did well for much of the period against a backdrop of tepid economic growth, low short-term interest rates and virtually non-existent inflation. In June and July, however, munis dropped nearly 4% when a brighter economic forecast sent interest rates higher and bond prices tumbling. After rebounding in August and September on the heels of strong investor demand, munis stumbled again in October, mainly due to news of stronger-than-expected economic growth.
Fidelity Advisor Municipal Income Fund's Class A, Class T, Class B and Class C shares returned 5.33%, 5.30%, 4.56% and 4.44%, respectively. Those returns compare to the 4.62% return for the fund's peer group, the LipperSM General Municipal Debt Funds Average. Additionally, the fund's benchmark - the Lehman Brothers 3 Plus Year Municipal Bond Index - returned 5.36%. A number of factors worked in the fund's favor during the year, including its focus on bonds backed by fees and dedicated revenues rather than bonds backed by taxes, and its overweighting in private colleges and universities and in hospitals. The fund also benefited from underweighting state-issued bonds - particularly those issued by California and New York - which came under pressure due to the fiscal challenges faced by the states and an increase in muni bond supply. Detracting from performance was the fund's underweighting in par bonds, which sell at face value. Par bonds were in strong demand among retail investors at times, helping them to outperform premium and discount bonds, which sell above and below face value, respectively.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five States as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Texas | 15.0 | 14.0 |
Illinois | 13.1 | 12.5 |
New York | 9.9 | 9.8 |
Washington | 7.9 | 7.9 |
California | 6.8 | 5.0 |
Top Five Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
General Obligations | 31.9 | 29.1 |
Electric Utilities | 13.2 | 14.2 |
Health Care | 11.7 | 14.3 |
Transportation | 11.2 | 10.0 |
Water & Sewer | 10.2 | 10.4 |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 15.0 | 15.1 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 7.5 | 7.1 |
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 (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
 | AAA 63.1% | | AAA 60.5% | ||||
 | AA,A 27.4% | | AA,A 29.1% | ||||
 | BBB 7.8% | | BBB 7.6% | ||||
 | BB and Below 0.1% | | BB and Below 0.0% | ||||
 | Not Rated 2.0% | | Not Rated 2.4% | ||||
 | Short-Term |  | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
* Short-Term Investments and Net Other Assets are not included in the pie chart.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Municipal Bonds - 100.4% | ||||
Principal | Value | |||
Alabama - 0.5% | ||||
Jefferson County Swr. Rev. Series A: | ||||
5% 2/1/33 (Pre-Refunded to 2/1/09 @ 101) (f) | $ 1,610,000 | $ 1,806,883 | ||
5% 2/1/41 (Pre-Refunded to 2/1/11 @ 101) (f) | 210,000 | 235,767 | ||
Oxford Gen. Oblig. 5.75% 5/1/25 (AMBAC Insured) | 1,000,000 | 1,091,490 | ||
3,134,140 | ||||
Alaska - 1.4% | ||||
Alaska Hsg. Fin. Corp. Series A, 5.4% 12/1/13 | 5,490,000 | 5,714,486 | ||
Alaska Student Ln. Corp. Student Ln. Rev. Series A: | ||||
5.25% 7/1/07 (AMBAC Insured) (e) | 1,500,000 | 1,618,125 | ||
5.45% 7/1/09 (AMBAC Insured) (e) | 1,500,000 | 1,592,070 | ||
8,924,681 | ||||
Arizona - 1.1% | ||||
Arizona Student Ln. Acquisition Auth. Student Ln. Rev. Series A1, 5.875% 5/1/18 (e) | 1,300,000 | 1,367,405 | ||
Phoenix Indl. Dev. Auth. Single Family Mtg. Rev. 0% 12/1/14 (Escrowed to Maturity) (f) | 3,750,000 | 2,331,150 | ||
Tucson Street & Hwy. User Rev. 4.5% 7/1/07 (AMBAC Insured) | 3,380,000 | 3,658,951 | ||
7,357,506 | ||||
Arkansas - 0.2% | ||||
Little Rock School District Series 2001 C, 5.25% 2/1/33 (FSA Insured) | 1,000,000 | 1,025,300 | ||
California - 6.8% | ||||
California Dept. of Wtr. Resources Pwr. Supply Rev.: | ||||
Series 2002 A, 5.75% 5/1/17 | 800,000 | 866,728 | ||
Series A: | ||||
5.25% 5/1/09 (MBIA Insured) | 3,600,000 | 4,041,360 | ||
5.5% 5/1/15 (AMBAC Insured) | 1,000,000 | 1,106,110 | ||
5.875% 5/1/16 | 2,100,000 | 2,316,762 | ||
California Gen. Oblig.: | ||||
4.5% 2/1/09 | 1,000,000 | 1,060,460 | ||
5.25% 2/1/11 | 2,300,000 | 2,498,743 | ||
5.25% 2/1/14 | 2,400,000 | 2,564,856 | ||
5.25% 2/1/15 | 1,200,000 | 1,271,664 | ||
5.25% 2/1/16 | 1,000,000 | 1,050,840 | ||
5.25% 2/1/20 | 1,300,000 | 1,327,118 | ||
5.25% 2/1/22 | 2,300,000 | 2,321,390 | ||
5.5% 3/1/11 | 3,500,000 | 3,860,850 | ||
5.5% 11/1/33 (a) | 1,100,000 | 1,113,464 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
California - continued | ||||
California Hsg. Fin. Agcy. Home Mtg. Rev.: | ||||
Series B, 5.2% 8/1/26 (MBIA Insured) (e) | $ 175,000 | $ 175,618 | ||
Series R, 5.35% 8/1/07 (MBIA Insured) (e) | 1,000,000 | 1,078,440 | ||
California State Univ. Rev. & Colleges Series 1999 AY, 5.875% 11/1/30 (FGIC Insured) | 1,000,000 | 1,096,650 | ||
Central Valley Fing. Auth. Cogeneration Proj. Rev. (Carson Ice Gen. Proj.) 6% 7/1/09 | 2,690,000 | 2,752,596 | ||
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.: | ||||
Series A, 5% 1/1/35 (MBIA Insured) | 700,000 | 700,343 | ||
5% 1/15/16 (MBIA Insured) | 400,000 | 422,780 | ||
5.75% 1/15/40 | 600,000 | 610,614 | ||
Golden State Tobacco Securitization Corp.: | ||||
Series 2003 A1, 6.75% 6/1/39 | 1,200,000 | 1,087,152 | ||
Series B, 5.75% 6/1/23 | 1,800,000 | 1,873,134 | ||
Los Angeles Dept. of Wtr. & Pwr. Wtrwks. Rev. Series 2001 A, 5.125% 7/1/41 | 4,000,000 | 4,006,040 | ||
Los Angeles Unified School District Series A: | ||||
5.375% 7/1/17 (MBIA Insured) | 1,800,000 | 1,976,112 | ||
5.375% 7/1/18 (MBIA Insured) | 1,000,000 | 1,089,510 | ||
Sacramento Cogeneration Auth. Cogeneration Proj. Rev. (Procter & Gamble Proj.) 6.375% 7/1/10 | 500,000 | 538,250 | ||
Sacramento Pwr. Auth. Cogeneration Proj. Rev. 6.5% 7/1/08 | 300,000 | 334,023 | ||
San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev. Series A, 0% 1/15/12 (MBIA Insured) | 1,300,000 | 930,696 | ||
44,072,303 | ||||
Colorado - 2.4% | ||||
Arapahoe County Cherry Creek School District #5 6% 12/15/15 | 1,250,000 | 1,445,775 | ||
Colorado Springs Arpt. Rev. Series C: | ||||
0% 1/1/06 (MBIA Insured) | 1,405,000 | 1,342,843 | ||
0% 1/1/08 (MBIA Insured) | 870,000 | 768,593 | ||
Colorado Wtr. Resources Pwr. Dev. Auth. Clean Wtr. Rev. Series 2001 A: | ||||
5.625% 9/1/13 | 1,610,000 | 1,829,620 | ||
5.625% 9/1/14 | 1,745,000 | 1,974,136 | ||
Denver City & County Arpt. Rev. Series A, 7.5% 11/15/23 (Pre-Refunded to 11/15/04 @ 102) (e)(f) | 430,000 | 466,176 | ||
Douglas County School District #RE1 Douglas & Elbert Counties Series 2002 B, 5.75% 12/15/16 | 2,775,000 | 3,173,351 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Colorado - continued | ||||
E-470 Pub. Hwy. Auth. Rev. Series 2000 A, 5.75% 9/1/29 (MBIA Insured) | $ 1,200,000 | $ 1,314,564 | ||
Larimer County School District #R1 Poudre 6% 12/15/17 (FGIC Insured) | 1,325,000 | 1,538,365 | ||
Mesa County Residual Rev. 0% 12/1/11 (Escrowed to Maturity) (f) | 2,275,000 | 1,677,517 | ||
15,530,940 | ||||
Connecticut - 0.7% | ||||
Connecticut Gen. Oblig. Series D, 5.375% 11/15/18 | 1,000,000 | 1,098,090 | ||
Eastern Connecticut Resources Recovery Auth. Solid Waste Rev. (Wheelabrator Lisbon Proj.) Series A, 5.5% 1/1/20 (e) | 3,350,000 | 3,139,922 | ||
4,238,012 | ||||
District Of Columbia - 2.0% | ||||
District of Columbia Gen. Oblig.: | ||||
Series A, 6% 6/1/07 (Escrowed to Maturity) (f) | 150,000 | 170,973 | ||
Series B, 5.25% 6/1/26 (FSA Insured) | 6,000,000 | 6,102,300 | ||
District of Columbia Rev.: | ||||
(George Washington Univ. Proj.) Series A, 5.75% 9/15/20 (MBIA Insured) | 1,490,000 | 1,652,216 | ||
(Georgetown Univ. Proj.) Series A, 5.95% 4/1/14 (MBIA Insured) | 2,000,000 | 2,287,740 | ||
(Nat'l. Academy of Sciences Proj.) Series A, 5% 1/1/19 (AMBAC Insured) | 2,500,000 | 2,574,025 | ||
12,787,254 | ||||
Florida - 2.4% | ||||
Dade County Aviation Rev. Series D, 5.75% 10/1/09 (AMBAC Insured) (e) | 5,000,000 | 5,417,400 | ||
Dade County School District 5.2% 7/15/07 (AMBAC Insured) | 1,200,000 | 1,333,968 | ||
Florida Board of Ed. Lottery Rev. Series B, 6% 7/1/15 (FGIC Insured) | 500,000 | 581,170 | ||
Florida Tpk. Auth. Tpk. Rev. Series B, 5% 7/1/11 (AMBAC Insured) | 600,000 | 663,882 | ||
Highlands County Health Facilities Auth. Rev. | 2,200,000 | 2,258,036 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Florida - continued | ||||
Reedy Creek Impt. District Utils. Rev. Series 2, 5.25% 10/1/10 (MBIA Insured) (a) | $ 3,300,000 | $ 3,683,658 | ||
Tampa Florida Guaranteed Entitlement Rev. 6% 10/1/08 (AMBAC Insured) | 1,500,000 | 1,734,540 | ||
15,672,654 | ||||
Georgia - 0.6% | ||||
College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series 2000, 5.75% 9/1/20 (AMBAC Insured) | 1,000,000 | 1,125,220 | ||
Columbus Wtr. & Swr. Rev. 5.25% 5/1/11 | 1,085,000 | 1,217,652 | ||
Henry County Wtr. & Swr. Auth. Rev. 5% 2/1/09 | 1,145,000 | 1,271,969 | ||
3,614,841 | ||||
Hawaii - 0.3% | ||||
Hawaii Arpts. Sys. Rev. Series 2000 B, 8% 7/1/11 (FGIC Insured) (e) | 1,300,000 | 1,641,224 | ||
Illinois - 13.1% | ||||
Chicago Board of Ed.: | ||||
Series A: | ||||
0% 12/1/14 (FGIC Insured) | 1,000,000 | 607,730 | ||
0% 12/1/16 (FGIC Insured) | 4,000,000 | 2,160,440 | ||
5.75% 12/1/27 (AMBAC Insured) | 14,055,000 | 15,197,531 | ||
Chicago Gen. Oblig.: | ||||
(City Colleges Proj.): | ||||
0% 1/1/16 (FGIC Insured) | 2,520,000 | 1,421,053 | ||
0% 1/1/24 (FGIC Insured) | 6,110,000 | 2,059,498 | ||
0% 1/1/28 (FGIC Insured) | 5,000,000 | 1,335,700 | ||
(Neighborhoods Alive 21 Prog.): | ||||
Series 2000 A, 6% 1/1/28 (FGIC Insured) | 1,400,000 | 1,565,886 | ||
5.5% 1/1/17 (FGIC Insured) | 2,265,000 | 2,468,691 | ||
Series A, 5% 1/1/42 (AMBAC Insured) | 1,700,000 | 1,686,281 | ||
Chicago Midway Arpt. Rev.: | ||||
Series A, 5.5% 1/1/29 (MBIA Insured) | 1,500,000 | 1,537,455 | ||
Series B, 6% 1/1/09 (MBIA Insured) (e) | 300,000 | 330,291 | ||
Chicago O'Hare Int'l. Arpt. Rev.: | ||||
Series A: | ||||
5.5% 1/1/16 (AMBAC Insured) (e) | 1,000,000 | 1,058,580 | ||
6.25% 1/1/09 (AMBAC Insured) (e) | 3,700,000 | 4,148,181 | ||
6.375% 1/1/15 (MBIA Insured) | 1,400,000 | 1,494,080 | ||
5.5% 1/1/09 (AMBAC Insured) (e) | 1,250,000 | 1,392,838 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Illinois - continued | ||||
Chicago Transit Auth. Cap. Grant Receipts Rev. | $ 1,400,000 | $ 1,444,534 | ||
Coles & Cumberland Counties Cmnty. Unit School District #2 5.8% 2/1/17 (FGIC Insured) | 1,000,000 | 1,121,530 | ||
DuPage County Cmnty. High School District #108 Lake Park 5.6% 1/1/17 (FSA Insured) | 3,190,000 | 3,563,517 | ||
Evanston Gen. Oblig. Series C, 5.25% 1/1/20 | 1,500,000 | 1,584,615 | ||
Illinois Edl. Facilities Auth. Revs. (DePaul Univ. Proj.): | ||||
5.5% 10/1/17 (AMBAC Insured) | 1,980,000 | 2,190,395 | ||
5.5% 10/1/18 (AMBAC Insured) | 2,195,000 | 2,419,812 | ||
5.5% 10/1/19 (AMBAC Insured) | 1,000,000 | 1,097,950 | ||
Illinois Gen. Oblig.: | ||||
First Series: | ||||
5.5% 8/1/19 (MBIA Insured) | 2,500,000 | 2,736,200 | ||
5.75% 12/1/18 (MBIA Insured) | 1,000,000 | 1,123,270 | ||
5.5% 4/1/17 (MBIA Insured) | 1,000,000 | 1,092,190 | ||
5.6% 4/1/21 (MBIA Insured) | 1,000,000 | 1,080,700 | ||
Illinois Health Facilities Auth. Rev.: | ||||
(Condell Med. Ctr. Proj.) 6.5% 5/15/30 | 3,000,000 | 3,137,670 | ||
(Dectaur Memorial Hosp. Proj.) Series 2001, 5.75% 10/1/24 | 2,100,000 | 2,125,242 | ||
(Lake Forest Hosp. Proj.) 6% 7/1/33 | 1,000,000 | 1,023,930 | ||
(Riverside Health Sys. Proj.) 6.8% 11/15/20 | 1,500,000 | 1,605,270 | ||
Illinois Sales Tax Rev.: | ||||
First Series 2001, 5.5% 6/15/13 | 3,250,000 | 3,637,628 | ||
6% 6/15/20 | 600,000 | 679,500 | ||
Kane & DuPage Counties Cmnty. Unit School District #303 Saint Charles Series A, 5.5% 1/1/17 | 2,000,000 | 2,198,560 | ||
Kane County School District #129 Aurora West Side Series A, 5.75% 2/1/18 (FGIC Insured) | 2,000,000 | 2,226,120 | ||
Lake County Cmnty. Consolidated School District #50 Woodland Series 2000 A, 6% 12/1/20 (FGIC Insured) | 1,025,000 | 1,169,453 | ||
McHenry County Conservation District Series A, 5.625% 2/1/21 (FGIC Insured) | 1,000,000 | 1,075,200 | ||
Metro. Pier & Exposition Auth. Dedicated State Tax Rev.: | ||||
(McCormick Place Expansion Proj.): | ||||
Series 2002 A: | ||||
0% 12/15/32 (MBIA Insured) | 2,000,000 | 397,020 | ||
5.75% 6/15/41 (MBIA Insured) | 1,000,000 | 1,073,540 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Illinois - continued | ||||
Metro. Pier & Exposition Auth. Dedicated State Tax Rev.: - continued | ||||
(McCormick Place Expansion Proj.): | ||||
Series A: | ||||
0% 12/15/24 (MBIA Insured) | $ 3,000,000 | $ 952,470 | ||
0% 6/15/31 (MBIA Insured) | 1,800,000 | 390,528 | ||
Series 2002 A: | ||||
0% 6/15/09 (Escrowed to Maturity) (f) | 975,000 | 820,433 | ||
0% 6/15/09 (FGIC Insured) | 25,000 | 20,706 | ||
Series A, 0% 6/15/09 (Escrowed to Maturity) (f) | 65,000 | 54,696 | ||
Ogle Lee & DeKalb Counties Township High School District #212 6% 12/1/16 (MBIA Insured) | 1,000,000 | 1,162,510 | ||
Univ. of Illinois Auxiliary Facilities Sys. Rev. 0% 4/1/15 (MBIA Insured) | 3,700,000 | 2,188,143 | ||
Will County Forest Preservation District Series B, 0% 12/1/14 (FGIC Insured) | 1,000,000 | 604,440 | ||
84,462,007 | ||||
Indiana - 1.1% | ||||
Indiana Bond Bank Rev.: | ||||
Series A, 5% 2/1/07 (MBIA Insured) | 1,000,000 | 1,088,670 | ||
Series B, 5% 2/1/10 (MBIA Insured) | 1,000,000 | 1,099,180 | ||
Indiana Health Facility Fing. Auth. Rev. (Sisters of Saint Francis Health Svc. Proj.) 5.5% 11/1/31 | 1,500,000 | 1,515,330 | ||
Indianapolis Econ. Dev. Rev. (Nat'l. Benevolent Assoc. Proj.) 7.625% 10/1/22 | 1,000,000 | 622,270 | ||
New Albany Floyd County Independent School Bldg. Corp. 5.75% 7/15/17 (FGIC Insured) | 1,000,000 | 1,130,060 | ||
Petersburg Poll. Cont. Rev. 5.95% 12/1/29 (e) | 2,000,000 | 1,943,260 | ||
7,398,770 | ||||
Iowa - 0.8% | ||||
Iowa Fin. Auth. Hosp. Facilities Rev. 5.875% 2/15/30 (AMBAC Insured) | 1,870,000 | 2,015,598 | ||
Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3% 6/1/25 | 4,000,000 | 3,168,720 | ||
5,184,318 | ||||
Kansas - 1.8% | ||||
Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.) 4.75%, tender 10/1/07 (b) | 1,000,000 | 1,064,780 | ||
Kansas Dept. of Trans. Hwy. Rev. Series 2000 A, 5.75% 9/1/15 | 600,000 | 680,910 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Kansas - continued | ||||
Kansas Dev. Fin. Auth. Health Facilities Rev. (Sisters of Charity Proj.) Series J, 6.25% 12/1/28 | $ 1,500,000 | $ 1,617,075 | ||
Kansas Dev. Fin. Auth. Pub. Wtr. Supply Revolving Ln. Fund Rev.: | ||||
(Sisters of Charity Leavenworth Health Svc. Co. Proj.): | ||||
5% 12/1/13 (MBIA Insured) | 2,390,000 | 2,552,377 | ||
5% 12/1/14 (MBIA Insured) | 500,000 | 533,530 | ||
5.25% 12/1/09 (MBIA Insured) | 1,420,000 | 1,573,857 | ||
5.25% 12/1/11 (MBIA Insured) | 1,750,000 | 1,911,245 | ||
Series 2000 2, 5.75% 4/1/16 (AMBAC Insured) | 1,550,000 | 1,756,243 | ||
11,690,017 | ||||
Kentucky - 1.7% | ||||
Kentucky Property & Bldgs. Commission Revs.: | ||||
5.625% 9/1/13 | 2,170,000 | 2,429,489 | ||
5.625% 9/1/14 | 1,500,000 | 1,672,650 | ||
Louisville & Jefferson County Metro. Swr. District Swr. & Drain Sys. Rev. Series A, 5.75% 5/15/33 | 6,050,000 | 6,587,664 | ||
10,689,803 | ||||
Maine - 1.3% | ||||
Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (FGIC Insured) | 8,000,000 | 8,666,640 | ||
Maryland - 0.5% | ||||
Maryland Health & Higher Edl. Facilities Auth. Rev. (Good Samaritan Hosp. Proj.) 5.75% 7/1/13 (Escrowed to Maturity) (f) | 2,680,000 | 3,083,554 | ||
Massachusetts - 3.1% | ||||
Massachusetts Bay Trans. Auth.: | ||||
Series 1997 D, 5% 3/1/27 | 2,000,000 | 2,002,920 | ||
Series A: | ||||
5.375% 3/1/19 | 1,000,000 | 1,066,600 | ||
5.75% 3/1/26 | 2,000,000 | 2,165,840 | ||
Massachusetts Gen. Oblig. Series D, 5.25% 10/1/22 | 1,200,000 | 1,256,052 | ||
Massachusetts Health & Edl. Facilities Auth. Rev. | 500,000 | 510,805 | ||
Massachusetts Indl. Fin. Agcy. Resource Recovery Rev. (Ogden Haverhill Proj.) Series 1992 A, 4.7% 12/1/03 | 1,000,000 | 1,000,140 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Massachusetts - continued | ||||
Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical Research Corp. Proj.) Series A2: | ||||
0% 8/1/08 | $ 800,000 | $ 695,664 | ||
0% 8/1/10 | 4,500,000 | 3,506,985 | ||
Massachusetts Wtr. Poll. Abatement Trust Wtr. Poll. Abatement Rev. (MWRA Ln. Prog.) Series A, 5.25% 8/1/13 | 10,000 | 10,816 | ||
Massachusetts Wtr. Resources Auth. Series A, 5.75% 8/1/39 (FGIC Insured) | 7,000,000 | 7,610,190 | ||
19,826,012 | ||||
Michigan - 1.9% | ||||
Detroit Gen. Oblig. Series A, 5% 4/1/08 (FSA Insured) (a) | 3,400,000 | 3,569,592 | ||
Detroit Wtr. Supply Sys. Rev. Series 2001 A, 5.25% 7/1/33 (FGIC Insured) | 1,065,000 | 1,093,318 | ||
Ecorse Pub. School District 5.5% 5/1/27 (FGIC Insured) | 1,000,000 | 1,041,470 | ||
Michigan Hosp. Fin. Auth. Hosp. Rev.: | ||||
(Ascension Health Cr. Group Proj.) Series A, 6.125% 11/15/26 (Pre-Refunded to 11/15/09 @ 101) (f) | 300,000 | 357,507 | ||
(McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19 | 2,000,000 | 1,967,260 | ||
Royal Oak Hosp. Fin. Auth. Hosp. Rev. (William Beaumont Hosp. Proj.) 6.25% 1/1/09 | 2,310,000 | 2,614,204 | ||
Zeeland Pub. Schools 5.375% 5/1/25 (FGIC Insured) | 1,500,000 | 1,559,100 | ||
12,202,451 | ||||
Minnesota - 1.5% | ||||
Mankato Independent School District #77 Series A, 5% 2/1/13 (FSA Insured) (a) | 600,000 | 638,706 | ||
Minneapolis & Saint Paul Hsg. & Redev. Auth. Health Care Sys. Rev. (Healthspan Corp. Proj.) Series A, 4.75% 11/15/18 (AMBAC Insured) | 1,800,000 | 1,828,134 | ||
Minneapolis Health Care Sys. Rev. (Allina Health Sys. Proj.) Series 2002 A, 6% 11/15/23 | 1,000,000 | 1,044,270 | ||
Minnesota Hsg. Fin. Agcy. (Single Family Mtg. Prog.) Series D, 6.4% 7/1/15 (e) | 1,080,000 | 1,116,590 | ||
Rochester Health Care Facilities Rev. (Mayo Foundation Proj.) Series A, 5.5% 11/15/27 | 900,000 | 930,735 | ||
Saint Cloud Health Care Rev. (Saint Cloud Hosp. Group Oblig. Proj.) Series A, 5.875% 5/1/30 | 2,000,000 | 2,177,520 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Minnesota - continued | ||||
Saint Paul Port Auth. Lease Rev. 5.25% 12/1/18 | $ 1,000,000 | $ 1,065,600 | ||
Waconia Independent School District #110 Series A, 5% 2/1/12 (FSA Insured) (a) | 500,000 | 544,270 | ||
9,345,825 | ||||
Missouri - 0.4% | ||||
Missouri Envir. Impt. & Energy Resources Auth. Wtr. Poll. Cont. & Drinking Wtr. Rev. (State Revolving Fund Prog.) Series 2003 A, 5.125% 1/1/21 | 1,010,000 | 1,057,167 | ||
Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg. Proj.) Series A, 5% 8/1/08 (FSA Insured) | 1,130,000 | 1,255,125 | ||
2,312,292 | ||||
Montana - 0.2% | ||||
Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.) Series A, 5.2%, tender 5/1/09 (b) | 1,100,000 | 1,120,911 | ||
Nevada - 0.9% | ||||
Clark County Arpt. Rev. Series C, 5.375% 7/1/22 (AMBAC Insured) (e) | 1,000,000 | 1,036,430 | ||
Clark County Gen. Oblig.: | ||||
(Park & Reg'l. Justice Ctr. Proj.) 5.75% 11/1/24 | 1,000,000 | 1,093,350 | ||
Series 2000, 5.5% 7/1/30 (MBIA Insured) | 500,000 | 526,945 | ||
Clark County School District Series 2000 A: | ||||
5.75% 6/15/17 (MBIA Insured) | 600,000 | 674,142 | ||
5.75% 6/15/20 (MBIA Insured) | 1,000,000 | 1,103,760 | ||
Washoe County Gen. Oblig. 5% 9/1/10 (FSA Insured) | 1,000,000 | 1,112,780 | ||
5,547,407 | ||||
New Jersey - 0.9% | ||||
New Jersey Tpk. Auth. Tpk. Rev. Series A: | ||||
5.625% 1/1/15 (MBIA Insured) | 185,000 | 203,348 | ||
5.625% 1/1/15 (Pre-Refunded to 1/1/10 @ 100) (f) | 715,000 | 823,215 | ||
North Hudson Swr. Auth. Swr. Rev. Series A, 5.25% 8/1/17 (FGIC Insured) | 2,000,000 | 2,158,760 | ||
Tobacco Settlement Fing. Corp.: | ||||
4.375% 6/1/19 | 600,000 | 557,130 | ||
6.125% 6/1/24 | 1,100,000 | 1,011,252 | ||
6.125% 6/1/42 | 1,600,000 | 1,321,696 | ||
6,075,401 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
New Mexico - 1.3% | ||||
Albuquerque Arpt. Rev.: | ||||
6.7% 7/1/18 (AMBAC Insured) (e) | $ 3,970,000 | $ 4,522,187 | ||
6.75% 7/1/09 (AMBAC Insured) (e) | 450,000 | 533,507 | ||
6.75% 7/1/11 (AMBAC Insured) (e) | 1,805,000 | 2,149,484 | ||
New Mexico Edl. Assistance Foundation Student Ln. Rev. Series IV A2, 6.65% 3/1/07 | 1,200,000 | 1,279,044 | ||
8,484,222 | ||||
New York - 9.9% | ||||
Erie County Indl. Dev. Agcy. School Facility Rev. | 1,000,000 | 1,108,470 | ||
Metro. Trans. Auth. Commuter Facilities Rev. Series 1997 B, 5% 7/1/20 (Escrowed to Maturity) (f) | 500,000 | 525,835 | ||
Metro. Trans. Auth. Rev. Series 2002 A, 5.75% 11/15/32 | 4,300,000 | 4,590,981 | ||
Metro. Trans. Auth. Svc. Contract Rev.: | ||||
Series 2002 B, 5% 1/1/07 | 3,000,000 | 3,251,760 | ||
Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (f) | 1,000,000 | 1,023,730 | ||
Series O, 5.75% 7/1/13 (Escrowed to Maturity) (f) | 700,000 | 806,407 | ||
Metro. Trans. Auth. Transit Facilities Rev.: | ||||
Series B2, 5% 7/1/17 (Escrowed to Maturity) (f) | 500,000 | 537,895 | ||
Series C, 4.75% 7/1/16 (Pre-Refunded to 1/1/12 @ 100) (f) | 150,000 | 164,312 | ||
Nassau County Gen. Oblig. Series Z: | ||||
5% 9/1/11 (FGIC Insured) | 300,000 | 329,139 | ||
5% 9/1/13 (FGIC Insured) | 850,000 | 917,822 | ||
New York City Gen. Oblig.: | ||||
Series A, 5.25% 11/1/14 (MBIA Insured) | 600,000 | 654,048 | ||
Series C, 5.75% 3/15/27 (FSA Insured) | 500,000 | 539,965 | ||
Series E, 6% 8/1/11 | 500,000 | 549,945 | ||
New York City Indl. Dev. Agcy. Indl. Dev. Rev. (Japan Airlines Co. Ltd. Proj.) Series 1991, 6% 11/1/15 | 845,000 | 889,253 | ||
New York City Indl. Dev. Agcy. Spl. Facilities Rev. | 8,680,000 | 8,893,788 | ||
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.: | ||||
Series A, 6% 6/15/28 | 1,500,000 | 1,686,840 | ||
Series B: | ||||
5.75% 6/15/26 | 5,000,000 | 5,390,600 | ||
5.75% 6/15/29 | 5,000,000 | 5,373,050 | ||
5.75% 6/15/29 (MBIA Insured) | 1,500,000 | 1,619,295 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
New York - continued | ||||
New York State Dorm. Auth. Revs.: | ||||
(City Univ. Sys. Consolidation Proj.) Series C, 7.5% 7/1/10 | $ 500,000 | $ 594,345 | ||
(The Jamaica Hosp. Proj.) Series F, 5.2% 2/15/14 (MBIA Insured) | 6,150,000 | 6,625,887 | ||
Series 2002 A, 5.75% 10/1/17 (MBIA Insured) | 1,000,000 | 1,136,770 | ||
New York State Envir. Facilities Corp. Clean Wtr. & Drinking Wtr. Rev. Series F: | ||||
4.875% 6/15/18 | 870,000 | 900,441 | ||
4.875% 6/15/18 (Escrowed to Maturity) (f) | 630,000 | 656,895 | ||
4.875% 6/15/20 | 795,000 | 815,885 | ||
5% 6/15/15 | 305,000 | 326,533 | ||
5% 6/15/15 (Escrowed to Maturity) (f) | 395,000 | 430,827 | ||
New York State Envir. Facilities Corp. State Wtr. Poll. Cont. Revolving Fund Rev. (New York City Muni. Wtr. Fin. Auth. Proj.): | ||||
Series 1997 E, 6% 6/15/11 (MBIA Insured) | 1,500,000 | 1,760,970 | ||
Series D, 5.125% 6/15/19 (Escrowed to Maturity) (f) | 1,000,000 | 1,051,270 | ||
New York State Thruway Auth. State Personal Income Tax Rev. Series A, 5.5% 3/15/17 | 500,000 | 551,080 | ||
New York State Thruway Auth. Svc. Contract Rev. 5.5% 4/1/16 | 1,000,000 | 1,089,240 | ||
New York State Urban Dev. Corp. Rev. Series C1, 5.5% 3/15/18 (FGIC Insured) | 1,000,000 | 1,102,530 | ||
Tobacco Settlement Fing. Corp. Series A1: | ||||
5.25% 6/1/21 (AMBAC Insured) | 1,000,000 | 1,045,430 | ||
5.25% 6/1/22 (AMBAC Insured) | 1,000,000 | 1,039,940 | ||
5.5% 6/1/16 | 4,700,000 | 4,969,780 | ||
Triborough Bridge & Tunnel Auth. Spl. Oblig. Series A, 5.25% 1/1/11 (Escrowed to Maturity) (f) | 500,000 | 554,255 | ||
63,505,213 | ||||
New York & New Jersey - 0.1% | ||||
Port Auth. of New York & New Jersey 124th Series, 5% 8/1/13 (FGIC Insured) (e) | 500,000 | 527,320 | ||
North Carolina - 3.1% | ||||
North Carolina Cap. Facilities Fin. Agcy. Rev. (Duke Univ. Proj.) Series A, 5.125% 7/1/42 | 3,190,000 | 3,230,258 | ||
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.: | ||||
Series A, 5.5% 1/1/11 | 1,500,000 | 1,627,125 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
North Carolina - continued | ||||
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.: - continued | ||||
Series B: | ||||
5.875% 1/1/21 (MBIA Insured) | $ 3,050,000 | $ 3,388,093 | ||
6% 1/1/06 | 5,820,000 | 6,251,029 | ||
7.25% 1/1/07 | 1,000,000 | 1,131,190 | ||
Series C: | ||||
5.5% 1/1/07 | 700,000 | 757,337 | ||
5.5% 1/1/07 (MBIA Insured) | 2,000,000 | 2,222,060 | ||
Series D, 6.7% 1/1/19 | 1,115,000 | 1,230,458 | ||
19,837,550 | ||||
North Dakota - 0.2% | ||||
North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/09 (FGIC Insured) | 1,400,000 | 1,579,438 | ||
Ohio - 1.5% | ||||
Cincinnati Student Ln. Fdg. Corp. Student Ln. Rev. | 1,005,000 | 1,009,382 | ||
Delaware County Gen. Oblig. 6% 12/1/25 | 1,000,000 | 1,134,370 | ||
Fairborn City School District (School Impt. Proj.) 5.75% 12/1/26 (FSA Insured) | 1,000,000 | 1,093,730 | ||
Franklin County Hosp. Rev. 5.5% 5/1/21 (AMBAC Insured) | 1,455,000 | 1,560,036 | ||
Gateway Econ. Dev. Corp. Greater Cleveland Stadium Rev. Series 1990, 6.5% 9/15/14 (e) | 3,000,000 | 3,080,040 | ||
Ohio Wtr. Dev. Auth. Rev. (Fresh Wtr. Impt. Proj.) 5.375% 12/1/17 | 1,000,000 | 1,093,880 | ||
Plain Local School District 6% 12/1/25 (FGIC Insured) | 410,000 | 461,972 | ||
9,433,410 | ||||
Oklahoma - 1.4% | ||||
Midwest City Muni. Auth. Cap. Impt. Rev. Series 2001, 5.5% 6/1/13 (Pre-Refunded to 6/1/10 @ 100.5) (f) | 1,000,000 | 1,157,380 | ||
Oklahoma Industries Auth. Rev.: | ||||
(Health Sys. Oblig. Group Proj.) Series A, 5.75% 8/15/29 (MBIA Insured) | 1,500,000 | 1,594,620 | ||
6% 8/15/19 (MBIA Insured) | 3,000,000 | 3,353,040 | ||
Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A, 5.75% 10/1/25 (MBIA Insured) | 3,000,000 | 3,235,050 | ||
9,340,090 | ||||
Oregon - 0.6% | ||||
Portland Swr. Sys. Rev. Series 2000 A, 5.75% 8/1/18 (FGIC Insured) | 500,000 | 560,620 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Oregon - continued | ||||
Tri-County Metro. Trans. District Rev. Series A: | ||||
5.75% 8/1/18 | $ 1,000,000 | $ 1,121,240 | ||
5.75% 8/1/19 | 2,080,000 | 2,319,034 | ||
4,000,894 | ||||
Pennsylvania - 4.0% | ||||
Allegheny County Arpt. Rev. (Pittsburgh Int'l. Arpt. Proj.) Series A1, 5.75% 1/1/07 (MBIA Insured) (e) | 1,000,000 | 1,092,580 | ||
Canon McMillan School District: | ||||
Series 2001 B, 5.75% 12/1/33 (FGIC Insured) | 1,000,000 | 1,083,160 | ||
Series 2002 B, 5.75% 12/1/35 (FGIC Insured) | 1,595,000 | 1,735,153 | ||
Cumberland County Muni. Auth. Rev. (Carlisle Hosp. & Health Proj.) 6.8% 11/15/14 (Pre-Refunded to 11/15/04 @ 102) (f) | 2,720,000 | 2,887,661 | ||
Delaware County Auth. College Rev. (Haverford College Proj.) 5.75% 11/15/29 | 3,500,000 | 3,793,265 | ||
Delaware County Auth. Rev. (First Mtg. Riddle Village Proj.) 8.25% 6/1/22 (Escrowed to Maturity) (f) | 2,120,000 | 2,258,733 | ||
Montgomery County Higher Ed. & Health Auth. Hosp. Rev. (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/16 (AMBAC Insured) | 1,860,000 | 2,174,080 | ||
Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev. (Amtrak Proj.) Series 2001 A, 6.25% 11/1/31 (e) | 2,000,000 | 1,953,600 | ||
Pennsylvania Higher Edl. Facilities Auth. Rev. (Lafayette College Proj.) 6% 5/1/30 | 3,065,000 | 3,406,594 | ||
Philadelphia School District Series 2002 A, 5.5% 2/1/31 (FSA Insured) | 1,300,000 | 1,368,640 | ||
Tredyffrin-Easttown School District 5.5% 2/15/15 | 2,010,000 | 2,236,527 | ||
Westmoreland County Muni. Auth. Muni. Svc. Rev. Series A, 0% 8/15/21 (FGIC Insured) | 5,000,000 | 2,029,100 | ||
26,019,093 | ||||
Puerto Rico - 0.2% | ||||
Puerto Rico Commonwealth Infrastructure Fing. Auth. Series 2000 A, 5.5% 10/1/32 (Escrowed to Maturity) (f) | 1,000,000 | 1,083,440 | ||
Rhode Island - 0.9% | ||||
Providence Redev. Agcy. Rev. Series A, 5.75% 4/1/29 (AMBAC Insured) | 800,000 | 863,336 | ||
Rhode Island Port Auth. & Econ. Dev. Corp. Arpt. Rev. Series A, 7% 7/1/14 (FSA Insured) (e) | 4,000,000 | 4,887,440 | ||
5,750,776 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
South Carolina - 1.0% | ||||
Greenwood County Hosp. Rev. (Self Memorial Hosp. Proj.): | ||||
5.5% 10/1/26 | $ 1,750,000 | $ 1,746,640 | ||
5.5% 10/1/31 | 2,000,000 | 1,977,980 | ||
South Carolina Ed. Assistance Auth. Rev. (Guaranteed Student Ln. Prog.) Series B, 5.7% 9/1/05 (e) | 1,000,000 | 1,056,070 | ||
South Carolina Jobs Econ. Dev. Auth. Hosp. Facilities Rev. (Palmetto Health Alliance Proj.) Series A, 7.375% 12/15/21 (Pre-Refunded to 12/15/10 @ 102) (f) | 1,000,000 | 1,270,750 | ||
Tobacco Settlement Rev. Mgmt. Auth. Series 2001 B, 6.375% 5/15/28 | 545,000 | 475,987 | ||
6,527,427 | ||||
Tennessee - 0.7% | ||||
Metro. Govt. Nashville & Davidson County Health & Edl. Facilities Board Rev. (Ascension Health Cr. Group Proj.) Series A: | ||||
5.875% 11/15/28 (Pre-Refunded to 11/15/09 @ 101) (f) | 400,000 | 473,612 | ||
6% 11/15/30 (Pre-Refunded to 11/15/09 @ 101) (f) | 600,000 | 714,564 | ||
Shelby County Health Edl. & Hsg. Facility Board Hosp. Rev. (Methodist Health Care Proj.) 6.5% 9/1/26 | 3,000,000 | 3,241,110 | ||
4,429,286 | ||||
Texas - 15.0% | ||||
Aldine Independent School District 5.5% 2/15/13 | 3,150,000 | 3,521,795 | ||
Alvin Independent School District 5.75% 8/15/21 | 1,000,000 | 1,102,930 | ||
Austin Util. Sys. Rev. Series A, 0% 11/15/10 | 1,100,000 | 854,073 | ||
Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.) Series D, 4.25%, tender 11/1/03 (b)(e) | 3,000,000 | 3,000,000 | ||
Canyon Independent School District Series A, 5.5% 2/15/18 | 1,575,000 | 1,728,909 | ||
Comal Independent School District 5.75% 8/1/28 | 2,000,000 | 2,162,460 | ||
Conroe Independent School District Lot B, 0% 2/15/09 | 750,000 | 632,700 | ||
Corpus Christi Util. Sys. Rev. 5.25% 7/15/18 (FSA Insured) | 1,500,000 | 1,603,860 | ||
Cypress-Fairbanks Independent School District: | ||||
Series A: | ||||
0% 2/15/14 | 3,200,000 | 2,017,344 | ||
0% 2/15/16 | 1,400,000 | 788,732 | ||
5% 2/15/10 | 1,000,000 | 1,106,340 | ||
5.75% 2/15/21 | 1,000,000 | 1,095,120 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Texas - continued | ||||
Del Valle Independent School District 5.5% 2/1/09 | $ 1,205,000 | $ 1,362,831 | ||
El Paso Gen. Oblig. 5.75% 8/15/25 (FSA Insured) | 4,500,000 | 4,836,960 | ||
El Paso Wtr. & Swr. Rev. 5% 3/1/10 (AMBAC Insured) | 1,205,000 | 1,335,429 | ||
Garland Independent School District: | ||||
Series A, 5% 2/15/11 (a) | 575,000 | 632,736 | ||
5.5% 2/15/19 | 2,500,000 | 2,703,075 | ||
Grapevine Gen. Oblig. 5.75% 8/15/18 (FGIC Insured) | 1,250,000 | 1,398,350 | ||
Harris County Gen. Oblig. 0% 10/1/17 (MBIA Insured) | 2,500,000 | 1,287,800 | ||
Harris County Health Facilities Dev. Corp. Rev. (Saint Luke's Episcopal Hosp. Proj.): | ||||
Series 2001 A, 5.5% 2/15/12 | 1,000,000 | 1,093,350 | ||
5.75% 2/15/21 | 1,310,000 | 1,370,037 | ||
Houston Arpt. Sys. Rev.: | ||||
Series A, 5.625% 7/1/19 (FSA Insured) (e) | 1,000,000 | 1,068,240 | ||
Series B, 5.5% 7/1/30 (FSA Insured) | 1,400,000 | 1,452,612 | ||
Houston Independent School District 0% 8/15/13 | 1,300,000 | 853,515 | ||
Hurst Euless Bedford Independent School District 0% 8/15/11 | 1,000,000 | 739,260 | ||
Lewisville Independent School District 0% 8/15/19 | 2,340,000 | 1,072,258 | ||
Los Fresnos Independent School District: | ||||
5.75% 8/15/13 | 1,040,000 | 1,189,542 | ||
5.75% 8/15/14 | 1,100,000 | 1,253,153 | ||
Lower Colorado River Auth. Transmission Contract Rev. (LCRA Transmission Services Corp. Proj.) Series 2003 C, 5.25% 5/15/19 (AMBAC Insured) | 1,000,000 | 1,067,520 | ||
Mansfield Independent School District 5.5% 2/15/17 | 2,000,000 | 2,184,880 | ||
Mount Pleasant Independent School District 5.5% 2/15/22 | 2,590,000 | 2,772,517 | ||
Northside Independent School District 5.5% 2/15/15 | 2,000,000 | 2,209,100 | ||
Northwest Texas Independent School District 5.5% 8/15/21 | 3,185,000 | 3,417,696 | ||
Pearland Independent School District 5.875% 2/15/17 | 1,205,000 | 1,361,915 | ||
Sabine River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.) Series B, 5.75%, tender 11/1/11 (b)(e) | 4,000,000 | 4,142,880 | ||
San Antonio Elec. & Gas Systems Rev.: | ||||
5.25% 2/1/07 (a) | 1,000,000 | 1,099,090 | ||
5.5% 2/1/20 (Pre-Refunded to 2/1/07 @ 101) (f) | 75,000 | 84,070 | ||
Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ. Proj.) 5.5% 10/1/14 (AMBAC Insured) | 2,245,000 | 2,526,366 | ||
Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375% 11/15/20 | 1,000,000 | 991,420 | ||
Texas Muni. Pwr. Agcy. Rev.: | ||||
0% 9/1/11 (AMBAC Insured) | 4,760,000 | 3,512,832 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Texas - continued | ||||
Texas Muni. Pwr. Agcy. Rev.: - continued | ||||
0% 9/1/11 (Escrowed to Maturity) (f) | $ 275,000 | $ 206,278 | ||
Texas Pub. Fin. Auth. Bldg. Rev. (Texas Technical College Proj.) 6.25% 8/1/09 (MBIA Insured) | 1,000,000 | 1,139,050 | ||
Texas Tpk. Auth. Central Tpk. Sys. Rev.: | ||||
Series A: | ||||
0% 8/15/25 (AMBAC Insured) | 2,910,000 | 879,693 | ||
0% 8/15/29 (AMBAC Insured) | 8,000,000 | 1,902,080 | ||
5.5% 8/15/39 (AMBAC Insured) | 3,600,000 | 3,797,748 | ||
5.75% 8/15/38 (AMBAC Insured) | 3,000,000 | 3,251,880 | ||
Texas Tpk. Auth. Dallas North Tollway Rev. 5.25% 1/1/23 (FGIC Insured) | 2,600,000 | 2,714,634 | ||
Texas Wtr. Dev. Board Rev. Series A, 5.5% 7/15/21 | 1,000,000 | 1,069,670 | ||
Travis County Health Facilities Dev. Corp. Rev. (Ascension Health Cr. Prog.) Series A, 6.25% 11/15/19 (Pre-Refunded to 11/15/09 @ 101) (f) | 4,000,000 | 4,819,040 | ||
Trinity River Auth. Reg'l. Wastewtr. Sys. Rev. 5.25% 8/1/11 (MBIA Insured) | 2,000,000 | 2,244,400 | ||
Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances Hosp. Reg'l. Health Care Ctr. Proj.) 6% 7/1/27 | 1,000,000 | 1,014,950 | ||
Williamson County Gen. Oblig. 6% 8/15/19 | 1,000,000 | 1,139,950 | ||
Yselta Independent School District 0% 8/15/09 | 4,065,000 | 3,374,844 | ||
96,187,914 | ||||
Utah - 2.2% | ||||
Intermountain Pwr. Agcy. Pwr. Supply Rev.: | ||||
Series A: | ||||
6.5% 7/1/09 (AMBAC Insured) | 365,000 | 434,292 | ||
6.5% 7/1/09 (Escrowed to Maturity) (f) | 635,000 | 764,438 | ||
Series B: | ||||
5.75% 7/1/16 (MBIA Insured) | 2,500,000 | 2,812,700 | ||
6% 7/1/16 (MBIA Insured) | 7,000,000 | 7,822,080 | ||
Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5% 5/15/10 (AMBAC Insured) | 2,000,000 | 2,269,060 | ||
14,102,570 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
Vermont - 0.2% | ||||
Vermont Edl. & Health Bldgs. Fing. Agcy. Rev. (Fletcher Allen Health Care, Inc. Proj.): | ||||
Series 2000 A, 6.125% 12/1/27 (AMBAC Insured) | $ 1,000,000 | $ 1,135,390 | ||
Series A, 5.75% 12/1/18 (AMBAC Insured) | 400,000 | 451,060 | ||
1,586,450 | ||||
Virginia - 0.9% | ||||
Loudoun County Indl. Dev. Auth. Residential Care Facilities Rev. (Falcons Landing Proj.) Series A, 9.25% 11/1/04 (Escrowed to Maturity) (f) | 430,000 | 446,065 | ||
Virginia Commonwealth Trans. Board Trans. Rev. | 1,965,000 | 2,168,947 | ||
Virginia Resources Auth. Clean Wtr. State Revolving Fund Rev.: | ||||
5.625% 10/1/22 | 1,250,000 | 1,351,863 | ||
5.75% 10/1/19 | 1,750,000 | 1,964,603 | ||
5,931,478 | ||||
Washington - 7.9% | ||||
Clark County School District #114 Evergreen 5.375% 12/1/14 (FSA Insured) | 3,040,000 | 3,383,611 | ||
Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17 (MBIA Insured) | 4,000,000 | 4,565,760 | ||
Grant County Pub. Util. District No. 2 (Priest Rapids | 1,715,000 | 1,842,082 | ||
King County Swr. Rev. Series B: | ||||
5.125% 1/1/33 (FSA Insured) | 2,800,000 | 2,826,992 | ||
5.5% 1/1/21 (FSA Insured) | 1,615,000 | 1,727,808 | ||
Port of Seattle Passenger Facilities Charge Rev. Series B, 5.25% 12/1/14 (AMBAC Insured) (e) | 3,000,000 | 3,160,200 | ||
Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 | 1,000,000 | 1,096,080 | ||
Snohomish County Pub. Hosp. District #2 (Stevens Health Care Proj.) 4.5% 12/1/10 (FGIC Insured) (a) | 1,000,000 | 1,078,450 | ||
Spokane Pub. Facilities District Hotel & Motel Tax & Sales Use Tax Rev. 5.75% 12/1/24 (MBIA Insured) | 1,000,000 | 1,094,810 | ||
Tumwater School District #33 Thurston County | 4,000,000 | 3,087,880 | ||
Univ. of Washington Univ. Revs. (Student Facilities Fee Prog.) 5.8% 6/1/30 (FSA Insured) | 3,000,000 | 3,247,200 | ||
Washington Gen. Oblig. Series 2000 A, 5.625% 7/1/24 | 2,000,000 | 2,118,860 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Washington - continued | ||||
Washington Health Care Facilities Auth. Rev. (Providence Health Systems Proj.) Series 2001 A, 5.5% 10/1/13 (MBIA Insured) | $ 3,000,000 | $ 3,348,090 | ||
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev. 5.4% 7/1/12 | 16,000,000 | 17,621,273 | ||
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev. Series C, 5.1% 7/1/07 | 500,000 | 547,695 | ||
50,746,791 | ||||
Wisconsin - 1.7% | ||||
Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27 | 1,000,000 | 912,530 | ||
Douglas County Gen. Oblig. 5.5% 2/1/18 | 1,000,000 | 1,094,270 | ||
Fond Du Lac School District 5.75% 4/1/13 | 1,300,000 | 1,481,675 | ||
Milwaukee County Gen. Oblig. Series A: | ||||
0% 12/1/10 (Escrowed to Maturity) (f) | 130,000 | 102,280 | ||
0% 12/1/10 (FGIC Insured) | 3,370,000 | 2,625,163 | ||
Wisconsin Health & Edl. Facilities Auth. Rev.: | ||||
(Marshfield Clinic Proj.) Series B, 6% 2/15/25 | 1,500,000 | 1,502,880 | ||
(Wheaton Franciscan Svcs., Inc. Proj.): | ||||
Series A, 5.5% 8/15/16 | 1,000,000 | 1,046,760 | ||
5.75% 8/15/30 | 1,500,000 | 1,530,735 | ||
6.25% 8/15/22 | 600,000 | 640,698 | ||
10,936,991 | ||||
TOTAL MUNICIPAL BONDS (Cost $614,058,618) | 645,614,616 | |||
Money Market Funds - 0.5% | |||
Shares | |||
Fidelity Municipal Cash Central Fund, 1.1% (c)(d) | 3,495,000 | 3,495,000 | |
TOTAL INVESTMENT PORTFOLIO - 100.9% (Cost $617,553,618) | 649,109,616 | ||
NET OTHER ASSETS - (0.9)% | (5,925,714) | ||
NET ASSETS - 100% | $ 643,183,902 | ||
Legend |
(a) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(b) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(c) Information in this report regarding holdings by state and security types does not reflect the holdings of the Fidelity Municipal Cash Central Fund. |
(d) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(e) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
(f) Security collateralized by an amount sufficient to pay interest and principal. |
Other Information |
The distribution of municipal securities by revenue source, as a percentage of total net assets, is as follows: |
General Obligations | 31.9% |
Electric Utilities | 13.2 |
Health Care | 11.7 |
Transportation | 11.2 |
Water & Sewer | 10.2 |
Education | 6.4 |
Escrowed/Pre-Refunded | 5.4 |
Others* (individually less than 5%) | 10.0 |
100.0% |
* Includes cash equivalents and |
Purchases and sales of securities, other than short-term securities, aggregated $197,399,467 and $165,778,772, respectively. |
Income Tax Information |
The fund hereby designates approximately $1,438,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (cost $617,553,618) - See accompanying schedule | $ 649,109,616 | |
Cash | 587,749 | |
Receivable for investments sold | 1,153,691 | |
Receivable for fund shares sold | 482,985 | |
Interest receivable | 9,796,518 | |
Prepaid expenses | 3,511 | |
Other receivables | 29 | |
Total assets | 661,134,099 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 13,623,722 | |
Payable for fund shares redeemed | 3,036,463 | |
Distributions payable | 770,547 | |
Accrued management fee | 203,293 | |
Distribution fees payable | 216,216 | |
Other payables and accrued expenses | 99,956 | |
Total liabilities | 17,950,197 | |
Net Assets | $ 643,183,902 | |
Net Assets consist of: | ||
Paid in capital | $ 609,419,246 | |
Undistributed net investment income | 63,585 | |
Accumulated undistributed net realized gain (loss) on investments | 2,145,073 | |
Net unrealized appreciation (depreciation) on investments | 31,555,998 | |
Net Assets | $ 643,183,902 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | $ 13.00 | |
Maximum offering price per share (100/95.25 of $13.00) | $ 13.65 | |
Class T: | $ 13.03 | |
Maximum offering price per share (100/96.50 of $13.03) | $ 13.50 | |
Class B: | $ 12.98 | |
Class C: | $ 13.02 | |
Institutional Class: | $ 12.96 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 31,207,103 | |
Expenses | ||
Management fee | $ 2,457,052 | |
Transfer agent fees | 614,129 | |
Distribution fees | 2,632,245 | |
Accounting fees and expenses | 198,483 | |
Non-interested trustees' compensation | 3,964 | |
Custodian fees and expenses | 11,599 | |
Registration fees | 84,382 | |
Audit | 45,297 | |
Legal | 6,951 | |
Miscellaneous | 8,579 | |
Total expenses before reductions | 6,062,681 | |
Expense reductions | (51,215) | 6,011,466 |
Net investment income (loss) | 25,195,637 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 9,451,291 | |
Swap agreements | (335,044) | |
Total net realized gain (loss) | 9,116,247 | |
Change in net unrealized appreciation (depreciation) on investment securities | (3,367,057) | |
Net gain (loss) | 5,749,190 | |
Net increase (decrease) in net assets resulting from operations | $ 30,944,827 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 25,195,637 | $ 24,346,402 |
Net realized gain (loss) | 9,116,247 | 6,471,744 |
Change in net unrealized appreciation (depreciation) | (3,367,057) | 1,623,032 |
Net increase (decrease) in net assets resulting | 30,944,827 | 32,441,178 |
Distributions to shareholders from net investment income | (25,330,647) | (24,182,551) |
Distributions to shareholders from net realized gain | (96,841) | - |
Total distributions | (25,427,488) | (24,182,551) |
Share transactions - net increase (decrease) | 22,471,782 | 39,992,400 |
Total increase (decrease) in net assets | 27,989,121 | 48,251,027 |
Net Assets | ||
Beginning of period | 615,194,781 | 566,943,754 |
End of period (including undistributed net investment income of $63,585 and undistributed net investment income of $153,350, respectively) | $ 643,183,902 | $ 615,194,781 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.87 | $ 12.70 | $ 12.02 | $ 11.69 | $ 12.54 |
Income from Investment Operations | |||||
Net investment income (loss) | .539 C | .557 C, E | .584 C | .591 C | .567 |
Net realized and unrealized gain (loss) | .137 | .168 E | .679 | .337 | (.850) |
Total from investment operations | .676 | .725 | 1.263 | .928 | (.283) |
Distributions from net investment income | (.544) | (.555) | (.583) | (.598) | (.567) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.546) | (.555) | (.583) | (.598) | (.567) |
Net asset value, | $ 13.00 | $ 12.87 | $ 12.70 | $ 12.02 | $ 11.69 |
Total Return A, B | 5.33% | 5.88% | 10.72% | 8.17% | (2.36)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .68% | .69% | .69% | .72% | .72% |
Expenses net of voluntary waivers, if any | .68% | .69% | .69% | .72% | .72% |
Expenses net of all reductions | .68% | .67% | .62% | .72% | .72% |
Net investment income (loss) | 4.15% | 4.41% E | 4.70% | 5.02% | 4.62% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 87,406 | $ 67,457 | $ 46,796 | $ 22,780 | $ 10,722 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.89 | $ 12.72 | $ 12.04 | $ 11.70 | $ 12.56 |
Income from Investment Operations | |||||
Net investment income (loss) | .529 C | .546 C, E | .572 C | .583 C | .555 |
Net realized and unrealized gain (loss) | .144 | .166 E | .679 | .343 | (.860) |
Total from investment operations | .673 | .712 | 1.251 | .926 | (.305) |
Distributions from net investment income | (.531) | (.542) | (.571) | (.586) | (.555) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.533) | (.542) | (.571) | (.586) | (.555) |
Net asset value, | $ 13.03 | $ 12.89 | $ 12.72 | $ 12.04 | $ 11.70 |
Total Return A, B | 5.30% | 5.76% | 10.59% | 8.14% | (2.53)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .78% | .79% | .79% | .81% | .81% |
Expenses net of voluntary waivers, if any | .78% | .79% | .79% | .81% | .81% |
Expenses net of all reductions | .77% | .77% | .72% | .81% | .81% |
Net investment income (loss) | 4.06% | 4.31% E | 4.60% | 4.93% | 4.51% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 340,542 | $ 354,030 | $ 369,295 | $ 340,959 | $ 329,926 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.85 | $ 12.67 | $ 12.00 | $ 11.67 | $ 12.53 |
Income from Investment Operations | |||||
Net investment income (loss) | .443 C | .462 C, E | .489 C | .504 C | .476 |
Net realized and unrealized gain (loss) | .136 | .178 E | .671 | .336 | (.860) |
Total from investment operations | .579 | .640 | 1.160 | .840 | (.384) |
Distributions from net investment income | (.447) | (.460) | (.490) | (.510) | (.476) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.449) | (.460) | (.490) | (.510) | (.476) |
Net asset value, | $ 12.98 | $ 12.85 | $ 12.67 | $ 12.00 | $ 11.67 |
Total Return A, B | 4.56% | 5.19% | 9.83% | 7.38% | (3.16)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.43% | 1.44% | 1.43% | 1.46% | 1.46% |
Expenses net of voluntary waivers, if any | 1.43% | 1.44% | 1.43% | 1.46% | 1.46% |
Expenses net of all reductions | 1.42% | 1.41% | 1.37% | 1.46% | 1.46% |
Net investment income (loss) | 3.41% | 3.66% E | 3.95% | 4.28% | 3.88% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 110,853 | $ 109,986 | $ 91,687 | $ 68,571 | $ 63,464 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 12.89 | $ 12.71 | $ 12.04 | $ 11.70 | $ 12.56 |
Income from Investment Operations | |||||
Net investment income (loss) | .430 C | .451 C, E | .478 C | .493 C | .465 |
Net realized and unrealized gain (loss) | .135 | .176 E | .669 | .345 | (.860) |
Total from investment operations | .565 | .627 | 1.147 | .838 | (.395) |
Distributions from net investment income | (.433) | (.447) | (.477) | (.498) | (.465) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.435) | (.447) | (.477) | (.498) | (.465) |
Net asset value, | $ 13.02 | $ 12.89 | $ 12.71 | $ 12.04 | $ 11.70 |
Total Return A, B | 4.44% | 5.06% | 9.69% | 7.34% | (3.24)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.53% | 1.53% | 1.53% | 1.56% | 1.56% |
Expenses net of voluntary waivers, if any | 1.53% | 1.53% | 1.53% | 1.56% | 1.56% |
Expenses net of all reductions | 1.52% | 1.51% | 1.47% | 1.56% | 1.56% |
Net investment income (loss) | 3.31% | 3.57% E | 3.85% | 4.18% | 3.79% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 59,423 | $ 52,019 | $ 37,324 | $ 17,120 | $ 13,071 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.83 | $ 12.66 | $ 11.98 | $ 11.65 | $ 12.51 |
Income from Investment Operations | |||||
Net investment income (loss) | .556 B | .573 B, D | .598 B | .604 B | .584 |
Net realized and unrealized gain (loss) | .139 | .170 D | .682 | .339 | (.860) |
Total from investment operations | .695 | .743 | 1.280 | .943 | (.276) |
Distributions from net investment income | (.563) | (.573) | (.600) | (.613) | (.584) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.565) | (.573) | (.600) | (.613) | (.584) |
Net asset value, | $ 12.96 | $ 12.83 | $ 12.66 | $ 11.98 | $ 11.65 |
Total Return A | 5.50% | 6.05% | 10.91% | 8.34% | (2.31)% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .54% | .55% | .54% | .61% | .60% |
Expenses net of voluntary waivers, if any | .54% | .55% | .54% | .61% | .60% |
Expenses net of all reductions | .53% | .52% | .48% | .61% | .60% |
Net investment income (loss) | 4.30% | 4.55% D | 4.84% | 5.13% | 4.75% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 44,960 | $ 31,703 | $ 21,842 | $ 8,324 | $ 3,431 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Municipal Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. 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 differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Annual Report
Notes to Financial Statements - continued
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 among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from net investment income and realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount and losses deferred due to futures transactions.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 34,697,510 | | |
Unrealized depreciation | (3,244,338) | |
Net unrealized appreciation (depreciation) | 31,453,172 | |
Undistributed ordinary income | 1,978,360 | |
Undistributed long-term capital gain | 942,998 | |
Cost for federal income tax purposes | $ 617,656,444 |
The tax character of distributions paid was as follows:
October 31, 2003 | October 31, 2002 | |
Tax-exempt Income | $ 25,330,647 | $ 24,182,551 |
Ordinary Income | 96,841 | - |
Total | $ 25,427,488 | $ 24,182,551 |
Annual Report
2. Operating Policies.
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company (FMR) and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .25% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .38% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 120,655 | $ 818 |
Class T | 0% | .25% | 887,239 | 10,882 |
Class B | .65% | .25% | 1,036,703 | 748,839 |
Class C | .75% | .25% | 587,648 | 213,918 |
$ 2,632,245 | $ 974,457 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 107,688 |
Class T | 44,212 |
Class B* | 327,223 |
Class C* | 18,013 |
$ 497,136 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent and Accounting Fees. Citibank, N.A. (Citibank) is the custodian, transfer agent, and shareholder servicing agent for each class of the fund. Citibank has entered into a sub-arrangement with Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, 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 Citibank, which is reimbursed by each class for such payments. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, each class paid the following transfer agent fees:
Amount | % of | |
Class A | $ 78,592 | .10 |
Class T | 334,215 | .09 |
Class B | 108,225 | .09 |
Class C | 55,497 | .09 |
Institutional Class | 37,600 | .10 |
$ 614,129 |
Citibank also has a sub-contract with Fidelity Service Company, Inc. (FSC), an affiliate of FMR, under which FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $27,048 for the period.
5. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody and accounting expenses by $9,574 and $41,641, respectively.
Annual Report
Notes to Financial Statements - continued
6. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 3,352,432 | $ 2,495,486 |
Class T | 14,468,124 | 15,356,391 |
Class B | 3,967,761 | 3,502,109 |
Class C | 1,950,363 | 1,530,399 |
Institutional Class | 1,591,967 | 1,298,166 |
Total | $ 25,330,647 | $ 24,182,551 |
From net realized gain | ||
Class A | $ 10,945 | $ - |
Class T | 55,415 | - |
Class B | 17,248 | - |
Class C | 8,364 | - |
Institutional Class | 4,869 | - |
Total | $ 96,841 | $ - |
Annual Report
7. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 3,901,567 | 2,957,378 | $ 50,803,639 | $ 37,394,606 |
Reinvestment of distributions | 162,162 | 123,485 | 2,110,532 | 1,562,606 |
Shares redeemed | (2,581,581) | (1,525,410) | (33,549,091) | (19,280,229) |
Net increase (decrease) | 1,482,148 | 1,555,453 | $ 19,365,080 | $ 19,676,983 |
Class T | ||||
Shares sold | 5,300,881 | 6,415,036 | $ 69,054,270 | $ 81,243,658 |
Reinvestment of distributions | 757,344 | 776,628 | 9,873,817 | 9,828,135 |
Shares redeemed | (7,372,291) | (8,770,570) | (95,857,703) | (111,096,235) |
Net increase (decrease) | (1,314,066) | (1,578,906) | $ (16,929,616) | $ (20,024,442) |
Class B | ||||
Shares sold | 2,246,062 | 3,190,931 | $ 29,269,745 | $ 40,478,563 |
Reinvestment of distributions | 172,328 | 153,825 | 2,238,503 | 1,940,257 |
Shares redeemed | (2,436,595) | (2,017,544) | (31,456,462) | (25,394,417) |
Net increase (decrease) | (18,205) | 1,327,212 | $ 51,786 | $ 17,024,403 |
Class C | ||||
Shares sold | 1,928,795 | 1,961,353 | $ 25,207,188 | $ 24,947,713 |
Reinvestment of distributions | 97,383 | 78,558 | 1,268,933 | 995,258 |
Shares redeemed | (1,498,069) | (939,655) | (19,484,342) | (11,931,816) |
Net increase (decrease) | 528,109 | 1,100,256 | $ 6,991,779 | $ 14,011,155 |
Institutional Class | ||||
Shares sold | 3,276,194 | 3,034,831 | $ 42,752,774 | $ 38,002,885 |
Reinvestment of distributions | 31,935 | 20,961 | 414,731 | 264,774 |
Shares redeemed | (2,309,742) | (2,310,449) | (30,174,752) | (28,963,358) |
Net increase (decrease) | 998,387 | 745,343 | $ 12,992,753 | $ 9,304,301 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Municipal Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Municipal Income Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Municipal Income Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Municipal Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Municipal Income. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Municipal Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Christine J. Thompson (45) | |
Year of Election or Appointment: 1998 Vice President of Advisor Municipal Income. Ms. Thompson is also Vice President of other funds advised by FMR. Prior to assuming her current responsibilities, Ms. Thompson managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Municipal Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Municipal Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Municipal Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Municipal Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Municipal Income. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Municipal Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor Municipal Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Municipal Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Municipal Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1996 Assistant Treasurer of Advisor Municipal Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Municipal Income Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Class A | 12/08/03 | 12/05/03 | $0.022 |
Class T | 12/08/03 | 12/05/03 | $0.022 |
Class B | 12/08/03 | 12/05/03 | $0.022 |
Class C | 12/08/03 | 12/05/03 | $0.022 |
During fiscal year ended 2003, 100% of the fund's income dividends was free from federal income tax, and 12.56% of the fund's income dividends was subject to the federal alternative minimum tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Adviser
Fidelity Investments Money
Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Citibank, N.A.
New York, NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
HIM-UANN-1203
1.784765.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Municipal Income Fund -
Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
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Other third party marks appearing herein are the property of their respective owners.
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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.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional ClassA | 5.50% | 5.60% | 5.57% |
A The initial offering of Institutional Class shares took place on July 3, 1995. Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. Returns prior to July 3, 1995 are those of Class T, the original class of the fund, and reflect Class T shares' 0.25% 12b-1 fee.
Annual Report
$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, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers Municipal Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Christine Thompson, Portfolio Manager of Fidelity® Advisor Municipal Income Fund
Despite late-period obstacles such as higher longer-term yields and downgrades in public finance debt, tax-exempt municipal bonds fared better than most investment-grade taxable bond sectors for the year ending October 31, 2003. In that time, the Lehman Brothers® Municipal Bond Index advanced 5.11%. That return far outdistanced Treasury, agency, mortgage- and asset-backed securities, a gap made even wider considering the tax-equivalent yield advantage munis offer. On an absolute basis, munis fared better than all the spread sectors except corporates. Munis did well for much of the period against a backdrop of tepid economic growth, low short-term interest rates and virtually non-existent inflation. In June and July, however, munis dropped nearly 4% when a brighter economic forecast sent interest rates higher and bond prices tumbling. After rebounding in August and September on the heels of strong investor demand, munis stumbled again in October, mainly due to news of stronger-than-expected economic growth.
Fidelity Advisor Municipal Income Fund's Institutional Class shares returned 5.50%. That return compares favorably to the 4.62% return for the fund's peer group, the LipperSM General Municipal Debt Funds Average. Additionally, the fund's benchmark - the Lehman Brothers 3 Plus Year Municipal Bond Index - returned 5.36%. A number of factors worked in the fund's favor during the year, including its focus on bonds backed by fees and dedicated revenues rather than bonds backed by taxes, and its overweighting in private colleges and universities and in hospitals. The fund also benefited from underweighting state-issued bonds - particularly those issued by California and New York - which came under pressure due to the fiscal challenges faced by the states and an increase in muni bond supply. Detracting from performance was the fund's underweighting in par bonds, which sell at face value. Par bonds were in strong demand among retail investors at times, helping them to outperform premium and discount bonds, which sell above and below face value, respectively.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Top Five States as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
Texas | 15.0 | 14.0 |
Illinois | 13.1 | 12.5 |
New York | 9.9 | 9.8 |
Washington | 7.9 | 7.9 |
California | 6.8 | 5.0 |
Top Five Sectors as of October 31, 2003 | ||
% of fund's | % of fund's net assets | |
General Obligations | 31.9 | 29.1 |
Electric Utilities | 13.2 | 14.2 |
Health Care | 11.7 | 14.3 |
Transportation | 11.2 | 10.0 |
Water & Sewer | 10.2 | 10.4 |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 15.0 | 15.1 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 7.5 | 7.1 |
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 (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| AAA 63.1% | | AAA 60.5% | ||||
| AA,A 27.4% | | AA,A 29.1% | ||||
| BBB 7.8% | | BBB 7.6% | ||||
| BB and Below 0.1% | | BB and Below 0.0% | ||||
| Not Rated 2.0% | | Not Rated 2.4% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
* Short-Term Investments and Net Other Assets are not included in the pie chart.
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Municipal Bonds - 100.4% | ||||
Principal | Value | |||
Alabama - 0.5% | ||||
Jefferson County Swr. Rev. Series A: | ||||
5% 2/1/33 (Pre-Refunded to 2/1/09 @ 101) (f) | $ 1,610,000 | $ 1,806,883 | ||
5% 2/1/41 (Pre-Refunded to 2/1/11 @ 101) (f) | 210,000 | 235,767 | ||
Oxford Gen. Oblig. 5.75% 5/1/25 (AMBAC Insured) | 1,000,000 | 1,091,490 | ||
3,134,140 | ||||
Alaska - 1.4% | ||||
Alaska Hsg. Fin. Corp. Series A, 5.4% 12/1/13 | 5,490,000 | 5,714,486 | ||
Alaska Student Ln. Corp. Student Ln. Rev. Series A: | ||||
5.25% 7/1/07 (AMBAC Insured) (e) | 1,500,000 | 1,618,125 | ||
5.45% 7/1/09 (AMBAC Insured) (e) | 1,500,000 | 1,592,070 | ||
8,924,681 | ||||
Arizona - 1.1% | ||||
Arizona Student Ln. Acquisition Auth. Student Ln. Rev. Series A1, 5.875% 5/1/18 (e) | 1,300,000 | 1,367,405 | ||
Phoenix Indl. Dev. Auth. Single Family Mtg. Rev. 0% 12/1/14 (Escrowed to Maturity) (f) | 3,750,000 | 2,331,150 | ||
Tucson Street & Hwy. User Rev. 4.5% 7/1/07 (AMBAC Insured) | 3,380,000 | 3,658,951 | ||
7,357,506 | ||||
Arkansas - 0.2% | ||||
Little Rock School District Series 2001 C, 5.25% 2/1/33 (FSA Insured) | 1,000,000 | 1,025,300 | ||
California - 6.8% | ||||
California Dept. of Wtr. Resources Pwr. Supply Rev.: | ||||
Series 2002 A, 5.75% 5/1/17 | 800,000 | 866,728 | ||
Series A: | ||||
5.25% 5/1/09 (MBIA Insured) | 3,600,000 | 4,041,360 | ||
5.5% 5/1/15 (AMBAC Insured) | 1,000,000 | 1,106,110 | ||
5.875% 5/1/16 | 2,100,000 | 2,316,762 | ||
California Gen. Oblig.: | ||||
4.5% 2/1/09 | 1,000,000 | 1,060,460 | ||
5.25% 2/1/11 | 2,300,000 | 2,498,743 | ||
5.25% 2/1/14 | 2,400,000 | 2,564,856 | ||
5.25% 2/1/15 | 1,200,000 | 1,271,664 | ||
5.25% 2/1/16 | 1,000,000 | 1,050,840 | ||
5.25% 2/1/20 | 1,300,000 | 1,327,118 | ||
5.25% 2/1/22 | 2,300,000 | 2,321,390 | ||
5.5% 3/1/11 | 3,500,000 | 3,860,850 | ||
5.5% 11/1/33 (a) | 1,100,000 | 1,113,464 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
California - continued | ||||
California Hsg. Fin. Agcy. Home Mtg. Rev.: | ||||
Series B, 5.2% 8/1/26 (MBIA Insured) (e) | $ 175,000 | $ 175,618 | ||
Series R, 5.35% 8/1/07 (MBIA Insured) (e) | 1,000,000 | 1,078,440 | ||
California State Univ. Rev. & Colleges Series 1999 AY, 5.875% 11/1/30 (FGIC Insured) | 1,000,000 | 1,096,650 | ||
Central Valley Fing. Auth. Cogeneration Proj. Rev. (Carson Ice Gen. Proj.) 6% 7/1/09 | 2,690,000 | 2,752,596 | ||
Foothill/Eastern Trans. Corridor Agcy. Toll Road Rev.: | ||||
Series A, 5% 1/1/35 (MBIA Insured) | 700,000 | 700,343 | ||
5% 1/15/16 (MBIA Insured) | 400,000 | 422,780 | ||
5.75% 1/15/40 | 600,000 | 610,614 | ||
Golden State Tobacco Securitization Corp.: | ||||
Series 2003 A1, 6.75% 6/1/39 | 1,200,000 | 1,087,152 | ||
Series B, 5.75% 6/1/23 | 1,800,000 | 1,873,134 | ||
Los Angeles Dept. of Wtr. & Pwr. Wtrwks. Rev. Series 2001 A, 5.125% 7/1/41 | 4,000,000 | 4,006,040 | ||
Los Angeles Unified School District Series A: | ||||
5.375% 7/1/17 (MBIA Insured) | 1,800,000 | 1,976,112 | ||
5.375% 7/1/18 (MBIA Insured) | 1,000,000 | 1,089,510 | ||
Sacramento Cogeneration Auth. Cogeneration Proj. Rev. (Procter & Gamble Proj.) 6.375% 7/1/10 | 500,000 | 538,250 | ||
Sacramento Pwr. Auth. Cogeneration Proj. Rev. 6.5% 7/1/08 | 300,000 | 334,023 | ||
San Joaquin Hills Trans. Corridor Agcy. Toll Road Rev. Series A, 0% 1/15/12 (MBIA Insured) | 1,300,000 | 930,696 | ||
44,072,303 | ||||
Colorado - 2.4% | ||||
Arapahoe County Cherry Creek School District #5 6% 12/15/15 | 1,250,000 | 1,445,775 | ||
Colorado Springs Arpt. Rev. Series C: | ||||
0% 1/1/06 (MBIA Insured) | 1,405,000 | 1,342,843 | ||
0% 1/1/08 (MBIA Insured) | 870,000 | 768,593 | ||
Colorado Wtr. Resources Pwr. Dev. Auth. Clean Wtr. Rev. Series 2001 A: | ||||
5.625% 9/1/13 | 1,610,000 | 1,829,620 | ||
5.625% 9/1/14 | 1,745,000 | 1,974,136 | ||
Denver City & County Arpt. Rev. Series A, 7.5% 11/15/23 (Pre-Refunded to 11/15/04 @ 102) (e)(f) | 430,000 | 466,176 | ||
Douglas County School District #RE1 Douglas & Elbert Counties Series 2002 B, 5.75% 12/15/16 | 2,775,000 | 3,173,351 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Colorado - continued | ||||
E-470 Pub. Hwy. Auth. Rev. Series 2000 A, 5.75% 9/1/29 (MBIA Insured) | $ 1,200,000 | $ 1,314,564 | ||
Larimer County School District #R1 Poudre 6% 12/15/17 (FGIC Insured) | 1,325,000 | 1,538,365 | ||
Mesa County Residual Rev. 0% 12/1/11 (Escrowed to Maturity) (f) | 2,275,000 | 1,677,517 | ||
15,530,940 | ||||
Connecticut - 0.7% | ||||
Connecticut Gen. Oblig. Series D, 5.375% 11/15/18 | 1,000,000 | 1,098,090 | ||
Eastern Connecticut Resources Recovery Auth. Solid Waste Rev. (Wheelabrator Lisbon Proj.) Series A, 5.5% 1/1/20 (e) | 3,350,000 | 3,139,922 | ||
4,238,012 | ||||
District Of Columbia - 2.0% | ||||
District of Columbia Gen. Oblig.: | ||||
Series A, 6% 6/1/07 (Escrowed to Maturity) (f) | 150,000 | 170,973 | ||
Series B, 5.25% 6/1/26 (FSA Insured) | 6,000,000 | 6,102,300 | ||
District of Columbia Rev.: | ||||
(George Washington Univ. Proj.) Series A, 5.75% 9/15/20 (MBIA Insured) | 1,490,000 | 1,652,216 | ||
(Georgetown Univ. Proj.) Series A, 5.95% 4/1/14 (MBIA Insured) | 2,000,000 | 2,287,740 | ||
(Nat'l. Academy of Sciences Proj.) Series A, 5% 1/1/19 (AMBAC Insured) | 2,500,000 | 2,574,025 | ||
12,787,254 | ||||
Florida - 2.4% | ||||
Dade County Aviation Rev. Series D, 5.75% 10/1/09 (AMBAC Insured) (e) | 5,000,000 | 5,417,400 | ||
Dade County School District 5.2% 7/15/07 (AMBAC Insured) | 1,200,000 | 1,333,968 | ||
Florida Board of Ed. Lottery Rev. Series B, 6% 7/1/15 (FGIC Insured) | 500,000 | 581,170 | ||
Florida Tpk. Auth. Tpk. Rev. Series B, 5% 7/1/11 (AMBAC Insured) | 600,000 | 663,882 | ||
Highlands County Health Facilities Auth. Rev. | 2,200,000 | 2,258,036 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Florida - continued | ||||
Reedy Creek Impt. District Utils. Rev. Series 2, 5.25% 10/1/10 (MBIA Insured) (a) | $ 3,300,000 | $ 3,683,658 | ||
Tampa Florida Guaranteed Entitlement Rev. 6% 10/1/08 (AMBAC Insured) | 1,500,000 | 1,734,540 | ||
15,672,654 | ||||
Georgia - 0.6% | ||||
College Park Bus. & Indl. Dev. Auth. Civic Ctr. Proj. Rev. Series 2000, 5.75% 9/1/20 (AMBAC Insured) | 1,000,000 | 1,125,220 | ||
Columbus Wtr. & Swr. Rev. 5.25% 5/1/11 | 1,085,000 | 1,217,652 | ||
Henry County Wtr. & Swr. Auth. Rev. 5% 2/1/09 | 1,145,000 | 1,271,969 | ||
3,614,841 | ||||
Hawaii - 0.3% | ||||
Hawaii Arpts. Sys. Rev. Series 2000 B, 8% 7/1/11 (FGIC Insured) (e) | 1,300,000 | 1,641,224 | ||
Illinois - 13.1% | ||||
Chicago Board of Ed.: | ||||
Series A: | ||||
0% 12/1/14 (FGIC Insured) | 1,000,000 | 607,730 | ||
0% 12/1/16 (FGIC Insured) | 4,000,000 | 2,160,440 | ||
5.75% 12/1/27 (AMBAC Insured) | 14,055,000 | 15,197,531 | ||
Chicago Gen. Oblig.: | ||||
(City Colleges Proj.): | ||||
0% 1/1/16 (FGIC Insured) | 2,520,000 | 1,421,053 | ||
0% 1/1/24 (FGIC Insured) | 6,110,000 | 2,059,498 | ||
0% 1/1/28 (FGIC Insured) | 5,000,000 | 1,335,700 | ||
(Neighborhoods Alive 21 Prog.): | ||||
Series 2000 A, 6% 1/1/28 (FGIC Insured) | 1,400,000 | 1,565,886 | ||
5.5% 1/1/17 (FGIC Insured) | 2,265,000 | 2,468,691 | ||
Series A, 5% 1/1/42 (AMBAC Insured) | 1,700,000 | 1,686,281 | ||
Chicago Midway Arpt. Rev.: | ||||
Series A, 5.5% 1/1/29 (MBIA Insured) | 1,500,000 | 1,537,455 | ||
Series B, 6% 1/1/09 (MBIA Insured) (e) | 300,000 | 330,291 | ||
Chicago O'Hare Int'l. Arpt. Rev.: | ||||
Series A: | ||||
5.5% 1/1/16 (AMBAC Insured) (e) | 1,000,000 | 1,058,580 | ||
6.25% 1/1/09 (AMBAC Insured) (e) | 3,700,000 | 4,148,181 | ||
6.375% 1/1/15 (MBIA Insured) | 1,400,000 | 1,494,080 | ||
5.5% 1/1/09 (AMBAC Insured) (e) | 1,250,000 | 1,392,838 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Illinois - continued | ||||
Chicago Transit Auth. Cap. Grant Receipts Rev. | $ 1,400,000 | $ 1,444,534 | ||
Coles & Cumberland Counties Cmnty. Unit School District #2 5.8% 2/1/17 (FGIC Insured) | 1,000,000 | 1,121,530 | ||
DuPage County Cmnty. High School District #108 Lake Park 5.6% 1/1/17 (FSA Insured) | 3,190,000 | 3,563,517 | ||
Evanston Gen. Oblig. Series C, 5.25% 1/1/20 | 1,500,000 | 1,584,615 | ||
Illinois Edl. Facilities Auth. Revs. (DePaul Univ. Proj.): | ||||
5.5% 10/1/17 (AMBAC Insured) | 1,980,000 | 2,190,395 | ||
5.5% 10/1/18 (AMBAC Insured) | 2,195,000 | 2,419,812 | ||
5.5% 10/1/19 (AMBAC Insured) | 1,000,000 | 1,097,950 | ||
Illinois Gen. Oblig.: | ||||
First Series: | ||||
5.5% 8/1/19 (MBIA Insured) | 2,500,000 | 2,736,200 | ||
5.75% 12/1/18 (MBIA Insured) | 1,000,000 | 1,123,270 | ||
5.5% 4/1/17 (MBIA Insured) | 1,000,000 | 1,092,190 | ||
5.6% 4/1/21 (MBIA Insured) | 1,000,000 | 1,080,700 | ||
Illinois Health Facilities Auth. Rev.: | ||||
(Condell Med. Ctr. Proj.) 6.5% 5/15/30 | 3,000,000 | 3,137,670 | ||
(Dectaur Memorial Hosp. Proj.) Series 2001, 5.75% 10/1/24 | 2,100,000 | 2,125,242 | ||
(Lake Forest Hosp. Proj.) 6% 7/1/33 | 1,000,000 | 1,023,930 | ||
(Riverside Health Sys. Proj.) 6.8% 11/15/20 | 1,500,000 | 1,605,270 | ||
Illinois Sales Tax Rev.: | ||||
First Series 2001, 5.5% 6/15/13 | 3,250,000 | 3,637,628 | ||
6% 6/15/20 | 600,000 | 679,500 | ||
Kane & DuPage Counties Cmnty. Unit School District #303 Saint Charles Series A, 5.5% 1/1/17 | 2,000,000 | 2,198,560 | ||
Kane County School District #129 Aurora West Side Series A, 5.75% 2/1/18 (FGIC Insured) | 2,000,000 | 2,226,120 | ||
Lake County Cmnty. Consolidated School District #50 Woodland Series 2000 A, 6% 12/1/20 (FGIC Insured) | 1,025,000 | 1,169,453 | ||
McHenry County Conservation District Series A, 5.625% 2/1/21 (FGIC Insured) | 1,000,000 | 1,075,200 | ||
Metro. Pier & Exposition Auth. Dedicated State Tax Rev.: | ||||
(McCormick Place Expansion Proj.): | ||||
Series 2002 A: | ||||
0% 12/15/32 (MBIA Insured) | 2,000,000 | 397,020 | ||
5.75% 6/15/41 (MBIA Insured) | 1,000,000 | 1,073,540 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Illinois - continued | ||||
Metro. Pier & Exposition Auth. Dedicated State Tax Rev.: - continued | ||||
(McCormick Place Expansion Proj.): | ||||
Series A: | ||||
0% 12/15/24 (MBIA Insured) | $ 3,000,000 | $ 952,470 | ||
0% 6/15/31 (MBIA Insured) | 1,800,000 | 390,528 | ||
Series 2002 A: | ||||
0% 6/15/09 (Escrowed to Maturity) (f) | 975,000 | 820,433 | ||
0% 6/15/09 (FGIC Insured) | 25,000 | 20,706 | ||
Series A, 0% 6/15/09 (Escrowed to Maturity) (f) | 65,000 | 54,696 | ||
Ogle Lee & DeKalb Counties Township High School District #212 6% 12/1/16 (MBIA Insured) | 1,000,000 | 1,162,510 | ||
Univ. of Illinois Auxiliary Facilities Sys. Rev. 0% 4/1/15 (MBIA Insured) | 3,700,000 | 2,188,143 | ||
Will County Forest Preservation District Series B, 0% 12/1/14 (FGIC Insured) | 1,000,000 | 604,440 | ||
84,462,007 | ||||
Indiana - 1.1% | ||||
Indiana Bond Bank Rev.: | ||||
Series A, 5% 2/1/07 (MBIA Insured) | 1,000,000 | 1,088,670 | ||
Series B, 5% 2/1/10 (MBIA Insured) | 1,000,000 | 1,099,180 | ||
Indiana Health Facility Fing. Auth. Rev. (Sisters of Saint Francis Health Svc. Proj.) 5.5% 11/1/31 | 1,500,000 | 1,515,330 | ||
Indianapolis Econ. Dev. Rev. (Nat'l. Benevolent Assoc. Proj.) 7.625% 10/1/22 | 1,000,000 | 622,270 | ||
New Albany Floyd County Independent School Bldg. Corp. 5.75% 7/15/17 (FGIC Insured) | 1,000,000 | 1,130,060 | ||
Petersburg Poll. Cont. Rev. 5.95% 12/1/29 (e) | 2,000,000 | 1,943,260 | ||
7,398,770 | ||||
Iowa - 0.8% | ||||
Iowa Fin. Auth. Hosp. Facilities Rev. 5.875% 2/15/30 (AMBAC Insured) | 1,870,000 | 2,015,598 | ||
Tobacco Settlement Auth. Tobacco Settlement Rev. 5.3% 6/1/25 | 4,000,000 | 3,168,720 | ||
5,184,318 | ||||
Kansas - 1.8% | ||||
Burlington Envir. Impt. Rev. (Kansas City Pwr. & Lt. Co. Proj.) 4.75%, tender 10/1/07 (b) | 1,000,000 | 1,064,780 | ||
Kansas Dept. of Trans. Hwy. Rev. Series 2000 A, 5.75% 9/1/15 | 600,000 | 680,910 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Kansas - continued | ||||
Kansas Dev. Fin. Auth. Health Facilities Rev. (Sisters of Charity Proj.) Series J, 6.25% 12/1/28 | $ 1,500,000 | $ 1,617,075 | ||
Kansas Dev. Fin. Auth. Pub. Wtr. Supply Revolving Ln. Fund Rev.: | ||||
(Sisters of Charity Leavenworth Health Svc. Co. Proj.): | ||||
5% 12/1/13 (MBIA Insured) | 2,390,000 | 2,552,377 | ||
5% 12/1/14 (MBIA Insured) | 500,000 | 533,530 | ||
5.25% 12/1/09 (MBIA Insured) | 1,420,000 | 1,573,857 | ||
5.25% 12/1/11 (MBIA Insured) | 1,750,000 | 1,911,245 | ||
Series 2000 2, 5.75% 4/1/16 (AMBAC Insured) | 1,550,000 | 1,756,243 | ||
11,690,017 | ||||
Kentucky - 1.7% | ||||
Kentucky Property & Bldgs. Commission Revs.: | ||||
5.625% 9/1/13 | 2,170,000 | 2,429,489 | ||
5.625% 9/1/14 | 1,500,000 | 1,672,650 | ||
Louisville & Jefferson County Metro. Swr. District Swr. & Drain Sys. Rev. Series A, 5.75% 5/15/33 | 6,050,000 | 6,587,664 | ||
10,689,803 | ||||
Maine - 1.3% | ||||
Maine Tpk. Auth. Tpk. Rev. Series 2000, 5.75% 7/1/28 (FGIC Insured) | 8,000,000 | 8,666,640 | ||
Maryland - 0.5% | ||||
Maryland Health & Higher Edl. Facilities Auth. Rev. (Good Samaritan Hosp. Proj.) 5.75% 7/1/13 (Escrowed to Maturity) (f) | 2,680,000 | 3,083,554 | ||
Massachusetts - 3.1% | ||||
Massachusetts Bay Trans. Auth.: | ||||
Series 1997 D, 5% 3/1/27 | 2,000,000 | 2,002,920 | ||
Series A: | ||||
5.375% 3/1/19 | 1,000,000 | 1,066,600 | ||
5.75% 3/1/26 | 2,000,000 | 2,165,840 | ||
Massachusetts Gen. Oblig. Series D, 5.25% 10/1/22 | 1,200,000 | 1,256,052 | ||
Massachusetts Health & Edl. Facilities Auth. Rev. | 500,000 | 510,805 | ||
Massachusetts Indl. Fin. Agcy. Resource Recovery Rev. (Ogden Haverhill Proj.) Series 1992 A, 4.7% 12/1/03 | 1,000,000 | 1,000,140 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Massachusetts - continued | ||||
Massachusetts Indl. Fin. Agcy. Rev. (Massachusetts Biomedical Research Corp. Proj.) Series A2: | ||||
0% 8/1/08 | $ 800,000 | $ 695,664 | ||
0% 8/1/10 | 4,500,000 | 3,506,985 | ||
Massachusetts Wtr. Poll. Abatement Trust Wtr. Poll. Abatement Rev. (MWRA Ln. Prog.) Series A, 5.25% 8/1/13 | 10,000 | 10,816 | ||
Massachusetts Wtr. Resources Auth. Series A, 5.75% 8/1/39 (FGIC Insured) | 7,000,000 | 7,610,190 | ||
19,826,012 | ||||
Michigan - 1.9% | ||||
Detroit Gen. Oblig. Series A, 5% 4/1/08 (FSA Insured) (a) | 3,400,000 | 3,569,592 | ||
Detroit Wtr. Supply Sys. Rev. Series 2001 A, 5.25% 7/1/33 (FGIC Insured) | 1,065,000 | 1,093,318 | ||
Ecorse Pub. School District 5.5% 5/1/27 (FGIC Insured) | 1,000,000 | 1,041,470 | ||
Michigan Hosp. Fin. Auth. Hosp. Rev.: | ||||
(Ascension Health Cr. Group Proj.) Series A, 6.125% 11/15/26 (Pre-Refunded to 11/15/09 @ 101) (f) | 300,000 | 357,507 | ||
(McLaren Health Care Corp. Proj.) Series A, 5% 6/1/19 | 2,000,000 | 1,967,260 | ||
Royal Oak Hosp. Fin. Auth. Hosp. Rev. (William Beaumont Hosp. Proj.) 6.25% 1/1/09 | 2,310,000 | 2,614,204 | ||
Zeeland Pub. Schools 5.375% 5/1/25 (FGIC Insured) | 1,500,000 | 1,559,100 | ||
12,202,451 | ||||
Minnesota - 1.5% | ||||
Mankato Independent School District #77 Series A, 5% 2/1/13 (FSA Insured) (a) | 600,000 | 638,706 | ||
Minneapolis & Saint Paul Hsg. & Redev. Auth. Health Care Sys. Rev. (Healthspan Corp. Proj.) Series A, 4.75% 11/15/18 (AMBAC Insured) | 1,800,000 | 1,828,134 | ||
Minneapolis Health Care Sys. Rev. (Allina Health Sys. Proj.) Series 2002 A, 6% 11/15/23 | 1,000,000 | 1,044,270 | ||
Minnesota Hsg. Fin. Agcy. (Single Family Mtg. Prog.) Series D, 6.4% 7/1/15 (e) | 1,080,000 | 1,116,590 | ||
Rochester Health Care Facilities Rev. (Mayo Foundation Proj.) Series A, 5.5% 11/15/27 | 900,000 | 930,735 | ||
Saint Cloud Health Care Rev. (Saint Cloud Hosp. Group Oblig. Proj.) Series A, 5.875% 5/1/30 | 2,000,000 | 2,177,520 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Minnesota - continued | ||||
Saint Paul Port Auth. Lease Rev. 5.25% 12/1/18 | $ 1,000,000 | $ 1,065,600 | ||
Waconia Independent School District #110 Series A, 5% 2/1/12 (FSA Insured) (a) | 500,000 | 544,270 | ||
9,345,825 | ||||
Missouri - 0.4% | ||||
Missouri Envir. Impt. & Energy Resources Auth. Wtr. Poll. Cont. & Drinking Wtr. Rev. (State Revolving Fund Prog.) Series 2003 A, 5.125% 1/1/21 | 1,010,000 | 1,057,167 | ||
Saint Louis Muni. Fin. Corp. Leasehold Rev. (Civil Courts Bldg. Proj.) Series A, 5% 8/1/08 (FSA Insured) | 1,130,000 | 1,255,125 | ||
2,312,292 | ||||
Montana - 0.2% | ||||
Forsyth Poll. Cont. Rev. (Portland Gen. Elec. Co. Projs.) Series A, 5.2%, tender 5/1/09 (b) | 1,100,000 | 1,120,911 | ||
Nevada - 0.9% | ||||
Clark County Arpt. Rev. Series C, 5.375% 7/1/22 (AMBAC Insured) (e) | 1,000,000 | 1,036,430 | ||
Clark County Gen. Oblig.: | ||||
(Park & Reg'l. Justice Ctr. Proj.) 5.75% 11/1/24 | 1,000,000 | 1,093,350 | ||
Series 2000, 5.5% 7/1/30 (MBIA Insured) | 500,000 | 526,945 | ||
Clark County School District Series 2000 A: | ||||
5.75% 6/15/17 (MBIA Insured) | 600,000 | 674,142 | ||
5.75% 6/15/20 (MBIA Insured) | 1,000,000 | 1,103,760 | ||
Washoe County Gen. Oblig. 5% 9/1/10 (FSA Insured) | 1,000,000 | 1,112,780 | ||
5,547,407 | ||||
New Jersey - 0.9% | ||||
New Jersey Tpk. Auth. Tpk. Rev. Series A: | ||||
5.625% 1/1/15 (MBIA Insured) | 185,000 | 203,348 | ||
5.625% 1/1/15 (Pre-Refunded to 1/1/10 @ 100) (f) | 715,000 | 823,215 | ||
North Hudson Swr. Auth. Swr. Rev. Series A, 5.25% 8/1/17 (FGIC Insured) | 2,000,000 | 2,158,760 | ||
Tobacco Settlement Fing. Corp.: | ||||
4.375% 6/1/19 | 600,000 | 557,130 | ||
6.125% 6/1/24 | 1,100,000 | 1,011,252 | ||
6.125% 6/1/42 | 1,600,000 | 1,321,696 | ||
6,075,401 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
New Mexico - 1.3% | ||||
Albuquerque Arpt. Rev.: | ||||
6.7% 7/1/18 (AMBAC Insured) (e) | $ 3,970,000 | $ 4,522,187 | ||
6.75% 7/1/09 (AMBAC Insured) (e) | 450,000 | 533,507 | ||
6.75% 7/1/11 (AMBAC Insured) (e) | 1,805,000 | 2,149,484 | ||
New Mexico Edl. Assistance Foundation Student Ln. Rev. Series IV A2, 6.65% 3/1/07 | 1,200,000 | 1,279,044 | ||
8,484,222 | ||||
New York - 9.9% | ||||
Erie County Indl. Dev. Agcy. School Facility Rev. | 1,000,000 | 1,108,470 | ||
Metro. Trans. Auth. Commuter Facilities Rev. Series 1997 B, 5% 7/1/20 (Escrowed to Maturity) (f) | 500,000 | 525,835 | ||
Metro. Trans. Auth. Rev. Series 2002 A, 5.75% 11/15/32 | 4,300,000 | 4,590,981 | ||
Metro. Trans. Auth. Svc. Contract Rev.: | ||||
Series 2002 B, 5% 1/1/07 | 3,000,000 | 3,251,760 | ||
Series 7, 5.625% 7/1/16 (Escrowed to Maturity) (f) | 1,000,000 | 1,023,730 | ||
Series O, 5.75% 7/1/13 (Escrowed to Maturity) (f) | 700,000 | 806,407 | ||
Metro. Trans. Auth. Transit Facilities Rev.: | ||||
Series B2, 5% 7/1/17 (Escrowed to Maturity) (f) | 500,000 | 537,895 | ||
Series C, 4.75% 7/1/16 (Pre-Refunded to 1/1/12 @ 100) (f) | 150,000 | 164,312 | ||
Nassau County Gen. Oblig. Series Z: | ||||
5% 9/1/11 (FGIC Insured) | 300,000 | 329,139 | ||
5% 9/1/13 (FGIC Insured) | 850,000 | 917,822 | ||
New York City Gen. Oblig.: | ||||
Series A, 5.25% 11/1/14 (MBIA Insured) | 600,000 | 654,048 | ||
Series C, 5.75% 3/15/27 (FSA Insured) | 500,000 | 539,965 | ||
Series E, 6% 8/1/11 | 500,000 | 549,945 | ||
New York City Indl. Dev. Agcy. Indl. Dev. Rev. (Japan Airlines Co. Ltd. Proj.) Series 1991, 6% 11/1/15 | 845,000 | 889,253 | ||
New York City Indl. Dev. Agcy. Spl. Facilities Rev. | 8,680,000 | 8,893,788 | ||
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Sys. Rev.: | ||||
Series A, 6% 6/15/28 | 1,500,000 | 1,686,840 | ||
Series B: | ||||
5.75% 6/15/26 | 5,000,000 | 5,390,600 | ||
5.75% 6/15/29 | 5,000,000 | 5,373,050 | ||
5.75% 6/15/29 (MBIA Insured) | 1,500,000 | 1,619,295 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
New York - continued | ||||
New York State Dorm. Auth. Revs.: | ||||
(City Univ. Sys. Consolidation Proj.) Series C, 7.5% 7/1/10 | $ 500,000 | $ 594,345 | ||
(The Jamaica Hosp. Proj.) Series F, 5.2% 2/15/14 (MBIA Insured) | 6,150,000 | 6,625,887 | ||
Series 2002 A, 5.75% 10/1/17 (MBIA Insured) | 1,000,000 | 1,136,770 | ||
New York State Envir. Facilities Corp. Clean Wtr. & Drinking Wtr. Rev. Series F: | ||||
4.875% 6/15/18 | 870,000 | 900,441 | ||
4.875% 6/15/18 (Escrowed to Maturity) (f) | 630,000 | 656,895 | ||
4.875% 6/15/20 | 795,000 | 815,885 | ||
5% 6/15/15 | 305,000 | 326,533 | ||
5% 6/15/15 (Escrowed to Maturity) (f) | 395,000 | 430,827 | ||
New York State Envir. Facilities Corp. State Wtr. Poll. Cont. Revolving Fund Rev. (New York City Muni. Wtr. Fin. Auth. Proj.): | ||||
Series 1997 E, 6% 6/15/11 (MBIA Insured) | 1,500,000 | 1,760,970 | ||
Series D, 5.125% 6/15/19 (Escrowed to Maturity) (f) | 1,000,000 | 1,051,270 | ||
New York State Thruway Auth. State Personal Income Tax Rev. Series A, 5.5% 3/15/17 | 500,000 | 551,080 | ||
New York State Thruway Auth. Svc. Contract Rev. 5.5% 4/1/16 | 1,000,000 | 1,089,240 | ||
New York State Urban Dev. Corp. Rev. Series C1, 5.5% 3/15/18 (FGIC Insured) | 1,000,000 | 1,102,530 | ||
Tobacco Settlement Fing. Corp. Series A1: | ||||
5.25% 6/1/21 (AMBAC Insured) | 1,000,000 | 1,045,430 | ||
5.25% 6/1/22 (AMBAC Insured) | 1,000,000 | 1,039,940 | ||
5.5% 6/1/16 | 4,700,000 | 4,969,780 | ||
Triborough Bridge & Tunnel Auth. Spl. Oblig. Series A, 5.25% 1/1/11 (Escrowed to Maturity) (f) | 500,000 | 554,255 | ||
63,505,213 | ||||
New York & New Jersey - 0.1% | ||||
Port Auth. of New York & New Jersey 124th Series, 5% 8/1/13 (FGIC Insured) (e) | 500,000 | 527,320 | ||
North Carolina - 3.1% | ||||
North Carolina Cap. Facilities Fin. Agcy. Rev. (Duke Univ. Proj.) Series A, 5.125% 7/1/42 | 3,190,000 | 3,230,258 | ||
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.: | ||||
Series A, 5.5% 1/1/11 | 1,500,000 | 1,627,125 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
North Carolina - continued | ||||
North Carolina Eastern Muni. Pwr. Agcy. Pwr. Sys. Rev.: - continued | ||||
Series B: | ||||
5.875% 1/1/21 (MBIA Insured) | $ 3,050,000 | $ 3,388,093 | ||
6% 1/1/06 | 5,820,000 | 6,251,029 | ||
7.25% 1/1/07 | 1,000,000 | 1,131,190 | ||
Series C: | ||||
5.5% 1/1/07 | 700,000 | 757,337 | ||
5.5% 1/1/07 (MBIA Insured) | 2,000,000 | 2,222,060 | ||
Series D, 6.7% 1/1/19 | 1,115,000 | 1,230,458 | ||
19,837,550 | ||||
North Dakota - 0.2% | ||||
North Dakota Bldg. Auth. Lease Rev. Series A, 5.25% 6/1/09 (FGIC Insured) | 1,400,000 | 1,579,438 | ||
Ohio - 1.5% | ||||
Cincinnati Student Ln. Fdg. Corp. Student Ln. Rev. | 1,005,000 | 1,009,382 | ||
Delaware County Gen. Oblig. 6% 12/1/25 | 1,000,000 | 1,134,370 | ||
Fairborn City School District (School Impt. Proj.) 5.75% 12/1/26 (FSA Insured) | 1,000,000 | 1,093,730 | ||
Franklin County Hosp. Rev. 5.5% 5/1/21 (AMBAC Insured) | 1,455,000 | 1,560,036 | ||
Gateway Econ. Dev. Corp. Greater Cleveland Stadium Rev. Series 1990, 6.5% 9/15/14 (e) | 3,000,000 | 3,080,040 | ||
Ohio Wtr. Dev. Auth. Rev. (Fresh Wtr. Impt. Proj.) 5.375% 12/1/17 | 1,000,000 | 1,093,880 | ||
Plain Local School District 6% 12/1/25 (FGIC Insured) | 410,000 | 461,972 | ||
9,433,410 | ||||
Oklahoma - 1.4% | ||||
Midwest City Muni. Auth. Cap. Impt. Rev. Series 2001, 5.5% 6/1/13 (Pre-Refunded to 6/1/10 @ 100.5) (f) | 1,000,000 | 1,157,380 | ||
Oklahoma Industries Auth. Rev.: | ||||
(Health Sys. Oblig. Group Proj.) Series A, 5.75% 8/15/29 (MBIA Insured) | 1,500,000 | 1,594,620 | ||
6% 8/15/19 (MBIA Insured) | 3,000,000 | 3,353,040 | ||
Tulsa Indl. Auth. Rev. (Univ. of Tulsa Proj.) Series 2000 A, 5.75% 10/1/25 (MBIA Insured) | 3,000,000 | 3,235,050 | ||
9,340,090 | ||||
Oregon - 0.6% | ||||
Portland Swr. Sys. Rev. Series 2000 A, 5.75% 8/1/18 (FGIC Insured) | 500,000 | 560,620 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Oregon - continued | ||||
Tri-County Metro. Trans. District Rev. Series A: | ||||
5.75% 8/1/18 | $ 1,000,000 | $ 1,121,240 | ||
5.75% 8/1/19 | 2,080,000 | 2,319,034 | ||
4,000,894 | ||||
Pennsylvania - 4.0% | ||||
Allegheny County Arpt. Rev. (Pittsburgh Int'l. Arpt. Proj.) Series A1, 5.75% 1/1/07 (MBIA Insured) (e) | 1,000,000 | 1,092,580 | ||
Canon McMillan School District: | ||||
Series 2001 B, 5.75% 12/1/33 (FGIC Insured) | 1,000,000 | 1,083,160 | ||
Series 2002 B, 5.75% 12/1/35 (FGIC Insured) | 1,595,000 | 1,735,153 | ||
Cumberland County Muni. Auth. Rev. (Carlisle Hosp. & Health Proj.) 6.8% 11/15/14 (Pre-Refunded to 11/15/04 @ 102) (f) | 2,720,000 | 2,887,661 | ||
Delaware County Auth. College Rev. (Haverford College Proj.) 5.75% 11/15/29 | 3,500,000 | 3,793,265 | ||
Delaware County Auth. Rev. (First Mtg. Riddle Village Proj.) 8.25% 6/1/22 (Escrowed to Maturity) (f) | 2,120,000 | 2,258,733 | ||
Montgomery County Higher Ed. & Health Auth. Hosp. Rev. (Abington Memorial Hosp. Proj.) Series A, 6% 6/1/16 (AMBAC Insured) | 1,860,000 | 2,174,080 | ||
Pennsylvania Econ. Dev. Fing. Auth. Exempt Facilities Rev. (Amtrak Proj.) Series 2001 A, 6.25% 11/1/31 (e) | 2,000,000 | 1,953,600 | ||
Pennsylvania Higher Edl. Facilities Auth. Rev. (Lafayette College Proj.) 6% 5/1/30 | 3,065,000 | 3,406,594 | ||
Philadelphia School District Series 2002 A, 5.5% 2/1/31 (FSA Insured) | 1,300,000 | 1,368,640 | ||
Tredyffrin-Easttown School District 5.5% 2/15/15 | 2,010,000 | 2,236,527 | ||
Westmoreland County Muni. Auth. Muni. Svc. Rev. Series A, 0% 8/15/21 (FGIC Insured) | 5,000,000 | 2,029,100 | ||
26,019,093 | ||||
Puerto Rico - 0.2% | ||||
Puerto Rico Commonwealth Infrastructure Fing. Auth. Series 2000 A, 5.5% 10/1/32 (Escrowed to Maturity) (f) | 1,000,000 | 1,083,440 | ||
Rhode Island - 0.9% | ||||
Providence Redev. Agcy. Rev. Series A, 5.75% 4/1/29 (AMBAC Insured) | 800,000 | 863,336 | ||
Rhode Island Port Auth. & Econ. Dev. Corp. Arpt. Rev. Series A, 7% 7/1/14 (FSA Insured) (e) | 4,000,000 | 4,887,440 | ||
5,750,776 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
South Carolina - 1.0% | ||||
Greenwood County Hosp. Rev. (Self Memorial Hosp. Proj.): | ||||
5.5% 10/1/26 | $ 1,750,000 | $ 1,746,640 | ||
5.5% 10/1/31 | 2,000,000 | 1,977,980 | ||
South Carolina Ed. Assistance Auth. Rev. (Guaranteed Student Ln. Prog.) Series B, 5.7% 9/1/05 (e) | 1,000,000 | 1,056,070 | ||
South Carolina Jobs Econ. Dev. Auth. Hosp. Facilities Rev. (Palmetto Health Alliance Proj.) Series A, 7.375% 12/15/21 (Pre-Refunded to 12/15/10 @ 102) (f) | 1,000,000 | 1,270,750 | ||
Tobacco Settlement Rev. Mgmt. Auth. Series 2001 B, 6.375% 5/15/28 | 545,000 | 475,987 | ||
6,527,427 | ||||
Tennessee - 0.7% | ||||
Metro. Govt. Nashville & Davidson County Health & Edl. Facilities Board Rev. (Ascension Health Cr. Group Proj.) Series A: | ||||
5.875% 11/15/28 (Pre-Refunded to 11/15/09 @ 101) (f) | 400,000 | 473,612 | ||
6% 11/15/30 (Pre-Refunded to 11/15/09 @ 101) (f) | 600,000 | 714,564 | ||
Shelby County Health Edl. & Hsg. Facility Board Hosp. Rev. (Methodist Health Care Proj.) 6.5% 9/1/26 | 3,000,000 | 3,241,110 | ||
4,429,286 | ||||
Texas - 15.0% | ||||
Aldine Independent School District 5.5% 2/15/13 | 3,150,000 | 3,521,795 | ||
Alvin Independent School District 5.75% 8/15/21 | 1,000,000 | 1,102,930 | ||
Austin Util. Sys. Rev. Series A, 0% 11/15/10 | 1,100,000 | 854,073 | ||
Brazos River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.) Series D, 4.25%, tender 11/1/03 (b)(e) | 3,000,000 | 3,000,000 | ||
Canyon Independent School District Series A, 5.5% 2/15/18 | 1,575,000 | 1,728,909 | ||
Comal Independent School District 5.75% 8/1/28 | 2,000,000 | 2,162,460 | ||
Conroe Independent School District Lot B, 0% 2/15/09 | 750,000 | 632,700 | ||
Corpus Christi Util. Sys. Rev. 5.25% 7/15/18 (FSA Insured) | 1,500,000 | 1,603,860 | ||
Cypress-Fairbanks Independent School District: | ||||
Series A: | ||||
0% 2/15/14 | 3,200,000 | 2,017,344 | ||
0% 2/15/16 | 1,400,000 | 788,732 | ||
5% 2/15/10 | 1,000,000 | 1,106,340 | ||
5.75% 2/15/21 | 1,000,000 | 1,095,120 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Texas - continued | ||||
Del Valle Independent School District 5.5% 2/1/09 | $ 1,205,000 | $ 1,362,831 | ||
El Paso Gen. Oblig. 5.75% 8/15/25 (FSA Insured) | 4,500,000 | 4,836,960 | ||
El Paso Wtr. & Swr. Rev. 5% 3/1/10 (AMBAC Insured) | 1,205,000 | 1,335,429 | ||
Garland Independent School District: | ||||
Series A, 5% 2/15/11 (a) | 575,000 | 632,736 | ||
5.5% 2/15/19 | 2,500,000 | 2,703,075 | ||
Grapevine Gen. Oblig. 5.75% 8/15/18 (FGIC Insured) | 1,250,000 | 1,398,350 | ||
Harris County Gen. Oblig. 0% 10/1/17 (MBIA Insured) | 2,500,000 | 1,287,800 | ||
Harris County Health Facilities Dev. Corp. Rev. (Saint Luke's Episcopal Hosp. Proj.): | ||||
Series 2001 A, 5.5% 2/15/12 | 1,000,000 | 1,093,350 | ||
5.75% 2/15/21 | 1,310,000 | 1,370,037 | ||
Houston Arpt. Sys. Rev.: | ||||
Series A, 5.625% 7/1/19 (FSA Insured) (e) | 1,000,000 | 1,068,240 | ||
Series B, 5.5% 7/1/30 (FSA Insured) | 1,400,000 | 1,452,612 | ||
Houston Independent School District 0% 8/15/13 | 1,300,000 | 853,515 | ||
Hurst Euless Bedford Independent School District 0% 8/15/11 | 1,000,000 | 739,260 | ||
Lewisville Independent School District 0% 8/15/19 | 2,340,000 | 1,072,258 | ||
Los Fresnos Independent School District: | ||||
5.75% 8/15/13 | 1,040,000 | 1,189,542 | ||
5.75% 8/15/14 | 1,100,000 | 1,253,153 | ||
Lower Colorado River Auth. Transmission Contract Rev. (LCRA Transmission Services Corp. Proj.) Series 2003 C, 5.25% 5/15/19 (AMBAC Insured) | 1,000,000 | 1,067,520 | ||
Mansfield Independent School District 5.5% 2/15/17 | 2,000,000 | 2,184,880 | ||
Mount Pleasant Independent School District 5.5% 2/15/22 | 2,590,000 | 2,772,517 | ||
Northside Independent School District 5.5% 2/15/15 | 2,000,000 | 2,209,100 | ||
Northwest Texas Independent School District 5.5% 8/15/21 | 3,185,000 | 3,417,696 | ||
Pearland Independent School District 5.875% 2/15/17 | 1,205,000 | 1,361,915 | ||
Sabine River Auth. Poll. Cont. Rev. (Texas Utils. Elec. Co. Proj.) Series B, 5.75%, tender 11/1/11 (b)(e) | 4,000,000 | 4,142,880 | ||
San Antonio Elec. & Gas Systems Rev.: | ||||
5.25% 2/1/07 (a) | 1,000,000 | 1,099,090 | ||
5.5% 2/1/20 (Pre-Refunded to 2/1/07 @ 101) (f) | 75,000 | 84,070 | ||
Southwest Higher Ed. Auth. Rev. (Southern Methodist Univ. Proj.) 5.5% 10/1/14 (AMBAC Insured) | 2,245,000 | 2,526,366 | ||
Tarrant County Health Facilities Dev. Corp. Hosp. Rev. 5.375% 11/15/20 | 1,000,000 | 991,420 | ||
Texas Muni. Pwr. Agcy. Rev.: | ||||
0% 9/1/11 (AMBAC Insured) | 4,760,000 | 3,512,832 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Texas - continued | ||||
Texas Muni. Pwr. Agcy. Rev.: - continued | ||||
0% 9/1/11 (Escrowed to Maturity) (f) | $ 275,000 | $ 206,278 | ||
Texas Pub. Fin. Auth. Bldg. Rev. (Texas Technical College Proj.) 6.25% 8/1/09 (MBIA Insured) | 1,000,000 | 1,139,050 | ||
Texas Tpk. Auth. Central Tpk. Sys. Rev.: | ||||
Series A: | ||||
0% 8/15/25 (AMBAC Insured) | 2,910,000 | 879,693 | ||
0% 8/15/29 (AMBAC Insured) | 8,000,000 | 1,902,080 | ||
5.5% 8/15/39 (AMBAC Insured) | 3,600,000 | 3,797,748 | ||
5.75% 8/15/38 (AMBAC Insured) | 3,000,000 | 3,251,880 | ||
Texas Tpk. Auth. Dallas North Tollway Rev. 5.25% 1/1/23 (FGIC Insured) | 2,600,000 | 2,714,634 | ||
Texas Wtr. Dev. Board Rev. Series A, 5.5% 7/15/21 | 1,000,000 | 1,069,670 | ||
Travis County Health Facilities Dev. Corp. Rev. (Ascension Health Cr. Prog.) Series A, 6.25% 11/15/19 (Pre-Refunded to 11/15/09 @ 101) (f) | 4,000,000 | 4,819,040 | ||
Trinity River Auth. Reg'l. Wastewtr. Sys. Rev. 5.25% 8/1/11 (MBIA Insured) | 2,000,000 | 2,244,400 | ||
Tyler Health Facilities Dev. Corp. Hosp. Rev. (Mother Frances Hosp. Reg'l. Health Care Ctr. Proj.) 6% 7/1/27 | 1,000,000 | 1,014,950 | ||
Williamson County Gen. Oblig. 6% 8/15/19 | 1,000,000 | 1,139,950 | ||
Yselta Independent School District 0% 8/15/09 | 4,065,000 | 3,374,844 | ||
96,187,914 | ||||
Utah - 2.2% | ||||
Intermountain Pwr. Agcy. Pwr. Supply Rev.: | ||||
Series A: | ||||
6.5% 7/1/09 (AMBAC Insured) | 365,000 | 434,292 | ||
6.5% 7/1/09 (Escrowed to Maturity) (f) | 635,000 | 764,438 | ||
Series B: | ||||
5.75% 7/1/16 (MBIA Insured) | 2,500,000 | 2,812,700 | ||
6% 7/1/16 (MBIA Insured) | 7,000,000 | 7,822,080 | ||
Salt Lake County Hosp. Rev. (IHC Health Svcs., Inc. Proj.) 5.5% 5/15/10 (AMBAC Insured) | 2,000,000 | 2,269,060 | ||
14,102,570 | ||||
Municipal Bonds - continued | ||||
Principal | Value | |||
Vermont - 0.2% | ||||
Vermont Edl. & Health Bldgs. Fing. Agcy. Rev. (Fletcher Allen Health Care, Inc. Proj.): | ||||
Series 2000 A, 6.125% 12/1/27 (AMBAC Insured) | $ 1,000,000 | $ 1,135,390 | ||
Series A, 5.75% 12/1/18 (AMBAC Insured) | 400,000 | 451,060 | ||
1,586,450 | ||||
Virginia - 0.9% | ||||
Loudoun County Indl. Dev. Auth. Residential Care Facilities Rev. (Falcons Landing Proj.) Series A, 9.25% 11/1/04 (Escrowed to Maturity) (f) | 430,000 | 446,065 | ||
Virginia Commonwealth Trans. Board Trans. Rev. | 1,965,000 | 2,168,947 | ||
Virginia Resources Auth. Clean Wtr. State Revolving Fund Rev.: | ||||
5.625% 10/1/22 | 1,250,000 | 1,351,863 | ||
5.75% 10/1/19 | 1,750,000 | 1,964,603 | ||
5,931,478 | ||||
Washington - 7.9% | ||||
Clark County School District #114 Evergreen 5.375% 12/1/14 (FSA Insured) | 3,040,000 | 3,383,611 | ||
Energy Northwest Elec. Rev. (#1 Proj.) Series B, 6% 7/1/17 (MBIA Insured) | 4,000,000 | 4,565,760 | ||
Grant County Pub. Util. District No. 2 (Priest Rapids | 1,715,000 | 1,842,082 | ||
King County Swr. Rev. Series B: | ||||
5.125% 1/1/33 (FSA Insured) | 2,800,000 | 2,826,992 | ||
5.5% 1/1/21 (FSA Insured) | 1,615,000 | 1,727,808 | ||
Port of Seattle Passenger Facilities Charge Rev. Series B, 5.25% 12/1/14 (AMBAC Insured) (e) | 3,000,000 | 3,160,200 | ||
Seattle Wtr. Sys. Rev. Series B, 5.75% 7/1/23 | 1,000,000 | 1,096,080 | ||
Snohomish County Pub. Hosp. District #2 (Stevens Health Care Proj.) 4.5% 12/1/10 (FGIC Insured) (a) | 1,000,000 | 1,078,450 | ||
Spokane Pub. Facilities District Hotel & Motel Tax & Sales Use Tax Rev. 5.75% 12/1/24 (MBIA Insured) | 1,000,000 | 1,094,810 | ||
Tumwater School District #33 Thurston County | 4,000,000 | 3,087,880 | ||
Univ. of Washington Univ. Revs. (Student Facilities Fee Prog.) 5.8% 6/1/30 (FSA Insured) | 3,000,000 | 3,247,200 | ||
Washington Gen. Oblig. Series 2000 A, 5.625% 7/1/24 | 2,000,000 | 2,118,860 | ||
Municipal Bonds - continued | ||||
Principal | Value | |||
Washington - continued | ||||
Washington Health Care Facilities Auth. Rev. (Providence Health Systems Proj.) Series 2001 A, 5.5% 10/1/13 (MBIA Insured) | $ 3,000,000 | $ 3,348,090 | ||
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #2 Rev. 5.4% 7/1/12 | 16,000,000 | 17,621,273 | ||
Washington Pub. Pwr. Supply Sys. Nuclear Proj. #3 Rev. Series C, 5.1% 7/1/07 | 500,000 | 547,695 | ||
50,746,791 | ||||
Wisconsin - 1.7% | ||||
Badger Tobacco Asset Securitization Corp. 6.125% 6/1/27 | 1,000,000 | 912,530 | ||
Douglas County Gen. Oblig. 5.5% 2/1/18 | 1,000,000 | 1,094,270 | ||
Fond Du Lac School District 5.75% 4/1/13 | 1,300,000 | 1,481,675 | ||
Milwaukee County Gen. Oblig. Series A: | ||||
0% 12/1/10 (Escrowed to Maturity) (f) | 130,000 | 102,280 | ||
0% 12/1/10 (FGIC Insured) | 3,370,000 | 2,625,163 | ||
Wisconsin Health & Edl. Facilities Auth. Rev.: | ||||
(Marshfield Clinic Proj.) Series B, 6% 2/15/25 | 1,500,000 | 1,502,880 | ||
(Wheaton Franciscan Svcs., Inc. Proj.): | ||||
Series A, 5.5% 8/15/16 | 1,000,000 | 1,046,760 | ||
5.75% 8/15/30 | 1,500,000 | 1,530,735 | ||
6.25% 8/15/22 | 600,000 | 640,698 | ||
10,936,991 | ||||
TOTAL MUNICIPAL BONDS (Cost $614,058,618) | 645,614,616 | |||
Money Market Funds - 0.5% | |||
Shares | |||
Fidelity Municipal Cash Central Fund, 1.1% (c)(d) | 3,495,000 | 3,495,000 | |
TOTAL INVESTMENT PORTFOLIO - 100.9% (Cost $617,553,618) | 649,109,616 | ||
NET OTHER ASSETS - (0.9)% | (5,925,714) | ||
NET ASSETS - 100% | $ 643,183,902 | ||
Legend |
(a) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(b) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(c) Information in this report regarding holdings by state and security types does not reflect the holdings of the Fidelity Municipal Cash Central Fund. |
(d) The rate quoted is the annualized seven-day yield of the fund at period end. A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(e) Private activity obligations whose interest is subject to the federal alternative minimum tax for individuals. |
(f) Security collateralized by an amount sufficient to pay interest and principal. |
Other Information |
The distribution of municipal securities by revenue source, as a percentage of total net assets, is as follows: |
General Obligations | 31.9% |
Electric Utilities | 13.2 |
Health Care | 11.7 |
Transportation | 11.2 |
Water & Sewer | 10.2 |
Education | 6.4 |
Escrowed/Pre-Refunded | 5.4 |
Others* (individually less than 5%) | 10.0 |
100.0% |
* Includes cash equivalents and |
Purchases and sales of securities, other than short-term securities, aggregated $197,399,467 and $165,778,772, respectively. |
Income Tax Information |
The fund hereby designates approximately $1,438,000 as a capital gain dividend for the purpose of the dividend paid deduction. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (cost $617,553,618) - See accompanying schedule | $ 649,109,616 | |
Cash | 587,749 | |
Receivable for investments sold | 1,153,691 | |
Receivable for fund shares sold | 482,985 | |
Interest receivable | 9,796,518 | |
Prepaid expenses | 3,511 | |
Other receivables | 29 | |
Total assets | 661,134,099 | |
Liabilities | ||
Payable for investments purchased on a delayed delivery basis | $ 13,623,722 | |
Payable for fund shares redeemed | 3,036,463 | |
Distributions payable | 770,547 | |
Accrued management fee | 203,293 | |
Distribution fees payable | 216,216 | |
Other payables and accrued expenses | 99,956 | |
Total liabilities | 17,950,197 | |
Net Assets | $ 643,183,902 | |
Net Assets consist of: | ||
Paid in capital | $ 609,419,246 | |
Undistributed net investment income | 63,585 | |
Accumulated undistributed net realized gain (loss) on investments | 2,145,073 | |
Net unrealized appreciation (depreciation) on investments | 31,555,998 | |
Net Assets | $ 643,183,902 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | $ 13.00 | |
Maximum offering price per share (100/95.25 of $13.00) | $ 13.65 | |
Class T: | $ 13.03 | |
Maximum offering price per share (100/96.50 of $13.03) | $ 13.50 | |
Class B: | $ 12.98 | |
Class C: | $ 13.02 | |
Institutional Class: | $ 12.96 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 31,207,103 | |
Expenses | ||
Management fee | $ 2,457,052 | |
Transfer agent fees | 614,129 | |
Distribution fees | 2,632,245 | |
Accounting fees and expenses | 198,483 | |
Non-interested trustees' compensation | 3,964 | |
Custodian fees and expenses | 11,599 | |
Registration fees | 84,382 | |
Audit | 45,297 | |
Legal | 6,951 | |
Miscellaneous | 8,579 | |
Total expenses before reductions | 6,062,681 | |
Expense reductions | (51,215) | 6,011,466 |
Net investment income (loss) | 25,195,637 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 9,451,291 | |
Swap agreements | (335,044) | |
Total net realized gain (loss) | 9,116,247 | |
Change in net unrealized appreciation (depreciation) on investment securities | (3,367,057) | |
Net gain (loss) | 5,749,190 | |
Net increase (decrease) in net assets resulting from operations | $ 30,944,827 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 25,195,637 | $ 24,346,402 |
Net realized gain (loss) | 9,116,247 | 6,471,744 |
Change in net unrealized appreciation (depreciation) | (3,367,057) | 1,623,032 |
Net increase (decrease) in net assets resulting | 30,944,827 | 32,441,178 |
Distributions to shareholders from net investment income | (25,330,647) | (24,182,551) |
Distributions to shareholders from net realized gain | (96,841) | - |
Total distributions | (25,427,488) | (24,182,551) |
Share transactions - net increase (decrease) | 22,471,782 | 39,992,400 |
Total increase (decrease) in net assets | 27,989,121 | 48,251,027 |
Net Assets | ||
Beginning of period | 615,194,781 | 566,943,754 |
End of period (including undistributed net investment income of $63,585 and undistributed net investment income of $153,350, respectively) | $ 643,183,902 | $ 615,194,781 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.87 | $ 12.70 | $ 12.02 | $ 11.69 | $ 12.54 |
Income from Investment Operations | |||||
Net investment income (loss) | .539 C | .557 C, E | .584 C | .591 C | .567 |
Net realized and unrealized gain (loss) | .137 | .168 E | .679 | .337 | (.850) |
Total from investment operations | .676 | .725 | 1.263 | .928 | (.283) |
Distributions from net investment income | (.544) | (.555) | (.583) | (.598) | (.567) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.546) | (.555) | (.583) | (.598) | (.567) |
Net asset value, | $ 13.00 | $ 12.87 | $ 12.70 | $ 12.02 | $ 11.69 |
Total Return A, B | 5.33% | 5.88% | 10.72% | 8.17% | (2.36)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .68% | .69% | .69% | .72% | .72% |
Expenses net of voluntary waivers, if any | .68% | .69% | .69% | .72% | .72% |
Expenses net of all reductions | .68% | .67% | .62% | .72% | .72% |
Net investment income (loss) | 4.15% | 4.41% E | 4.70% | 5.02% | 4.62% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 87,406 | $ 67,457 | $ 46,796 | $ 22,780 | $ 10,722 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.89 | $ 12.72 | $ 12.04 | $ 11.70 | $ 12.56 |
Income from Investment Operations | |||||
Net investment income (loss) | .529 C | .546 C, E | .572 C | .583 C | .555 |
Net realized and unrealized gain (loss) | .144 | .166 E | .679 | .343 | (.860) |
Total from investment operations | .673 | .712 | 1.251 | .926 | (.305) |
Distributions from net investment income | (.531) | (.542) | (.571) | (.586) | (.555) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.533) | (.542) | (.571) | (.586) | (.555) |
Net asset value, | $ 13.03 | $ 12.89 | $ 12.72 | $ 12.04 | $ 11.70 |
Total Return A, B | 5.30% | 5.76% | 10.59% | 8.14% | (2.53)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | .78% | .79% | .79% | .81% | .81% |
Expenses net of voluntary waivers, if any | .78% | .79% | .79% | .81% | .81% |
Expenses net of all reductions | .77% | .77% | .72% | .81% | .81% |
Net investment income (loss) | 4.06% | 4.31% E | 4.60% | 4.93% | 4.51% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 340,542 | $ 354,030 | $ 369,295 | $ 340,959 | $ 329,926 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.85 | $ 12.67 | $ 12.00 | $ 11.67 | $ 12.53 |
Income from Investment Operations | |||||
Net investment income (loss) | .443 C | .462 C, E | .489 C | .504 C | .476 |
Net realized and unrealized gain (loss) | .136 | .178 E | .671 | .336 | (.860) |
Total from investment operations | .579 | .640 | 1.160 | .840 | (.384) |
Distributions from net investment income | (.447) | (.460) | (.490) | (.510) | (.476) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.449) | (.460) | (.490) | (.510) | (.476) |
Net asset value, | $ 12.98 | $ 12.85 | $ 12.67 | $ 12.00 | $ 11.67 |
Total Return A, B | 4.56% | 5.19% | 9.83% | 7.38% | (3.16)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.43% | 1.44% | 1.43% | 1.46% | 1.46% |
Expenses net of voluntary waivers, if any | 1.43% | 1.44% | 1.43% | 1.46% | 1.46% |
Expenses net of all reductions | 1.42% | 1.41% | 1.37% | 1.46% | 1.46% |
Net investment income (loss) | 3.41% | 3.66% E | 3.95% | 4.28% | 3.88% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 110,853 | $ 109,986 | $ 91,687 | $ 68,571 | $ 63,464 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 12.89 | $ 12.71 | $ 12.04 | $ 11.70 | $ 12.56 |
Income from Investment Operations | |||||
Net investment income (loss) | .430 C | .451 C, E | .478 C | .493 C | .465 |
Net realized and unrealized gain (loss) | .135 | .176 E | .669 | .345 | (.860) |
Total from investment operations | .565 | .627 | 1.147 | .838 | (.395) |
Distributions from net investment income | (.433) | (.447) | (.477) | (.498) | (.465) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.435) | (.447) | (.477) | (.498) | (.465) |
Net asset value, | $ 13.02 | $ 12.89 | $ 12.71 | $ 12.04 | $ 11.70 |
Total Return A, B | 4.44% | 5.06% | 9.69% | 7.34% | (3.24)% |
Ratios to Average Net Assets D | |||||
Expenses before expense reductions | 1.53% | 1.53% | 1.53% | 1.56% | 1.56% |
Expenses net of voluntary waivers, if any | 1.53% | 1.53% | 1.53% | 1.56% | 1.56% |
Expenses net of all reductions | 1.52% | 1.51% | 1.47% | 1.56% | 1.56% |
Net investment income (loss) | 3.31% | 3.57% E | 3.85% | 4.18% | 3.79% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 59,423 | $ 52,019 | $ 37,324 | $ 17,120 | $ 13,071 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, | $ 12.83 | $ 12.66 | $ 11.98 | $ 11.65 | $ 12.51 |
Income from Investment Operations | |||||
Net investment income (loss) | .556 B | .573 B, D | .598 B | .604 B | .584 |
Net realized and unrealized gain (loss) | .139 | .170 D | .682 | .339 | (.860) |
Total from investment operations | .695 | .743 | 1.280 | .943 | (.276) |
Distributions from net investment income | (.563) | (.573) | (.600) | (.613) | (.584) |
Distributions from net realized gain | (.002) | - | - | - | - |
Total distributions | (.565) | (.573) | (.600) | (.613) | (.584) |
Net asset value, | $ 12.96 | $ 12.83 | $ 12.66 | $ 11.98 | $ 11.65 |
Total Return A | 5.50% | 6.05% | 10.91% | 8.34% | (2.31)% |
Ratios to Average Net Assets C | |||||
Expenses before expense reductions | .54% | .55% | .54% | .61% | .60% |
Expenses net of voluntary waivers, if any | .54% | .55% | .54% | .61% | .60% |
Expenses net of all reductions | .53% | .52% | .48% | .61% | .60% |
Net investment income (loss) | 4.30% | 4.55% D | 4.84% | 5.13% | 4.75% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 44,960 | $ 31,703 | $ 21,842 | $ 8,324 | $ 3,431 |
Portfolio turnover rate | 26% | 20% | 16% | 39% | 23% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
D Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Municipal Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. 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 differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Annual Report
Notes to Financial Statements - continued
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 among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the fund will treat a portion of the proceeds from shares redeemed as a distribution from net investment income and realized gain for income tax purposes. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to market discount and losses deferred due to futures transactions.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 34,697,510 | | |
Unrealized depreciation | (3,244,338) | |
Net unrealized appreciation (depreciation) | 31,453,172 | |
Undistributed ordinary income | 1,978,360 | |
Undistributed long-term capital gain | 942,998 | |
Cost for federal income tax purposes | $ 617,656,444 |
The tax character of distributions paid was as follows:
October 31, 2003 | October 31, 2002 | |
Tax-exempt Income | $ 25,330,647 | $ 24,182,551 |
Ordinary Income | 96,841 | - |
Total | $ 25,427,488 | $ 24,182,551 |
Annual Report
2. Operating Policies.
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company (FMR) and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .25% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .38% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 120,655 | $ 818 |
Class T | 0% | .25% | 887,239 | 10,882 |
Class B | .65% | .25% | 1,036,703 | 748,839 |
Class C | .75% | .25% | 587,648 | 213,918 |
$ 2,632,245 | $ 974,457 |
Sales Load. FDC receives a front-end sales charge of up to 4.75% for selling Class A shares, and 3.50% for selling Class T shares of the fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 107,688 |
Class T | 44,212 |
Class B* | 327,223 |
Class C* | 18,013 |
$ 497,136 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent and Accounting Fees. Citibank, N.A. (Citibank) is the custodian, transfer agent, and shareholder servicing agent for each class of the fund. Citibank has entered into a sub-arrangement with Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, 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 Citibank, which is reimbursed by each class for such payments. FIIOC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, each class paid the following transfer agent fees:
Amount | % of | |
Class A | $ 78,592 | .10 |
Class T | 334,215 | .09 |
Class B | 108,225 | .09 |
Class C | 55,497 | .09 |
Institutional Class | 37,600 | .10 |
$ 614,129 |
Citibank also has a sub-contract with Fidelity Service Company, Inc. (FSC), an affiliate of FMR, under which FSC maintains the fund's accounting records. The fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $27,048 for the period.
5. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody and accounting expenses by $9,574 and $41,641, respectively.
Annual Report
Notes to Financial Statements - continued
6. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 | |
From net investment income | ||
Class A | $ 3,352,432 | $ 2,495,486 |
Class T | 14,468,124 | 15,356,391 |
Class B | 3,967,761 | 3,502,109 |
Class C | 1,950,363 | 1,530,399 |
Institutional Class | 1,591,967 | 1,298,166 |
Total | $ 25,330,647 | $ 24,182,551 |
From net realized gain | ||
Class A | $ 10,945 | $ - |
Class T | 55,415 | - |
Class B | 17,248 | - |
Class C | 8,364 | - |
Institutional Class | 4,869 | - |
Total | $ 96,841 | $ - |
Annual Report
7. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended October 31, | Years ended October 31, | |||
2003 | 2002 | 2003 | 2002 | |
Class A | ||||
Shares sold | 3,901,567 | 2,957,378 | $ 50,803,639 | $ 37,394,606 |
Reinvestment of distributions | 162,162 | 123,485 | 2,110,532 | 1,562,606 |
Shares redeemed | (2,581,581) | (1,525,410) | (33,549,091) | (19,280,229) |
Net increase (decrease) | 1,482,148 | 1,555,453 | $ 19,365,080 | $ 19,676,983 |
Class T | ||||
Shares sold | 5,300,881 | 6,415,036 | $ 69,054,270 | $ 81,243,658 |
Reinvestment of distributions | 757,344 | 776,628 | 9,873,817 | 9,828,135 |
Shares redeemed | (7,372,291) | (8,770,570) | (95,857,703) | (111,096,235) |
Net increase (decrease) | (1,314,066) | (1,578,906) | $ (16,929,616) | $ (20,024,442) |
Class B | ||||
Shares sold | 2,246,062 | 3,190,931 | $ 29,269,745 | $ 40,478,563 |
Reinvestment of distributions | 172,328 | 153,825 | 2,238,503 | 1,940,257 |
Shares redeemed | (2,436,595) | (2,017,544) | (31,456,462) | (25,394,417) |
Net increase (decrease) | (18,205) | 1,327,212 | $ 51,786 | $ 17,024,403 |
Class C | ||||
Shares sold | 1,928,795 | 1,961,353 | $ 25,207,188 | $ 24,947,713 |
Reinvestment of distributions | 97,383 | 78,558 | 1,268,933 | 995,258 |
Shares redeemed | (1,498,069) | (939,655) | (19,484,342) | (11,931,816) |
Net increase (decrease) | 528,109 | 1,100,256 | $ 6,991,779 | $ 14,011,155 |
Institutional Class | ||||
Shares sold | 3,276,194 | 3,034,831 | $ 42,752,774 | $ 38,002,885 |
Reinvestment of distributions | 31,935 | 20,961 | 414,731 | 264,774 |
Shares redeemed | (2,309,742) | (2,310,449) | (30,174,752) | (28,963,358) |
Net increase (decrease) | 998,387 | 745,343 | $ 12,992,753 | $ 9,304,301 |
Annual Report
Report of Independent Auditors
To the Trustees of Fidelity Advisor Series II and the Shareholders of Fidelity Advisor Municipal Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Fidelity Advisor Municipal Income Fund (a fund of Fidelity Advisor Series II) at October 31, 2003 and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Advisor Municipal Income Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Municipal Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Municipal Income. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Municipal Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Christine J. Thompson (45) | |
Year of Election or Appointment: 1998 Vice President of Advisor Municipal Income. Ms. Thompson is also Vice President of other funds advised by FMR. Prior to assuming her current responsibilities, Ms. Thompson managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Municipal Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Municipal Income. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Municipal Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Municipal Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Municipal Income. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Municipal Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor Municipal Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Municipal Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Municipal Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1996 Assistant Treasurer of Advisor Municipal Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
The Board of Trustees of Fidelity Advisor Municipal Income Fund voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities:
Pay Date | Record Date | Capital Gains | |
Institutional Class | 12/08/03 | 12/05/03 | $0.022 |
During fiscal year ended 2003, 100% of the fund's income dividends was free from federal income tax, and 12.56% of the fund's income dividends was subject to the federal alternative minimum tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Adviser
Fidelity Investments Money
Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Citibank, N.A.
New York, NY
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
HIMI-UANN-1203
1.784766.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Short Fixed-Income
Fund - Class A, Class T, Class B and Class C
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions |
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns may reflect the conversion of Class B shares to Class A shares after a maximum of four years.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Class A (incl. 1.50% | 2.60% | 5.09% | 4.87% | |
Class T (incl. 1.50% | 2.48% | 5.07% | 4.88% | |
Class B (incl. contingent | 0.23% | 4.54% | 4.52% | |
Class C (incl. contingent | 2.19% | 4.51% | 4.51% |
A Class A shares bear a 0.15% 12b-1 fee. The initial offering of Class A shares took place on September 3, 1996. Returns prior to September 3, 1996 are those of Class T, the original class of the fund, and reflect Class T shares' 0.15% 12b-1 fee.
B Class B shares bear a 0.90% 12b-1 fee. The initial offering of Class B shares took place on October 9, 2002. Returns between November 3, 1997 and October 9, 2002 are those of Class C, and reflect a 1.00% 12b-1 fee. Class B returns prior to November 3, 1997 are those of Class T which has a 12b-1 fee of 0.15%. If Class B's 12b-1 fee had been reflected, returns from November 3, 1997 through October 9, 2002 would have been higher and returns prior to November 3, 1997 would have been lower. Class B shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 3%, 0%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns prior to November 3, 1997 are those of Class T, the original class of the fund, and reflect Class T shares' 0.15% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to November 3, 1997 would have been lower. Class C shares' contingent deferred sales charge included in the past one year, past five year and past 10 year total return figures are 1%, 0%, and 0%, respectively.
Annual Report
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Short Fixed-Income Fund - Class T on October 31, 1993, and the current 1.50% sales charge was paid. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers 1-3 Year Government/Credit Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Andrew Dudley, Portfolio Manager of Fidelity® Advisor Short Fixed-Income Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
For the 12 months that ended October 31, 2003, the fund's Class A, Class T, Class B and Class C shares returned 4.16%, 4.04%, 3.23% and 3.19%, respectively. By comparison, the LipperSM Short Investment Grade Debt Funds Average returned 3.10%, while the Lehman Brothers 1-3 Year Government/Credit Bond Index returned 3.26%. The fund benefited from owning corporate bonds, which staged a strong rally in the first half of the period. In particular, strong security selection and a heavy concentration in the telecommunications, cable, media and utilities industries added to returns. I reduced our stake in finance and banking, where many bonds neared what I viewed as full valuations. I redirected the proceeds into asset-backed securities (ABS) - with an emphasis on home equity ABS - as well as higher-premium mortgage bonds. Both provided attractive yields for the fund, which helped offset falling bond prices in a rising interest rate environment. Treasury bonds, which represented less than 10% of the fund's assets at period end, were weak performers as interest rates rose.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| U.S. Government | | U.S. Government | ||||
| AAA 21.3% | | AAA 18.6% | ||||
 | AA 3.8% |  | AA 5.4% | ||||
 | A 15.7% | | A 16.2% | ||||
| BBB 14.3% | | BBB 14.3% | ||||
| BB and Below 2.1% | | BB and Below 1.5% | ||||
 | Not Rated 4.4% | | Not Rated 0.8% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 2.4 | 2.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 1.8 | 1.7 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
 | Corporate Bonds 23.8% | | Corporate Bonds 26.6% | ||||
| U.S. Government | | U.S. Government | ||||
| Asset-Backed | | Asset-Backed | ||||
| CMOs and Other | | CMOs and Other Mortgage Related | ||||
| Other Investments 0.4% | | Other Investments 0.8% | ||||
 | Short-Term | | Short-Term | ||||
* Foreign investments | 4.0% | ** Foreign investments | 4.1% | ||||
* Futures and Swaps | 12.8% | ** Futures and Swaps | 8.8% | ||||
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 22.8% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 3.1% | ||||
Auto Components - 0.5% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.05% 6/4/08 | $ 650,000 | $ 628,332 | ||
4.75% 1/15/08 | 2,250,000 | 2,248,157 | ||
6.9% 9/1/04 | 1,500,000 | 1,554,911 | ||
7.4% 1/20/05 | 400,000 | 422,852 | ||
7.75% 6/15/05 | 1,100,000 | 1,185,476 | ||
6,039,728 | ||||
Media - 2.5% | ||||
AOL Time Warner, Inc.: | ||||
5.625% 5/1/05 | 1,150,000 | 1,206,895 | ||
6.15% 5/1/07 | 1,825,000 | 1,983,972 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 2,350,000 | 2,602,625 | ||
Continental Cablevision, Inc. 8.3% 5/15/06 | 3,200,000 | 3,583,453 | ||
Cox Communications, Inc.: | ||||
6.875% 6/15/05 | 2,025,000 | 2,174,929 | ||
7.5% 8/15/04 | 1,450,000 | 1,509,102 | ||
7.75% 8/15/06 | 600,000 | 677,362 | ||
Cox Enterprises, Inc. 4.375% 5/1/08 (a) | 1,370,000 | 1,385,297 | ||
Liberty Media Corp. 2.64% 9/17/06 (d) | 3,000,000 | 3,001,740 | ||
News America, Inc. 6.625% 1/9/08 | 3,000,000 | 3,330,906 | ||
TCI Communications, Inc. 8% 8/1/05 | 3,610,000 | 3,941,579 | ||
Time Warner, Inc. 7.75% 6/15/05 | 3,050,000 | 3,305,337 | ||
Univision Communications, Inc. 3.875% 10/15/08 | 500,000 | 493,901 | ||
29,197,098 | ||||
Textiles Apparel & Luxury Goods - 0.1% | ||||
Jones Apparel Group, Inc. 7.5% 6/15/04 | 800,000 | 824,626 | ||
TOTAL CONSUMER DISCRETIONARY | 36,061,452 | |||
CONSUMER STAPLES - 1.0% | ||||
Food & Staples Retailing - 0.2% | ||||
Fred Meyer, Inc. 7.375% 3/1/05 | 1,510,000 | 1,612,858 | ||
Food Products - 0.3% | ||||
Kraft Foods, Inc. 5.25% 6/1/07 | 3,265,000 | 3,464,707 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Tobacco - 0.5% | ||||
Altria Group, Inc. 5.625% 11/4/08 | $ 4,000,000 | $ 3,979,720 | ||
Philip Morris Companies, Inc. 6.375% 2/1/06 | 2,000,000 | 2,079,156 | ||
6,058,876 | ||||
TOTAL CONSUMER STAPLES | 11,136,441 | |||
ENERGY - 0.8% | ||||
Energy Equipment & Services - 0.1% | ||||
Petroliam Nasional BHD (Petronas) yankee 8.875% 8/1/04 (a) | 1,135,000 | 1,194,709 | ||
Oil & Gas - 0.7% | ||||
Canada Occidental Petroleum Ltd. yankee 7.125% 2/4/04 | 1,550,000 | 1,571,282 | ||
Duke Energy Field Services LLC 5.75% 11/15/06 | 1,600,000 | 1,718,840 | ||
Kerr-McGee Corp. 5.375% 4/15/05 | 1,375,000 | 1,429,575 | ||
Mitchell Energy & Development Corp. 6.75% 2/15/04 | 1,425,000 | 1,440,832 | ||
Pemex Project Funding Master Trust 2.65% 1/7/05 (a)(d) | 1,700,000 | 1,708,981 | ||
7,869,510 | ||||
TOTAL ENERGY | 9,064,219 | |||
FINANCIALS - 11.0% | ||||
Capital Markets - 1.7% | ||||
ABN-AMRO Bank NV, Chicago 7.25% 5/31/05 | 610,000 | 659,758 | ||
Amvescap PLC: | ||||
5.9% 1/15/07 | 500,000 | 538,706 | ||
yankee 6.6% 5/15/05 | 600,000 | 638,221 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (d) | 2,750,000 | 2,690,179 | ||
4.25% 9/4/12 (d) | 1,285,000 | 1,307,809 | ||
Goldman Sachs Group LP 7.2% 11/1/06 (a) | 500,000 | 563,791 | ||
Goldman Sachs Group, Inc. 4.125% 1/15/08 | 2,995,000 | 3,057,778 | ||
J.P. Morgan Chase & Co. 5.35% 3/1/07 | 1,775,000 | 1,905,558 | ||
Lehman Brothers Holdings, Inc.: | ||||
4% 1/22/08 | 300,000 | 304,363 | ||
6.25% 5/15/06 | 2,795,000 | 3,044,887 | ||
6.625% 2/5/06 | 120,000 | 130,692 | ||
7.75% 1/15/05 | 1,000,000 | 1,077,254 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Merrill Lynch & Co., Inc.: | ||||
3.7% 4/21/08 | $ 1,400,000 | $ 1,402,149 | ||
6.13% 5/16/06 | 515,000 | 560,224 | ||
Morgan Stanley 6.1% 4/15/06 | 1,800,000 | 1,950,772 | ||
19,832,141 | ||||
Commercial Banks - 1.0% | ||||
Australia & New Zealand Banking Group Ltd. yankee 7.55% 9/15/06 | 405,000 | 455,640 | ||
Bank of America Corp.: | ||||
3.875% 1/15/08 | 275,000 | 278,954 | ||
7.125% 9/15/06 | 1,750,000 | 1,957,916 | ||
Bank One Corp. 6.5% 2/1/06 | 2,085,000 | 2,277,160 | ||
Corporacion Andina de Fomento yankee 7.25% 3/1/07 | 965,000 | 1,076,217 | ||
First National Boston Corp. 7.375% 9/15/06 | 1,145,000 | 1,287,512 | ||
KeyCorp. 4.625% 5/16/05 | 1,060,000 | 1,104,146 | ||
Korea Development Bank 7.375% 9/17/04 | 810,000 | 848,346 | ||
Mellon Bank NA, Pittsburgh 6.5% 8/1/05 | 2,000,000 | 2,148,140 | ||
11,434,031 | ||||
Consumer Finance - 2.4% | ||||
American General Finance Corp. 4.5% 11/15/07 | 1,115,000 | 1,155,626 | ||
Ford Motor Credit Co.: | ||||
6.5% 1/25/07 | 4,215,000 | 4,348,991 | ||
6.875% 2/1/06 | 5,200,000 | 5,442,284 | ||
7.5% 3/15/05 | 600,000 | 630,371 | ||
General Motors Acceptance Corp.: | ||||
6.125% 2/1/07 | 400,000 | 420,032 | ||
6.125% 8/28/07 | 1,900,000 | 2,001,546 | ||
6.75% 1/15/06 | 4,250,000 | 4,531,363 | ||
7.5% 7/15/05 | 1,070,000 | 1,145,659 | ||
Household Finance Corp.: | ||||
4.625% 1/15/08 | 818,000 | 847,740 | ||
5.75% 1/30/07 | 1,450,000 | 1,565,517 | ||
Household International, Inc. 8.875% 2/15/08 | 2,025,000 | 2,291,032 | ||
John Deere Capital Corp. 1.74% 9/17/04 (d) | 1,300,000 | 1,305,243 | ||
Washington Mutual Finance Corp. 8.25% 6/15/05 | 2,000,000 | 2,191,382 | ||
27,876,786 | ||||
Diversified Financial Services - 2.9% | ||||
Citigroup, Inc. 6.75% 12/1/05 | 4,100,000 | 4,467,561 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Delta Air Lines, Inc. pass thru trust certificates 7.379% 5/18/10 | $ 917,868 | $ 936,013 | ||
Deutsche Telekom International Finance BV: | ||||
3.875% 7/22/08 | 2,425,000 | 2,417,444 | ||
8.25% 6/15/05 | 4,190,000 | 4,577,868 | ||
NiSource Finance Corp.: | ||||
3.2% 11/1/06 | 1,085,000 | 1,083,503 | ||
7.5% 11/15/03 | 2,100,000 | 2,103,396 | ||
Pemex Project Funding Master Trust 6.125% 8/15/08 | 2,535,000 | 2,664,285 | ||
Powergen US Funding LLC 4.5% 10/15/04 | 4,240,000 | 4,329,807 | ||
Prime Property Funding II 6.25% 5/15/07 | 1,000,000 | 1,079,365 | ||
Sprint Capital Corp.: | ||||
6% 1/15/07 | 2,240,000 | 2,373,771 | ||
7.125% 1/30/06 | 1,925,000 | 2,081,293 | ||
Verizon Global Funding Corp. 6.125% 6/15/07 | 4,840,000 | 5,290,115 | ||
33,404,421 | ||||
Insurance - 0.3% | ||||
Allstate Corp. 7.875% 5/1/05 | 535,000 | 581,623 | ||
MetLife, Inc. 3.911% 5/15/05 | 2,750,000 | 2,839,903 | ||
Travelers Property Casualty Corp. 3.75% 3/15/08 | 530,000 | 528,521 | ||
3,950,047 | ||||
Real Estate - 2.3% | ||||
AMB Property LP 7.2% 12/15/05 | 1,000,000 | 1,097,117 | ||
Arden Realty LP 8.875% 3/1/05 | 2,045,000 | 2,216,946 | ||
AvalonBay Communities, Inc.: | ||||
5% 8/1/07 | 915,000 | 958,877 | ||
6.58% 2/15/04 | 705,000 | 715,003 | ||
BRE Properties, Inc. 5.95% 3/15/07 | 575,000 | 613,488 | ||
Camden Property Trust: | ||||
5.875% 6/1/07 | 580,000 | 622,892 | ||
7% 4/15/04 | 1,400,000 | 1,429,750 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 1,745,000 | 1,803,327 | ||
CenterPoint Properties Trust: | ||||
6.75% 4/1/05 | 470,000 | 496,868 | ||
7.125% 3/15/04 | 1,300,000 | 1,324,359 | ||
Duke Realty LP 6.875% 3/15/05 | 1,200,000 | 1,278,152 | ||
EOP Operating LP: | ||||
6.5% 1/15/04 | 750,000 | 757,003 | ||
6.625% 2/15/05 | 500,000 | 527,788 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Real Estate - continued | ||||
EOP Operating LP: - continued | ||||
6.763% 6/15/07 | $ 625,000 | $ 690,549 | ||
7.375% 11/15/03 | 1,100,000 | 1,101,757 | ||
8.375% 3/15/06 | 1,500,000 | 1,683,075 | ||
ERP Operating LP 7.1% 6/23/04 | 1,700,000 | 1,755,826 | ||
Gables Realty LP: | ||||
5.75% 7/15/07 | 1,220,000 | 1,290,575 | ||
7.25% 2/15/06 | 2,200,000 | 2,381,095 | ||
Mack-Cali Realty LP 7% 3/15/04 | 615,000 | 627,034 | ||
Merry Land & Investment Co., Inc. 7.25% 6/15/05 | 600,000 | 646,084 | ||
ProLogis 6.7% 4/15/04 | 1,405,000 | 1,440,000 | ||
Vornado Realty Trust 5.625% 6/15/07 | 750,000 | 792,159 | ||
26,249,724 | ||||
Thrifts & Mortgage Finance - 0.4% | ||||
Abbey National PLC 6.69% 10/17/05 | 200,000 | 217,585 | ||
Countrywide Home Loans, Inc.: | ||||
1.62% 6/2/06 (d) | 1,250,000 | 1,253,298 | ||
5.5% 8/1/06 | 1,290,000 | 1,376,199 | ||
5.625% 5/15/07 | 745,000 | 798,224 | ||
Washington Mutual, Inc. 7.5% 8/15/06 | 700,000 | 784,991 | ||
4,430,297 | ||||
TOTAL FINANCIALS | 127,177,447 | |||
INDUSTRIALS - 1.4% | ||||
Aerospace & Defense - 0.4% | ||||
Bombardier Capital, Inc. 6.125% 6/29/06 (a) | 2,050,000 | 2,173,000 | ||
Raytheon Co.: | ||||
4.5% 11/15/07 | 1,600,000 | 1,604,558 | ||
6.75% 8/15/07 | 900,000 | 986,134 | ||
4,763,692 | ||||
Air Freight & Logistics - 0.2% | ||||
Federal Express Corp. pass thru trust certificates 7.53% 9/23/06 | 867,605 | 929,690 | ||
FedEx Corp. 6.625% 2/12/04 | 900,000 | 912,253 | ||
1,841,943 | ||||
Commercial Services & Supplies - 0.1% | ||||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 1,100,000 | 1,141,237 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Industrial Conglomerates - 0.6% | ||||
Textron Financial Corp. 2.75% 6/1/06 | $ 1,005,000 | $ 998,438 | ||
Tyco International Group SA yankee 6.375% 6/15/05 | 6,100,000 | 6,397,375 | ||
7,395,813 | ||||
Road & Rail - 0.1% | ||||
Union Pacific Corp. 6.34% 11/25/03 | 820,000 | 822,025 | ||
TOTAL INDUSTRIALS | 15,964,710 | |||
INFORMATION TECHNOLOGY - 0.4% | ||||
Communications Equipment - 0.4% | ||||
Motorola, Inc. 6.75% 2/1/06 | 4,350,000 | 4,684,915 | ||
MATERIALS - 0.7% | ||||
Containers & Packaging - 0.1% | ||||
Sealed Air Corp.: | ||||
6.95% 5/15/09 (a) | 855,000 | 946,913 | ||
8.75% 7/1/08 (a) | 685,000 | 799,738 | ||
1,746,651 | ||||
Paper & Forest Products - 0.6% | ||||
Boise Cascade Corp.: | ||||
7.43% 10/10/05 | 1,540,000 | 1,611,893 | ||
7.5% 2/1/08 | 525,000 | 559,061 | ||
8% 2/24/06 | 745,000 | 792,960 | ||
Weyerhaeuser Co. 5.95% 11/1/08 | 3,245,000 | 3,472,426 | ||
6,436,340 | ||||
TOTAL MATERIALS | 8,182,991 | |||
TELECOMMUNICATION SERVICES - 2.8% | ||||
Diversified Telecommunication Services - 2.0% | ||||
AT&T Corp. 7% 11/15/06 | 3,950,000 | 4,374,270 | ||
British Telecommunications PLC: | ||||
2.445% 12/15/03 (d) | 1,350,000 | 1,351,585 | ||
7.875% 12/15/05 | 2,200,000 | 2,435,937 | ||
Citizens Communications Co. 8.5% 5/15/06 | 1,450,000 | 1,637,882 | ||
France Telecom SA 8.45% 3/1/06 | 2,250,000 | 2,519,809 | ||
GTE Hawaiian Telephone Co., Inc. 7.375% 9/1/06 | 1,250,000 | 1,397,731 | ||
Telecom Italia Capital 4% 11/15/08 (a) | 3,100,000 | 3,096,193 | ||
Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06 | 2,220,000 | 2,401,276 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
Telefonica Europe BV 7.35% 9/15/05 | $ 180,000 | $ 196,260 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 3,645,000 | 4,048,039 | ||
23,458,982 | ||||
Wireless Telecommunication Services - 0.8% | ||||
AT&T Wireless Services, Inc. 7.5% 5/1/07 | 6,190,000 | 6,943,131 | ||
Vodafone Group PLC yankee 7.625% 2/15/05 | 1,800,000 | 1,931,355 | ||
8,874,486 | ||||
TOTAL TELECOMMUNICATION SERVICES | 32,333,468 | |||
UTILITIES - 1.6% | ||||
Electric Utilities - 1.0% | ||||
Cleveland Electric Illuminating Co./Toledo Edison Co. 7.67% 7/1/04 | 1,535,000 | 1,591,735 | ||
DTE Energy Co. 6.45% 6/1/06 | 1,510,000 | 1,637,681 | ||
FirstEnergy Corp. 5.5% 11/15/06 | 1,635,000 | 1,718,164 | ||
FPL Group Capital, Inc. 3.25% 4/11/06 | 705,000 | 713,250 | ||
MidAmerican Energy Holdings, Inc. 4.625% 10/1/07 | 705,000 | 721,116 | ||
Monongahela Power Co. 5% 10/1/06 | 2,015,000 | 2,066,163 | ||
Progress Energy, Inc. 6.75% 3/1/06 | 1,500,000 | 1,632,309 | ||
Southwestern Public Service Co. 5.125% 11/1/06 | 650,000 | 690,494 | ||
Texas Utilities Electric Co. 8.25% 4/1/04 | 475,000 | 487,464 | ||
11,258,376 | ||||
Gas Utilities - 0.5% | ||||
Consolidated Natural Gas Co. 7.375% 4/1/05 | 1,100,000 | 1,181,067 | ||
Kinder Morgan Energy Partners LP 5.35% 8/15/07 | 1,400,000 | 1,492,679 | ||
Texas Eastern Transmission Corp. 5.25% 7/15/07 | 310,000 | 328,009 | ||
Williams Holdings of Delaware, Inc.: | ||||
6.125% 12/1/03 | 2,260,000 | 2,293,900 | ||
6.25% 2/1/06 | 530,000 | 543,250 | ||
5,838,905 | ||||
Multi-Utilities & Unregulated Power - 0.1% | ||||
Duke Energy Corp. 4.2% 10/1/08 | 1,140,000 | 1,138,610 | ||
TOTAL UTILITIES | 18,235,891 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $254,979,122) | 262,841,534 | |||
U.S. Government and Government Agency Obligations - 10.8% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 3.7% | ||||
Fannie Mae 6% 5/15/08 | $ 16,824,000 | $ 18,628,576 | ||
Freddie Mac: | ||||
0% 3/4/04 (c) | 695,000 | 692,456 | ||
2.875% 9/15/05 | 22,907,000 | 23,248,841 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | 352,941 | 359,778 | ||
Private Export Funding Corp. secured | 95,400 | 97,928 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 43,027,579 | |||
U.S. Treasury Obligations - 7.1% | ||||
U.S. Treasury Bonds: | ||||
10% 5/15/10 | 5,021,000 | 5,648,038 | ||
11.75% 2/15/10 | 1,625,000 | 1,834,981 | ||
12% 8/15/13 | 17,526,000 | 24,322,110 | ||
U.S. Treasury Notes: | ||||
2% 8/31/05 | 22,420,000 | 22,521,585 | ||
3.5% 11/15/06 | 185,000 | 190,940 | ||
4.375% 5/15/07 | 25,400,000 | 26,874,394 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 81,392,048 | |||
TOTAL U.S. GOVERNMENT AND (Cost $124,889,542) | 124,419,627 | |||
U.S. Government Agency - Mortgage Securities - 12.3% | ||||
Fannie Mae - 11.9% | ||||
5.5% 8/1/14 to 3/1/18 | 16,351,429 | 16,859,870 | ||
6.5% 5/1/09 to 1/1/33 | 66,443,261 | 69,766,384 | ||
6.5% 11/1/18 to 11/1/33 (b) | 23,945,064 | 25,091,695 | ||
7% 4/1/07 to 5/1/33 | 23,786,992 | 25,082,247 | ||
7% 11/1/18 (b) | 485,000 | 515,161 | ||
7.5% 5/1/12 to 10/1/14 | 308,178 | 329,267 | ||
11.5% 11/1/15 | 148,492 | 170,073 | ||
TOTAL FANNIE MAE | 137,814,697 | |||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Freddie Mac - 0.0% | ||||
8.5% 5/1/26 to 7/1/28 | $ 556,784 | $ 605,561 | ||
12% 11/1/19 | 29,167 | 33,146 | ||
TOTAL FREDDIE MAC | 638,707 | |||
Government National Mortgage Association - 0.4% | ||||
7% 1/15/25 to 6/15/32 | 3,953,783 | 4,191,764 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $142,418,936) | 142,645,168 | |||
Asset-Backed Securities - 20.3% | ||||
ABSC NIMS Trust Series 2002-HE3 Class A, 7% 10/17/32 (a) | 351,178 | 351,947 | ||
Accredited Mortgage Loan Trust Series 2003-2 | 2,270,000 | 2,268,268 | ||
ACE Securities Corp.: | ||||
Series 2002-HE1, Class A, 1.46% 6/25/32 (d) | 1,086,708 | 1,086,891 | ||
Series 2002-HE2 Class A2, 1.55% 8/25/32 (d) | 1,059,755 | 1,061,373 | ||
Series 2003-HE1: | ||||
Class A2, 1.53% 11/25/33 (d) | 3,600,000 | 3,600,000 | ||
Class M1 1.77% 11/25/33 (d) | 430,000 | 430,000 | ||
Class M2, 2.82% 11/25/33 (d) | 270,000 | 270,000 | ||
Series 2003-NC1 Class A2A, 1.54% 7/25/33 (d) | 4,200,000 | 4,206,300 | ||
ACE Securities Corp. NIMS Trust Series 2002-HE1N Class N, 8.85% 7/25/12 | 131,532 | 131,204 | ||
American Express Credit Account Master Trust | 1,600,000 | 1,712,900 | ||
AmeriCredit Automobile Receivables Trust: | ||||
Series 1999-D Class A3, 7.02% 12/12/05 | 756,982 | 760,585 | ||
Series 2001-B Class A4, 5.37% 6/12/08 | 2,700,000 | 2,785,923 | ||
Series 2001-C Class A4, 5.01% 7/14/08 | 2,500,000 | 2,584,734 | ||
Series 2001-D Class A4 4.41% 11/12/08 | 2,350,000 | 2,414,665 | ||
Series 2002-A Class A4, 4.61% 1/12/09 | 3,675,000 | 3,825,892 | ||
Series 2002-B: | ||||
Class A3, 3.78% 2/12/07 | 3,880,000 | 3,934,582 | ||
Class A4, 4.46% 4/12/09 | 980,000 | 1,009,120 | ||
Series 2003-AM Class A4A, 3.1% 11/6/09 | 875,000 | 877,450 | ||
Series 2003-BX: | ||||
Class A3, 2.11% 8/6/07 | 740,000 | 741,786 | ||
Class A4A, 2.72% 1/6/10 | 1,105,000 | 1,092,072 | ||
Series 2003-CF Class A4, 3.48% 5/6/10 | 1,810,000 | 1,826,109 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
AmeriCredit Automobile Receivables Trust: - continued | ||||
Series 2003-DM Class A4, 2.84% 8/6/10 | $ 1,580,000 | $ 1,560,250 | ||
Ameriquest Mortgage Securities, Inc.: | ||||
Series 2002-4 Class A2, 1.56% 2/25/33 (d) | 692,514 | 693,785 | ||
Series 2002-AR1 Class M1, 1.83% 9/25/32 (d) | 1,100,000 | 1,095,875 | ||
Series 2003-3 Class S, 5% 9/25/05 (f) | 4,753,191 | 250,100 | ||
Series 2003-7 Class M1, 1.97% 8/25/33 (d) | 625,000 | 627,097 | ||
Amortizing Residential Collateral Trust: | ||||
Series 2002-BC3 Class A, 1.45% 6/25/32 (d) | 1,236,215 | 1,235,256 | ||
Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 85,741 | 85,098 | ||
Series 2002-BC6 Class AIO, 6% 8/25/04 (f) | 12,937,273 | 452,378 | ||
Series 2002-BC7: | ||||
Class AIO, 6% 9/25/04 (f) | 8,750,000 | 348,626 | ||
Class M1, 1.92% 10/25/32 (d) | 1,100,000 | 1,100,000 | ||
Series 2002-BC9 Class A2, 1.6% 12/25/32 (d) | 986,359 | 989,113 | ||
AQ Finance NIMS Trust Series 2003-N1 Class NOTE, 9.37% 3/25/33 (a) | 777,998 | 777,979 | ||
Arcadia Automobile Receivables Trust Series 1999-C Class A3, 7.2% 6/15/07 | 881,029 | 883,003 | ||
Argent Securities, Inc.: | ||||
Series 2003-W3: | ||||
Class AV1B, 1.57% 9/25/33 (d) | 367,511 | 367,511 | ||
Class AV2, 1.52% 9/25/33 (d) | 415,401 | 415,401 | ||
Class M2, 2.92% 9/25/33 (d) | 3,100,000 | 3,100,000 | ||
Series 2003-W6 Class AV2, 1.49% 1/25/34 (b)(d) | 3,800,000 | 3,800,000 | ||
Series 2003-W7: | ||||
Class A2, 1.51% 3/25/34 (b)(d) | 2,900,000 | 2,900,000 | ||
Class M1, 1.81% 3/25/34 (b)(d) | 2,500,000 | 2,500,000 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2001-HE3 Class A1, 1.39% 11/15/31 (d) | 702,238 | 702,039 | ||
Series 2002-HE3 Class 2A, 1.52% 10/15/32 (d) | 542,298 | 544,024 | ||
Series 2003-HE2 Class A2, 1.5% 4/15/33 (d) | 2,261,410 | 2,257,548 | ||
Series 2003-HE3 Class A2, 1.47% 6/15/33 (d) | 417,897 | 417,234 | ||
Series 2003-HE4 Class A3, 1.34% 8/15/33 (d) | 1,111,052 | 1,110,879 | ||
Series 2003-HE5 Class A2B, 4.5% 8/15/33 | 949,750 | 949,719 | ||
Series 2003-HE7 Class A3, 1.53% 12/15/33 (b)(d) | 2,710,000 | 2,710,000 | ||
Associates Automobile Receivables Trust: | ||||
Series 2000-1 Class B, 7.83% 8/15/07 | 2,345,000 | 2,431,161 | ||
Series 2000-2 Class A4, 6.9% 8/15/05 | 971,948 | 982,123 | ||
Bank One Issuance Trust Series 2002-B2 Class B2, 1.46% 5/15/08 (d) | 1,100,000 | 1,102,664 | ||
Bayview Commercial Asset Trust Series 2003-2 Class A, 1.7% 12/25/33 (a)(d) | 4,225,000 | 4,225,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
BMW Vehicle Owner Trust Series 2002-A Class A3, 3.8% 5/25/06 | $ 1,145,442 | $ 1,157,434 | ||
Capital Auto Receivables Asset Trust: | ||||
Series 2002-4, Class CTFS, 2.62% 3/17/08 | 2,097,005 | 2,109,736 | ||
Series 2002-5 Class B, 2.8% 4/15/08 | 1,772,039 | 1,786,073 | ||
Capital One Auto Finance Trust Series 2002-A Class A4, 4.79% 1/15/09 | 1,900,000 | 1,979,518 | ||
Capital One Master Trust: | ||||
Series 1999-3 Class B, 1.6% 9/15/09 (d) | 1,000,000 | 999,462 | ||
Series 2001-1 Class B, 1.63% 12/15/10 (d) | 1,700,000 | 1,674,500 | ||
Series 2001-8A Class A, 4.6% 8/17/09 | 1,390,000 | 1,431,019 | ||
Series 2002-3A Class B, 4.55% 2/15/08 | 2,250,000 | 2,310,075 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2002-B1 Class B1, 1.8% 7/15/08 (d) | 1,495,000 | 1,499,440 | ||
Series 2003-B1 Class B1, 2.29% 2/17/09 (d) | 5,715,000 | 5,779,294 | ||
CDC Mortgage Capital Trust: | ||||
Series 2001-HE1 Class A, 1.46% 1/25/32 (d) | 1,933,560 | 1,928,337 | ||
Series 2002-HE2: | ||||
Class A, 1.41% 1/25/33 (d) | 541,178 | 540,657 | ||
Class M1, 1.82% 1/25/33 (d) | 899,998 | 900,740 | ||
Series 2003-HE4 Class A2, 1.35% 3/25/34 (b)(d) | 5,000,000 | 5,000,000 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.47% 2/15/11 (b)(d) | 2,150,000 | 2,148,259 | ||
Chase Manhattan Auto Owner Trust: | ||||
Series 2000-A Class CTFS, 6.48% 6/15/07 | 320,212 | 327,386 | ||
Series 2001-A: | ||||
Class A3, 4.55% 8/15/05 | 531,045 | 534,705 | ||
Class CTFS, 5.06% 2/15/08 | 142,993 | 146,698 | ||
Citibank Credit Card Issuance Trust Series 2001-A8 Class A8, 4.1% 12/7/06 | 3,000,000 | 3,082,419 | ||
Countrywide Home Loans, Inc. Series 2002-3NIM Class NOTE, 9% 9/25/32 (a) | 117,748 | 118,339 | ||
CS First Boston Mortgage Securities Corp. NIMS Trust: | ||||
Series 2001-H30N Class A, 8% 7/27/32 (a) | 166,946 | 165,694 | ||
Series 2001-HE22N Class A, 8% 3/27/32 | 34,820 | 34,733 | ||
Series 2002-H10N Class A, 8% 11/27/32 (a) | 1,131,329 | 1,114,359 | ||
Series 2002-H16N Class A, 8% 11/27/32 (a) | 789,530 | 777,687 | ||
Series 2002-H1N Class A, 8% 8/27/32 (a) | 65,606 | 64,950 | ||
Series 2002-H4N Class A, 8% 8/27/32 (a) | 352,937 | 349,408 | ||
DaimlerChrysler Auto Trust Series 2001-A Class A3, 5.16% 1/6/05 | 388,006 | 388,649 | ||
Discover Card Master Trust I: | ||||
Series 1999-6 Class A, 6.85% 7/17/07 | 1,400,000 | 1,485,251 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Discover Card Master Trust I: - continued | ||||
Series 2001-5 Class B, 5.65% 11/15/06 | $ 700,000 | $ 717,869 | ||
First USA Credit Card Master Trust Series 1997-1 | 2,170,000 | 2,170,786 | ||
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 2,045,000 | 2,085,163 | ||
Ford Credit Auto Owner Trust: | ||||
Series 2001-B Class B, 5.71% 9/15/05 | 290,000 | 297,431 | ||
Series 2001-C Class A4, 4.83% 2/15/05 | 527,296 | 531,580 | ||
Series 2002-A Class A3A, 3.62% 1/15/06 | 2,967,908 | 2,998,407 | ||
GS Mortgage Securities Corp. Series 2003-HE2 Class M1, 1.77% 8/25/33 (d) | 650,000 | 645,957 | ||
GSAMP Trust Series 2002-NC1 Class A2, 1.44% 7/25/32 (d) | 875,070 | 874,174 | ||
Harley-Davidson Motorcycle Trust Series 2001-2 Class A1, 3.77% 4/17/06 | 39,068 | 39,106 | ||
Home Equity Asset Trust: | ||||
Series 2002-2 Class A4, 1.47% 6/25/32 (d) | 1,392,152 | 1,392,152 | ||
Series 2002-5 Class A3, 1.64% 5/25/33 (d) | 2,562,376 | 2,571,350 | ||
Series 2003-3 Class A4, 1.58% 2/25/33 (d) | 2,100,000 | 2,100,000 | ||
Series 2003-5 Class A2, 1.47% 12/25/33 (d) | 3,449,402 | 3,458,026 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (a) | 200,000 | 199,090 | ||
Series 2003-7 Class A2, 1.5% 3/25/34 (b)(d) | 4,100,000 | 4,100,000 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-2N Class A, 8% 1/27/33 (a) | 189,173 | 187,281 | ||
Series 2002-3N Class A, 8% 3/25/33 (a) | 418,711 | 410,336 | ||
Series 2002-4N Class A, 8% 5/27/33 (a) | 404,271 | 396,186 | ||
Series 2003-2N Class A, 8% 9/27/33 (a) | 608,949 | 596,161 | ||
Series 2003-3N Class A, 8% 9/27/33 (a) | 1,448,860 | 1,419,882 | ||
Honda Auto Receivables Owner Trust Series 2001-2 Class A3, 4.67% 3/18/05 | 263,602 | 265,708 | ||
Household Automotive Trust: | ||||
Series 2001-1 Class A4, 5.57% 11/19/07 | 1,500,000 | 1,557,121 | ||
Series 2001-2 Class A4, 5.39% 8/17/08 | 1,000,000 | 1,042,996 | ||
Series 2002-2 Class A3, 2.85% 3/19/07 | 2,700,000 | 2,725,171 | ||
Household Home Equity Loan Trust: | ||||
Series 2002-1 Class A, 1.49% 12/22/31 (d) | 735,740 | 736,445 | ||
Series 2002-3 Class A, 1.57% 7/20/32 (d) | 1,138,609 | 1,138,315 | ||
Series 2003-1 Class A, 1.47% 10/20/32 (d) | 2,807,978 | 2,807,976 | ||
Household Mortgage Loan Trust Series 2003-HC2: | ||||
Class A2, 1.45% 6/20/33 (d) | 2,360,000 | 2,360,000 | ||
Class M, 1.72% 6/20/33 (d) | 1,925,000 | 1,925,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Household Private Label Credit Card Master Note Trust I: | ||||
Series 2001-2 Class A, 4.95% 6/16/08 | $ 1,600,000 | $ 1,642,093 | ||
Series 2002-2 Class B, 1.67% 1/18/11 (d) | 1,000,000 | 1,004,961 | ||
Series 2002-3 Class B, 2.37% 9/15/09 (d) | 975,000 | 975,787 | ||
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 23,019 | 22,789 | ||
Isuzu Auto Owner Trust Series 2001-1 Class A3, 4.88% 11/22/04 | 159,286 | 160,065 | ||
JCPenney Master Credit Card Trust Series E Class A, 5.5% 6/15/07 | 1,100,000 | 1,101,760 | ||
Long Beach Asset Holdings Corp. NIMS Trust Series 2002-3 Class NOTE, 1.67% 8/25/09 (a)(d) | 1,145,094 | 1,144,736 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2001-B1 Class B1, 1.495% 10/15/08 (d) | 1,350,000 | 1,351,875 | ||
Series 2001-B2 Class B2, 1.48% 1/15/09 (d) | 4,750,000 | 4,765,816 | ||
Series 2002-B1 Class B1, 5.15% 7/15/09 | 1,025,000 | 1,085,476 | ||
Series 2002-B2 Class B2, 1.5% 10/15/09 (d) | 3,600,000 | 3,611,250 | ||
Series 2002-B3 Class B3, 1.52% 1/15/08 (d) | 1,100,000 | 1,103,156 | ||
MBNA Master Credit Card Trust II: | ||||
Series 1998-E Class B, 1.48% 9/15/10 (d) | 1,500,000 | 1,504,095 | ||
Series 1998-G Class B, 1.52% 2/17/09 (d) | 1,550,000 | 1,553,096 | ||
Series 1999-G Class A, 6.35% 12/15/06 | 1,000,000 | 1,035,079 | ||
Series 2000-L Class B, 1.62% 4/15/10 (d) | 650,000 | 653,877 | ||
Merrill Lynch Mortgage Investments, Inc. Series 2003-HE1 Class A1, 1.57% 7/25/34 (d) | 4,200,000 | 4,200,000 | ||
Morgan Stanley ABS Capital I, Inc. Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 233,813 | 233,891 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4N Class NOTE, 8.5% 1/25/32 (a) | 37,896 | 37,919 | ||
Series 2002-AM3 Class A3, 1.61% 2/25/33 (d) | 1,188,082 | 1,191,565 | ||
Series 2002-HE2 Class M1, 1.82% 8/25/32 (d) | 1,150,000 | 1,150,346 | ||
Series 2002-HE2N Class NOTE, 9.5% 8/25/32 (a) | 228,139 | 228,241 | ||
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (a) | 153,065 | 153,171 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (a) | 593,988 | 594,229 | ||
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 107,881 | 107,986 | ||
Series 2003-NC2 Class M2, 3.12% 2/25/33 (d) | 615,000 | 620,687 | ||
Morgan Stanley Dean Witter Capital I, Inc.: | ||||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 443,218 | 443,636 | ||
Series 2003-NC1N Class NOTE, 9.5% 11/25/32 (a) | 2,001,487 | 2,000,948 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 1,668,372 | 1,667,719 | ||
Mortgage Asset Backed Securities Trust Series 2002-NC1 Class M1, 1.97% 10/25/32 (d) | 1,600,000 | 1,605,250 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
New Century Home Equity Loan Trust Series 2003-2 Class AIO, 5.5% 3/25/05 (f) | $ 25,823,160 | $ 1,451,262 | ||
Nissan Auto Lease Trust Series 2003-A Class A3A, 1.26% 6/15/09 (d) | 3,400,000 | 3,400,000 | ||
Onyx Acceptance Owner Trust: | ||||
Series 2000-C Class A4, 7.26% 5/15/07 | 1,185,669 | 1,223,895 | ||
Series 2000-D Class A4, 6.85% 8/15/07 | 1,467,092 | 1,502,622 | ||
Series 2001-D Class A3, 3.63% 12/15/05 | 699,702 | 704,213 | ||
Series 2002-A Class A3, 3.75% 4/15/06 | 508,570 | 513,911 | ||
Series 2002-C: | ||||
Class A3, 3.29% 9/15/06 | 1,158,684 | 1,171,168 | ||
Class A4, 4.07% 4/15/09 | 970,000 | 1,002,770 | ||
Series 2003-D Class A3, 2.4% 12/15/07 | 1,685,000 | 1,686,580 | ||
Option One Mortgage Securities Corp. NIMS Trust: | ||||
Series 2002-2A Class CFTS, 8.83% 6/26/32 (a) | 82,087 | 82,139 | ||
Series 2002-4 Class CTFS, 8.35% 7/25/32 (a) | 115,398 | 114,244 | ||
PP&L Transition Bonds LLC Series 1999-1 Class A5, 6.83% 3/25/07 | 1,600,000 | 1,666,692 | ||
Providian Gateway Master Trust Series 2002-B Class A, 1.82% 6/15/09 (a)(d) | 1,400,000 | 1,409,380 | ||
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 Class A1, 3.6% 4/25/33 | 2,033,866 | 2,008,284 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (a) | 1,635,779 | 1,627,371 | ||
Sears Credit Account Master Trust II: | ||||
Series 1996-3 Class A, 7% 7/15/08 | 243,750 | 248,781 | ||
Series 2000-1: | ||||
Class A, 7.25% 11/15/07 | 250,000 | 250,571 | ||
Class B, 7.5% 11/15/07 | 1,700,000 | 1,703,505 | ||
Series 2001-2 Class B, 1.41% 6/16/08 (d) | 1,200,000 | 1,197,778 | ||
Series 2002-4 Class B, 1.545% 8/18/09 (d) | 1,100,000 | 1,097,934 | ||
Series 2002-5 Class B, 2.37% 11/17/09 (d) | 2,200,000 | 2,204,892 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 1.57% 3/15/11 (a)(d) | 2,520,000 | 2,520,000 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.55% 9/25/34 (d) | 4,200,000 | 4,200,000 | ||
Toyota Auto Receivables 2000-A Owner Trust Series 2000-A Class A4, 7.21% 4/15/07 | 1,490,734 | 1,511,589 | ||
Triad Auto Receivables Owner Trust Series 2002-A: | ||||
Class A3, 2.62% 2/12/07 | 2,600,000 | 2,619,500 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Triad Auto Receivables Owner Trust Series 2002-A: - continued | ||||
Class A4, 3.24% 8/12/09 | $ 1,505,000 | $ 1,526,031 | ||
Wells Fargo Auto Trust Series 2001-A Class A3, 4.68% 2/15/05 | 151,442 | 152,024 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $233,942,535) | 234,918,790 | |||
Collateralized Mortgage Obligations - 5.3% | ||||
Private Sponsor - 1.4% | ||||
Countrywide Home Loans, Inc. sequential pay: | ||||
Series 2002-25 Class 2A1, 5.5% 11/27/17 | 1,499,272 | 1,523,313 | ||
Series 2002-32 Class 2A3, 5% 1/25/18 | 723,951 | 730,158 | ||
Merrill Lynch Mortgage Investments, Inc.: | ||||
floater Series 2003-A Class 2A1, 1.51% 3/25/28 (d) | 3,456,774 | 3,454,047 | ||
Series 2003-E Class XA1, 1% 10/25/28 (d)(f) | 21,327,719 | 339,966 | ||
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 (b) | 3,695,000 | 3,810,180 | ||
Sequoia Mortgage Funding Trust Series 2003-A | 78,320,000 | 892,848 | ||
Sequoia Mortgage Trust: | ||||
floater Series 2003-5 Class A2, 1.5313% 9/20/33 (d) | 1,492,606 | 1,489,302 | ||
Series 2003-6 Class A2, 1.5513% 11/20/33 (d) | 3,390,000 | 3,390,000 | ||
Washington Mutual Mortgage Securities Corp. Series 2002-MS2 Class 1A32, 6.5% 4/25/32 | 214,118 | 214,854 | ||
TOTAL PRIVATE SPONSOR | 15,844,668 | |||
U.S. Government Agency - 3.9% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1993-183 Class J, 6.5% 11/25/22 | 2,845,000 | 2,916,483 | ||
Series 1993-206 Class KA, 6.5% 12/25/22 | 507,126 | 517,444 | ||
Series 1993-78 Class G, 6.5% 11/25/07 | 213,760 | 216,452 | ||
Series 1994-51 Class PH, 6.5% 1/25/23 | 301,769 | 305,763 | ||
Series 1994-63 Class PH, 7% 6/25/23 | 1,010,447 | 1,033,185 | ||
Series 1993-187 Class L, 6.5% 7/25/23 | 2,265,000 | 2,418,894 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class: | ||||
Series 2001-53 Class OH, 6.5% 6/25/30 | 784,905 | 801,228 | ||
Series 2001-71 Class QD, 6% 4/25/15 | 2,600,000 | 2,661,166 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | ||||
planned amortization class: | ||||
Series 2001-80 Class PH, 6% 12/25/27 | $ 1,055,243 | $ 1,066,743 | ||
Series 2002-55 Class PA, 5.5% 3/25/18 | 672,361 | 673,946 | ||
Series 2003-16 Class PA, 4.5% 11/25/09 | 530,000 | 541,246 | ||
sequential pay: | ||||
Series 2001-9 Class PB, 6.5% 5/25/27 | 913,733 | 921,692 | ||
Series 2002-28 Class VB, 6.5% 3/25/20 | 1,170,000 | 1,185,664 | ||
Series 2002-38 Class QB, 5.75% 7/25/13 | 1,542,217 | 1,546,051 | ||
Series 2003-19 Class MJ, 4.25% 5/25/30 | 3,871,108 | 3,878,347 | ||
Freddie Mac planned amortization class: | ||||
Series 2115 Class PC, 6% 5/15/11 | 45,579 | 45,572 | ||
Series 2162 Class TF, 6% 11/15/24 | 1,117,097 | 1,122,748 | ||
Series 2355 Class CD, 6.5% 6/15/30 | 428,011 | 434,444 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 32 Class TH, 7% 9/25/22 | 766,384 | 770,630 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 1714 Class H, 6.75% 5/15/23 | 1,023,102 | 1,045,270 | ||
Series 2134 Class PC, 5.725% 4/15/11 | 31,366 | 31,350 | ||
Series 2322 Class HC, 6.5% 3/15/30 | 242,794 | 247,525 | ||
Series 2489 Class PD, 6% 2/15/31 | 2,525,000 | 2,637,517 | ||
sequential pay: | ||||
Series 2230 Class VB, 8% 2/15/16 | 652,082 | 657,030 | ||
Series 2447 Class LG, 5.5% 12/15/13 | 225,163 | 226,525 | ||
Series 2458 Class VK, 6.5% 3/15/13 | 2,313,087 | 2,427,240 | ||
Series 2489 Class MA, 5% 12/15/12 | 426,004 | 428,198 | ||
Series 1803 Class A, 6% 12/15/08 | 690,674 | 713,695 | ||
Series 2496 Class OC, 5.5% 9/15/14 | 10,260,000 | 10,665,743 | ||
Series 2628 Class AZ, 4.5% 6/15/18 | 2,222,284 | 2,222,284 | ||
Ginnie Mae guaranteed REMIC pass thru securities Series 2001-53 Class TA, 6% 12/20/30 | 1,383,429 | 1,415,046 | ||
TOTAL U.S. GOVERNMENT AGENCY | 45,775,121 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $62,161,077) | 61,619,789 | |||
Commercial Mortgage Securities - 8.4% | ||||
Principal | Value | |||
280 Park Avenue Trust floater Series 2001-280 | $ 15,667,010 | $ 833,595 | ||
Asset Securitization Corp.: | ||||
sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29 | 521,274 | 561,158 | ||
Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 11,395,532 | 752,283 | ||
Banc America Commercial Mortgage, Inc.: | ||||
Series 2002-2 Class XP, 1.803% 7/11/43 (a)(d)(f) | 8,205,000 | 696,143 | ||
Series 2003-1 Class XP1, 1.475% 9/11/36 (a)(d)(f) | 52,955,000 | 1,911,347 | ||
Banc America Large Loan, Inc. floater Series 2002-FL2A Class A2, 1.44% 9/8/14 (a)(d) | 2,100,000 | 2,100,656 | ||
Bear Stearns Commercial Mortgage Securities, Inc.: | ||||
Series 2002-TOP8 Class X2, 2.3371% 8/15/38 (a)(d)(f) | 9,053,000 | 948,583 | ||
Series 2003-PWR2 Class X2, 0.721% 5/11/39 (a)(d)(f) | 23,310,000 | 764,859 | ||
Series 2003-T12 Class X2, 0.9251% 8/13/39 (a)(d)(f) | 15,835,000 | 566,597 | ||
Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2000-FL1A Class B, 1.57% 12/12/13 (a)(d) | 467,326 | 466,829 | ||
sequential pay: | ||||
Series 1998-1 Class A2, 6.56% 5/18/30 | 5,500,000 | 6,111,511 | ||
Series 1999-2 Class A1, 7.032% 1/15/32 | 665,180 | 730,602 | ||
Series 2000-3 Class A1, 7.093% 10/15/32 | 1,253,742 | 1,383,237 | ||
COMM floater: | ||||
Series 2000-FL3A Class C, 1.88% 11/15/12 (a)(d) | 2,470,000 | 2,452,080 | ||
Series 2001-FL5A: | ||||
Class A2, 1.67% 11/15/13 (a)(d) | 1,898,511 | 1,899,267 | ||
Class D, 2.37% 11/15/13 (a)(d) | 1,350,000 | 1,348,909 | ||
Series 2002-FL6 Class G, 3.02% 6/14/14 (a)(d) | 800,000 | 788,000 | ||
Series 2002-FL7: | ||||
Class H, 3.37% 11/15/14 (a)(d) | 1,232,000 | 1,218,202 | ||
Class MPP, 3.52% 11/15/14 (a)(d) | 850,000 | 850,000 | ||
Commercial Resecuritization Trust sequential pay Series 1999-ABC1 Class A, 6.74% 1/27/09 (a) | 848,590 | 896,456 | ||
CS First Boston Mortgage Securities Corp.: | ||||
floater Series 2001-TFLA Class H230, 3.07% 9/15/11 (a)(d) | 700,000 | 693,000 | ||
sequential pay: | ||||
Series 1997-C2 Class A2, 6.52% 1/17/35 | 794,450 | 834,251 | ||
Series 2000-C1 Class A1, 7.325% 4/14/62 | 951,203 | 1,045,598 | ||
Series 2000-FL1A Class A2, 1.52% 12/15/09 (a)(d) | 1,044,572 | 1,044,650 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
CS First Boston Mortgage Securities Corp.: - continued | ||||
sequential pay: | ||||
Series 2001-CK3 Class A2, 6.04% 6/15/34 | $ 1,050,000 | $ 1,128,601 | ||
Series 2001-CK6 Class AX, 0.645% 9/15/18 (f) | 20,329,059 | 817,686 | ||
Series 2003-C3 Class ASP, 2.1423% 5/15/38 (a)(d)(f) | 26,520,000 | 2,248,047 | ||
Series 2003-C4 Class ASP, 0.6007% 8/15/36 (a)(d)(f) | 19,040,000 | 477,695 | ||
Series 2003-TF2A: | ||||
Class A2, 1.44% 11/15/14 (b)(d) | 1,200,000 | 1,200,000 | ||
Class C, 1.72% 11/15/14 (b)(d) | 240,000 | 240,000 | ||
Class E, 2.17% 11/15/14 (b)(d) | 190,000 | 190,000 | ||
Class H, 3.12% 11/15/14 (b)(d) | 235,000 | 235,000 | ||
Class K, 4.37% 11/15/14 (a)(b)(d) | 350,000 | 350,000 | ||
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1: | ||||
Class A2, 6.538% 6/15/31 | 895,000 | 979,060 | ||
Class D, 7.231% 6/15/31 | 485,000 | 492,760 | ||
DLJ Commercial Mortgage Corp. sequential pay Series 2000-CF1 Class A1A, 7.45% 6/10/33 | 905,229 | 997,613 | ||
Equitable Life Assurance Society of the United States sequential pay Series 174 Class A1, 7.24% 5/15/06 (a) | 1,000,000 | 1,102,501 | ||
First Union-Lehman Brothers Commercial Mortgage Trust sequential pay: | ||||
Series 1997-C1 Class A2, 7.3% 4/18/29 | 330,766 | 332,619 | ||
Series 1997-C2 Class A3, 6.65% 11/18/29 | 2,780,000 | 3,068,020 | ||
FMAC Loan Receivables Trust sequential pay Series 1998-CA Class A1, 5.99% 11/15/04 (a) | 133,834 | 120,451 | ||
Franchise Loan Trust sequential pay Series 1998-I | 239,691 | 215,722 | ||
GE Capital Commercial Mortgage Corp. Series 2001-1 Class X1, 0.791% 5/15/33 (a)(d)(f) | 11,944,206 | 489,880 | ||
GGP Mall Properties Trust floater Series 2001-C1A: | ||||
Class A1, 1.72% 11/15/11 (a)(d) | 702,925 | 702,631 | ||
Class A3 1.82% 2/15/14 (a)(d) | 949,480 | 957,184 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
Series 2001-WTCA: | ||||
Class A1, 1.34% 9/9/15 (a)(d) | 431,416 | 426,361 | ||
Class A2, 1.49% 9/9/15 (a)(d) | 2,750,000 | 2,701,875 | ||
Class C, 2.22% 9/9/15 (a)(d) | 2,150,000 | 2,066,352 | ||
Class E, 3.02% 9/9/15 (a)(d) | 650,000 | 622,781 | ||
Class X1, 0.8% 9/1/15 (a)(f) | 15,876,316 | 19,845 | ||
Series 2003-C2 Class X2, 0.3887% 4/10/40 (f) | 56,940,000 | 721,601 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Greenwich Capital Commercial Funding Corp.: | ||||
Series 2002-C1 Class SWDB 5.857% 11/11/19 (a) | $ 1,150,000 | $ 1,155,391 | ||
Series 2003-C1 Class XP, 2.4429% 7/5/35 (a)(d)(f) | 13,440,000 | 1,314,600 | ||
GS Mortgage Securities Corp. Series 2003-HE1 Class M2, 3.02% 6/20/33 (d) | 1,810,000 | 1,811,429 | ||
GS Mortgage Securities Corp. II Series 2003-C1 Class A2A, 3.59% 1/10/40 | 1,705,000 | 1,702,574 | ||
GS Mortgage Trust II floater Series 2001-FL4A Class D, 2.03% 12/15/10 (a)(d) | 136,502 | 136,173 | ||
Hilton Hotel Pool Trust sequential pay Series 2000-HLTA Class A1, 7.055% 10/3/15 (a) | 792,358 | 863,480 | ||
Host Marriot Pool Trust sequential pay Series 1999-HMTA Class A, 6.98% 8/3/15 (a) | 670,988 | 730,752 | ||
J.P. Morgan Chase Commercial Mortgage Securities Corp.: | ||||
Series 2002-C3 Class X2, 1.3645% 7/12/35 (a)(d)(f) | 7,395,000 | 387,646 | ||
Series 2003-LN1 Class X2, 0.7861% 10/15/37 (a)(d)(f) | 29,610,000 | 1,051,451 | ||
J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 1997-C5 Class A2, 7.069% 9/15/29 | 751,453 | 787,829 | ||
Kansas Mortgage Capital LP Series 1995-1 Class E, 8.2532% 2/20/30 (a)(d) | 788,585 | 787,485 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential pay: | ||||
Series 2003-C3 Class A2, 3.086% 5/15/27 | 1,465,000 | 1,422,557 | ||
Series 2003-C5 Class A2, 3.478% 7/15/27 | 4,605,000 | 4,540,383 | ||
Series 2002-C4 Class XCP, 1.6957% 10/15/35 (a)(d)(f) | 13,355,000 | 927,518 | ||
Series 2002-C7 Class XCP, 1.1897% 1/15/36 (a)(f) | 14,590,000 | 694,513 | ||
Series 2003-C1 Class XCP, 1.6571% 12/15/36 (a)(d)(f) | 7,565,000 | 483,882 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater: | ||||
Series 2001-LLFA Class A, 1.36% 8/16/13 (a)(d) | 1,641,635 | 1,641,571 | ||
Series 2002-LLFA Class A, 1.41% 6/14/17 (a)(d) | 862,745 | 862,717 | ||
Merrill Lynch Mortgage Trust Series 2002-MW1 | 6,130,159 | 428,488 | ||
Morgan Stanley Capital I, Inc.: | ||||
sequential pay: | ||||
Series 1999-CAM1 Class A2, 6.76% 3/15/32 | 187,878 | 203,592 | ||
Series 1999-LIFE Class A1, 6.97% 4/15/33 | 734,901 | 805,488 | ||
Series 1997-RR: | ||||
Class B, 7.3089% 4/30/39 (a)(d) | 1,079,770 | 1,122,615 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Morgan Stanley Capital I, Inc.: - continued | ||||
Series 1997-RR: | ||||
Class C, 7.4389% 4/30/39 (a)(d) | $ 1,275,066 | $ 1,341,343 | ||
Series 1999-1NYP Class F, 7.2465% 5/3/30 (a)(d) | 910,000 | 974,968 | ||
Series 2003-IQ5 Class X2, 1.13% 4/15/38 (a)(d)(f) | 10,090,000 | 545,261 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
floater Series 2002-XLF: | ||||
Class D, 2.02% 8/5/14 (a)(d) | 1,893,158 | 1,893,149 | ||
Class F, 3.27% 8/5/14 (a)(d) | 2,820,204 | 2,820,176 | ||
Series 2003-HQ2 Class X2, 1.579% 3/12/35 (a)(d)(f) | 15,050,000 | 1,067,602 | ||
Series 2003-TOP9 Class X2, 1.524% 11/13/36 (a)(d)(f) | 8,960,000 | 679,697 | ||
Mortgage Capital Funding, Inc. sequential pay | 800,681 | 879,448 | ||
Nationslink Funding Corp. sequential pay: | ||||
Series 1999-1 Class A1, 6.042% 1/20/31 | 514,258 | 539,087 | ||
Series 1999-2 Class A1C, 7.03% 6/20/31 | 859,473 | 933,468 | ||
Salomon Brothers Mortgage Securities VII, Inc. floater Series 2001-CDCA Class C, 1.92% 2/15/13 (a)(d) | 1,364,000 | 1,344,502 | ||
Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A1, 6.537% 11/15/04 (a) | 4,780,000 | 4,986,588 | ||
Trizechahn Office Properties Trust Series 2001-TZHA Class E3, 7.253% 3/15/13 (a) | 1,555,000 | 1,626,642 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $96,937,663) | 97,296,163 | |||
Foreign Government and Government Agency Obligations - 0.4% | ||||
Chilean Republic 5.625% 7/23/07 | 740,000 | 789,950 | ||
United Mexican States 4.625% 10/8/08 | 3,190,000 | 3,197,975 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $3,904,708) | 3,987,925 | |||
Fixed-Income Funds - 14.0% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 1,626,147 | 161,752,842 | |
Cash Equivalents - 10.9% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 125,873,224 | $ 125,862,000 | |
TOTAL INVESTMENT PORTFOLIO - 105.2% (Cost $1,206,695,634) | 1,215,343,838 | ||
NET OTHER ASSETS - (5.2)% | (59,852,695) | ||
NET ASSETS - 100% | $ 1,155,491,143 | ||
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
102 Eurodollar 90 Day Index Contracts | June 2005 | $ 81,335,846 | $ 83,225 | ||
102 Eurodollar 90 Day Index Contracts | Sept. 2005 | 86,336,447 | 57,800 | ||
102 Eurodollar 90 Day Index Contracts | Dec. 2005 | 97,278,073 | 43,413 | ||
102 Eurodollar 90 Day Index Contracts | March 2006 | 90,074,905 | 27,838 | ||
102 Eurodollar 90 Day Index Contracts | June 2006 | 91,987,803 | 5,076 | ||
102 Eurodollar 90 Day Index Contracts | Sept. 2006 | 91,964,728 | (79,237) | ||
102 Eurodollar 90 Day Index Contracts | Dec. 2006 | 98,985,108 | (94,112) | ||
102 Eurodollar 90 Day Index Contracts | March 2007 | 91,960,282 | 48,667 | ||
92,670 | |||||
Swap Agreements | |||||
Expiration | Notional | Unrealized | |||
Credit Default Swap | |||||
Receive from Morgan Stanley, Inc., upon default of Vornado Realty Trust, par value of the notional amount of Vornado Realty Trust 5.625% 6/15/07, and pay quarterly notional amount multiplied by 1.37% | June 2007 | $ 750,000 | $ (15,526) | ||
Receive quarterly notional amount multiplied by .62% and pay Goldman Sachs upon default of SLM Corp., par value of the notional amount of SLM Corp. 1.1106% 7/25/35 | August 2007 | 400,000 | 3,530 | ||
Receive quarterly notional amount multiplied by 1.12% and pay Morgan Stanley, Inc. upon default of Comcast Cable Communications, Inc., par value of the notional amount of Comcast Cable Communications, Inc. 6.75% 1/30/11 | June 2006 | 1,600,000 | 28,701 | ||
TOTAL CREDIT DEFAULT SWAP | 2,750,000 | 16,705 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 2.3192% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | April 2006 | 11,000,000 | (44,305) | ||
Receive quarterly a fixed rate equal to 3.098% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2007 | 21,470,000 | 56,640 | ||
Receive quarterly a fixed rate equal to 3.1422% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2007 | 18,280,000 | 82,335 | ||
TOTAL INTEREST RATE SWAP | 50,750,000 | 94,670 | |||
$ 53,500,000 | $ 111,375 | ||||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $98,237,974 or 8.5% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $692,456. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,270,580,605 and $1,004,667,969, respectively, of which long-term U.S. government and government agency obligations aggregated $747,785,252 and $683,634,977, respectively. |
The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which loans were outstanding amounted to $7,303,500. The weighted average interest rate was 1.3%. Interest earned from the interfund lending program amounted to $526 and is included in interest income on the Statement of Operations. At period end there were no interfund loans outstanding. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $11,617,000 of which $2,265,000, $3,149,000, $2,459,000 and $3,744,000 will expire on October 31, 2004, 2005, 2007 and 2008, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $125,862,000) (cost $1,206,695,634) - See accompanying schedule | $ 1,215,343,838 | |
Cash | 329,683 | |
Receivable for investments sold | 6,621,432 | |
Receivable for fund shares sold | 3,365,887 | |
Interest receivable | 8,558,517 | |
Receivable for daily variation on futures contracts | 33,000 | |
Unrealized gain on swap agreements | 111,375 | |
Prepaid expenses | 6,042 | |
Total assets | 1,234,369,774 | |
Liabilities | ||
Payable for investments purchased | $ 16,631,057 | |
Delayed delivery | 54,876,066 | |
Payable for fund shares redeemed | 5,867,885 | |
Distributions payable | 416,050 | |
Accrued management fee | 412,740 | |
Distribution fees payable | 422,301 | |
Other payables and accrued expenses | 252,532 | |
Total liabilities | 78,878,631 | |
Net Assets | $ 1,155,491,143 | |
Net Assets consist of: | ||
Paid in capital | $ 1,164,427,662 | |
Undistributed net investment income | 1,900,936 | |
Accumulated undistributed net realized gain (loss) on investments | (19,689,704) | |
Net unrealized appreciation (depreciation) on investments | 8,852,249 | |
Net Assets | $ 1,155,491,143 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 9.55 | |
Maximum offering price per share (100/98.50 of $9.55) | $ 9.70 | |
Class T: | $ 9.55 | |
Maximum offering price per share (100/98.50 of $9.55) | $ 9.70 | |
Class B: | $ 9.56 | |
Class C: | $ 9.55 | |
Institutional Class: | $ 9.55 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 37,626,420 | |
Security lending | 4,582 | |
Total income | 37,631,002 | |
Expenses | ||
Management fee | $ 4,558,204 | |
Transfer agent fees | 1,850,399 | |
Distribution fees | 4,647,516 | |
Accounting and security lending fees | 247,552 | |
Non-interested trustees' compensation | 4,470 | |
Custodian fees and expenses | 45,274 | |
Registration fees | 187,418 | |
Audit | 53,631 | |
Legal | 7,965 | |
Miscellaneous | 9,119 | |
Total expenses before reductions | 11,611,548 | |
Expense reductions | (9,030) | 11,602,518 |
Net investment income (loss) | 26,028,484 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 11,803,676 | |
Futures contracts | 857,562 | |
Swap agreements | (137,101) | |
Total net realized gain (loss) | 12,524,137 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (2,474,863) | |
Futures contracts | (333,915) | |
Swap agreements | 51,702 | |
Delayed delivery commitments | 39,356 | |
Total change in net unrealized appreciation (depreciation) | (2,717,720) | |
Net gain (loss) | 9,806,417 | |
Net increase (decrease) in net assets resulting from operations | $ 35,834,901 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 26,028,484 | $ 23,776,366 |
Net realized gain (loss) | 12,524,137 | 770,168 |
Change in net unrealized appreciation (depreciation) | (2,717,720) | 398,471 |
Net increase (decrease) in net assets resulting | 35,834,901 | 24,945,005 |
Distributions to shareholders from net investment income | (27,246,649) | (24,339,852) |
Share transactions - net increase (decrease) | 300,204,128 | 375,108,953 |
Total increase (decrease) in net assets | 308,792,380 | 375,714,106 |
Net Assets | ||
Beginning of period | 846,698,763 | 470,984,657 |
End of period (including undistributed net investment income of $1,900,936 and undistributed net | $ 1,155,491,143 | $ 846,698,763 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.44 | $ 9.49 | $ 9.12 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .261 | .381F | .523 | .551 | .518 |
Net realized and unrealized gain (loss) | .128 | (.034)D,F | .386 | (.028) | (.233) |
Total from investment operations | .389 | .347 | .909 | .523 | .285 |
Distributions from net investment income | (.279) | (.397) | (.539) | (.553) | (.515) |
Net asset value, end of period | $ 9.55 | $ 9.44 | $ 9.49 | $ 9.12 | $ 9.15 |
Total ReturnA,B | 4.16% | 3.78% | 10.22% | 5.91% | 3.12% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | .81% | .80% | .85% | .83% | .82% |
Expenses net of voluntary | .81% | .80% | .85% | .83% | .82% |
Expenses net of all reductions | .81% | .80% | .84% | .83% | .80% |
Net investment income (loss) | 2.74% | 4.09%F | 5.63% | 6.05% | 5.68% |
Supplemental Data | |||||
Net assets, end of period | $ 186,290 | $ 106,018 | $ 38,240 | $ 16,698 | $ 17,835 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .261 | .381F | .525 | .550 | .523 |
Net realized and unrealized gain (loss) | .118 | (.036)D,F | .383 | (.019) | (.238) |
Total from investment operations | .379 | .345 | .908 | .531 | .285 |
Distributions from net investment income | (.279) | (.395) | (.538) | (.551) | (.515) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 |
Total ReturnA,B | 4.04% | 3.75% | 10.21% | 6.00% | 3.12% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | .82% | .82% | .85% | .84% | .84% |
Expenses net of voluntary | .82% | .82% | .85% | .84% | .84% |
Expenses net of all reductions | .82% | .82% | .85% | .83% | .83% |
Net investment income (loss) | 2.73% | 4.07%F | 5.62% | 6.05% | 5.64% |
Supplemental Data | |||||
Net assets, end of period | $ 468,931 | $ 388,495 | $ 309,958 | $ 279,306 | $ 309,670 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002G |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 9.46 | $ 9.43 |
Income from Investment Operations | ||
Net investment income (loss)E | .183 | .281I |
Net realized and unrealized gain (loss) | .120 | (.234)F,I |
Total from investment operations | .303 | .047 |
Distributions from net investment income | (.203) | (.017) |
Net asset value, end of period | $ 9.56 | $ 9.46 |
Total ReturnB,C,D | 3.23% | .50% |
Ratios to Average Net AssetsH | ||
Expenses before expense reductions | 1.61% | 1.86%A |
Expenses net of voluntary waivers, if any | 1.61% | 1.65%A |
Expenses net of all reductions | 1.61% | 1.65%A |
Net investment income (loss) | 1.94% | 3.59%A,I |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 49,353 | $ 3,811 |
Portfolio turnover rate | 102% | 111% |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
G For the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.16 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .182 | .304F | .448 | .467 | .434 |
Net realized and unrealized gain (loss) | .118 | (.037)D,F | .383 | (.021) | (.222) |
Total from investment operations | .300 | .267 | .831 | .446 | .212 |
Distributions from net investment income | (.200) | (.317) | (.461) | (.476) | (.432) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.16 |
Total ReturnA,B | 3.19% | 2.90% | 9.30% | 5.01% | 2.31% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | 1.64% | 1.64% | 1.68% | 1.68% | 1.73% |
Expenses net of voluntary | 1.64% | 1.64% | 1.68% | 1.68% | 1.73% |
Expenses net of all reductions | 1.64% | 1.63% | 1.68% | 1.67% | 1.72% |
Net investment income (loss) | 1.91% | 3.25%F | 4.80% | 5.21% | 4.75% |
Supplemental Data | |||||
Net assets, end of period | $ 359,779 | $ 283,046 | $ 99,486 | $ 50,824 | $ 30,428 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)B | .278 | .397E | .540 | .564 | .534 |
Net realized and unrealized gain (loss) | .119 | (.034)C,E | .387 | (.015) | (.236) |
Total from investment operations | .397 | .363 | .927 | .549 | .298 |
Distributions from net investment income | (.297) | (.413) | (.557) | (.569) | (.528) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 |
Total ReturnA | 4.24% | 3.95% | 10.43% | 6.21% | 3.27% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .63% | .64% | .66% | .67% | .71% |
Expenses net of voluntary | .63% | .64% | .66% | .67% | .71% |
Expenses net of all reductions | .63% | .63% | .66% | .67% | .70% |
Net investment income (loss) | 2.92% | 4.25%E | 5.81% | 6.21% | 5.77% |
Supplemental Data | |||||
Net assets, end of period | $ 91,138 | $ 65,330 | $ 23,301 | $ 7,655 | $ 6,805 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. 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 differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards, expiring capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 8,823,368 | | |
Unrealized depreciation | (4,308,280) | |
Net unrealized appreciation (depreciation) | 4,515,088 | |
Capital loss carryforward | (11,616,827) | |
Cost for federal income tax purposes | $ 1,210,828,750 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 27,246,649 | $ 24,339,852 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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 any 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 counter-parties 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - continued
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
each class' average net assets. In addition FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 221,961 | $ - |
Class T | 0% | .15% | 678,832 | 19,897 |
Class B | .65% | .25% | 269,955 | 194,969 |
Class C | .75% | .25% | 3,476,768 | 1,865,951 |
$ 4,647,516 | $ 2,080,817 |
Sales Load. FDC receives a front-end sales charge of up to 1.50% for selling Class A and Class T shares of the fund. FDC receives the proceeds of a contingent deferred sales charges levied on Class A, Class T, Class B and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3% to 1% for Class B, 1% for Class C and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 125,622 |
Class T | 107,198 |
Class B* | 70,625 |
Class C* | 284,065 |
$ 587,510 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 264,029 | .18 |
Class T | 839,823 | .19 |
Class B | 68,388 | .23 |
Class C | 556,107 | .16 |
Institutional Class | 122,052 | .15 |
$ 1,850,399 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,135,744 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund
Annual Report
Notes to Financial Statements - continued
5. Security Lending - continued
and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $9,030.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 A | |
From net investment income | ||
Class A | $ 4,157,590 | $ 2,835,721 |
Class T | 13,023,102 | 13,908,158 |
Class B | 541,261 | 3,116 |
Class C | 7,051,516 | 5,924,153 |
Institutional Class | 2,473,180 | 1,668,704 |
Total | $ 27,246,649 | $ 24,339,852 |
A Distributions for Class B are for the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002A | 2003 | 2002 A | |
Class A | ||||
Shares sold | 20,802,909 | 12,401,366 | $ 198,897,539 | $ 116,092,388 |
Reinvestment of distributions | 344,259 | 233,387 | 3,291,947 | 2,185,806 |
Shares redeemed | (12,855,965) | (5,438,298) | (122,878,485) | (50,877,139) |
Net increase (decrease) | 8,291,203 | 7,196,455 | $ 79,311,001 | $ 67,401,055 |
Annual Report
8. Share Transactions - continued
Shares | Dollars | |||
2003 | 2002A | 2003 | 2002 A | |
Class T | ||||
Shares sold | 37,820,298 | 28,672,077 | $ 361,699,855 | $ 268,734,836 |
Reinvestment of distributions | 1,149,084 | 1,219,862 | 10,991,925 | 11,429,888 |
Shares redeemed | (30,982,503) | (21,422,615) | (296,311,977) | (200,548,069) |
Net increase (decrease) | 7,986,879 | 8,469,324 | $ 76,379,803 | $ 79,616,655 |
Class B | ||||
Shares sold | 6,189,378 | 414,351 | $ 59,258,449 | $ 3,894,764 |
Reinvestment of distributions | 45,938 | 267 | 440,440 | 2,527 |
Shares redeemed | (1,475,998) | (11,738) | (14,147,798) | (109,887) |
Net increase (decrease) | 4,759,318 | 402,880 | $ 45,551,091 | $ 3,787,404 |
Class C | ||||
Shares sold | 23,921,233 | 28,343,213 | $ 228,874,396 | $ 265,589,128 |
Reinvestment of distributions | 469,309 | 434,745 | 4,490,147 | 4,075,779 |
Shares redeemed | (16,674,118) | (9,309,604) | (159,470,102) | (87,172,345) |
Net increase (decrease) | 7,716,424 | 19,468,354 | $ 73,894,441 | $ 182,492,562 |
Institutional Class | ||||
Shares sold | 8,171,676 | 7,208,504 | $ 78,200,044 | $ 67,548,577 |
Reinvestment of distributions | 141,892 | 119,045 | 1,357,285 | 1,116,186 |
Shares redeemed | (5,685,068) | (2,868,304) | (54,489,537) | (26,853,486) |
Net increase (decrease) | 2,628,500 | 4,459,245 | $ 25,067,792 | $ 41,811,277 |
A Share transactions for Class B are for the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
9. Other Information.
At the end of the period, one unaffiliated shareholder was the owner of record of 12% of the total outstanding shares of the fund.
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Short Fixed-Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Short Fixed-Income Fund as of October 31, 2003, and 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 12, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Short Fixed-Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Short Fixed-Income. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Short Fixed-Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Andrew Dudley (38) | |
Year of Election or Appointment: 1997 Vice President of Advisor Short Fixed-Income. Mr. Dudley is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Dudley managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Short Fixed-Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment:2003 Assistant Secretary of Advisor Short Fixed-Income . Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Short Fixed-Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Short Fixed-Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Short Fixed-Income. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Short Fixed-Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 13.40% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Adviser
Fidelity Management &
Research (U.K.) Inc.
Fidelity Management &
Research (Far East) Inc.
Fidelity Investments Japan Limited
Fidelity Investments Money
Management, Inc.
Fidelity International
Investment Advisors
Fidelity International
Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
SFI-UANN-1203
1.784769.100
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Short Fixed-Income
Fund - Institutional Class
Annual Report
October 31, 2003
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to the financial statements. | |
Auditors' Opinion | ||
Trustees and Officers | ||
Distributions | ||
For a free copy of the fund's proxy voting guidelines call 1-877-208-0098 or visit the Securities and Exchange Commission (SEC)'s web site at www.sec.gov.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
(Recycle graphic) This report is printed on recycled paper using soy-based inks.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any depository institution. Shares are not insured by the FDIC, Federal Reserve Board or any other agency, and are subject to investment risks, including possible loss of principal amount invested.
Neither the fund nor Fidelity Distributors Corporation is a bank.
For more information on any Fidelity Advisor fund, including charges and expenses, contact your investment professional for a free prospectus. Read it carefully before you invest or send money.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Many of you have read or heard news stories recently that were critical of mutual funds and made allegations that the mutual fund industry has been less than forthright. I find these reports unsettling and not necessarily an accurate picture of the overall industry, and I would like you to know where we at Fidelity stand.
With specific regard to allegations that certain mutual fund companies were violating the Securities and Exchange Commission's forward pricing rules or were involved in so-called "market timing" activities, I want to say two things:
First, Fidelity does not have agreements that permit customers who buy fund shares after 4 p.m. to obtain the 4 p.m. price. This is not to say that someone could not deceive the company through fraudulent acts. But I underscore that we have no so-called "agreements" which would permit this illegal practice.
Second, Fidelity has been on record for years opposing predatory short-term trading which adversely affects other shareholders in a mutual fund. In fact, in the 1980s, we began charging a fee - which is returned to the fund and, therefore, to investors - to discourage this activity. What's more, several years ago we took the industry lead in developing a Fair Value Pricing Policy to prevent market timing on foreign securities in our funds. It is reasonable to assume that another structure can be developed that would alter the system to make it much more difficult for predatory traders to operate. This, however, will only be achieved through close cooperation among regulators, legislators and the industry.
Certainly no industry is perfect, and there have been instances of unethical and illegal activity from time to time within the mutual fund industry. When this occurs, confessed or convicted offenders should be dealt with appropriately. Clearly, every system can be improved. We applaud well thought out improvements by regulators, legislators and industry representatives that achieve the common goal of building and protecting the value of investors' holdings. But we remain concerned about the risk of over-regulation and the quick application of simplistic solutions to intricate problems.
For more than 57 years, Fidelity Investments has worked very hard to improve its products and service to justify your trust. When our family founded this company in 1946, we had only a few hundred customers. Many of them were family and friends. Today, we serve more than 18 million customers including individual investors and participants in retirement plans across America.
Let me close by saying that we do not take your trust in us for granted, and we realize that we must always work to improve all aspects of our service to you. In turn, we urge you to continue your active participation with your financial matters, so that your interests can be well served.
Best regards,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Performance: The Bottom Line
Average annual 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) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended October 31, 2003 | Past 1 | Past 5 | Past 10 | |
Institutional Class A | 4.24% | 5.59% | 5.18% |
A The initial offering of Institutional Class shares took place on July 3, 1995. Institutional Class shares are sold to eligible investors without a sales load or 12b-1 fee. Returns prior to July 3, 1995 are those of Class T, the original class of the fund, and reflect Class T shares' 0.15% 12b-1 fee.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Short Fixed-Income Fund - Institutional Class on October 31, 1993. The chart shows how the value of your investment would have grown, and also shows how the Lehman Brothers 1-3 Year Government/Credit Bond Index did over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Andrew Dudley, Portfolio Manager of Fidelity® Advisor Short Fixed-Income Fund
Buoyed by low inflation and favorable interest rates, the investment-grade bond market returned 4.91% for the year ending October 31, 2003, according to the Lehman Brothers® Aggregate Bond Index. The Federal Reserve Board spurred bonds upward by lowering short-term rates twice, dropping the fed funds target rate to a 45-year low. Treasuries benefited at various times in the past year when investors sought the highest-quality bonds. Returns suffered during the summer, though, when long-term interest rates spiked higher due to a firming economy and waning prospects for additional rate cuts. For the year overall, the Lehman Brothers Treasury Index rose 2.82%. Strong demand for yield helped all spread sectors except mortgages outpace Treasuries. It was a banner year for corporates, which rebounded from depressed levels on improved credit conditions, as well as positive economic and profit trends. Agencies, hindered by increased regulatory scrutiny, still bested Treasuries, while mortgages, hurt by faster-than-expected prepayments, slightly underperformed.
For the 12 months that ended October 31, 2003, the fund's Institutional Class shares returned 4.24%. This beat the LipperSM Short Investment Grade Debt Funds Average, which returned 3.10%, as well as the Lehman Brothers 1-3 Year Government/Credit Bond Index, which returned 3.26%. The fund benefited from owning corporate bonds, which staged a strong rally in the first half of the period. In particular, strong security selection and a heavy concentration in the telecommunications, cable, media and utilities industries added to returns. I reduced our stake in finance and banking, where many bonds neared what I viewed as full valuations. I redirected the proceeds into asset-backed securities (ABS) - with an emphasis on home equity ABS - as well as higher premium mortgage bonds. Both provided attractive yields for the fund, which helped offset falling bond prices in a rising interest rate environment. Treasury bonds, which represented less than 10% of the fund's assets at period end, were weak performers as interest rates rose.
The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.
Annual Report
Investment Changes
Quality Diversification (% of fund's net assets) | |||||||
As of October 31, 2003 | As of April 30, 2003 | ||||||
| U.S. Government | | U.S. Government | ||||
| AAA 21.3% | | AAA 18.6% | ||||
| AA 3.8% | | AA 5.4% | ||||
| A 15.7% | | A 16.2% | ||||
| BBB 14.3% | | BBB 14.3% | ||||
| BB and Below 2.1% | | BB and Below 1.5% | ||||
| Not Rated 4.4% | | Not Rated 0.8% | ||||
| Short-Term | | Short-Term | ||||
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. Securities rated BB or below were rated investment grade at the time of acquisition. |
Average Years to Maturity as of October 31, 2003 | ||
6 months ago | ||
Years | 2.4 | 2.3 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the fund's bonds, weighted by dollar amount. |
Duration as of October 31, 2003 | ||
6 months ago | ||
Years | 1.8 | 1.7 |
Duration shows how much a bond fund's price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five-year duration is likely to lose about 5% of its value. Other factors also can influence a bond fund's performance and share price. Accordingly, a bond fund's actual performance may differ from this example. |
Asset Allocation (% of fund's net assets) | |||||||
As of October 31, 2003 * | As of April 30, 2003 ** | ||||||
| Corporate Bonds 23.8% | | Corporate Bonds 26.6% | ||||
| U.S. Government | | U.S. Government | ||||
| Asset-Backed | | Asset-Backed | ||||
| CMOs and Other | | CMOs and Other Mortgage Related | ||||
| Other Investments 0.4% | | Other Investments 0.8% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 4.0% | ** Foreign investments | 4.1% | ||||
* Futures and Swaps | 12.8% | ** Futures and Swaps | 8.8% | ||||
The information in the above tables is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central fund. |
Annual Report
Investments October 31, 2003
Showing Percentage of Net Assets
Nonconvertible Bonds - 22.8% | ||||
Principal | Value | |||
CONSUMER DISCRETIONARY - 3.1% | ||||
Auto Components - 0.5% | ||||
DaimlerChrysler NA Holding Corp.: | ||||
4.05% 6/4/08 | $ 650,000 | $ 628,332 | ||
4.75% 1/15/08 | 2,250,000 | 2,248,157 | ||
6.9% 9/1/04 | 1,500,000 | 1,554,911 | ||
7.4% 1/20/05 | 400,000 | 422,852 | ||
7.75% 6/15/05 | 1,100,000 | 1,185,476 | ||
6,039,728 | ||||
Media - 2.5% | ||||
AOL Time Warner, Inc.: | ||||
5.625% 5/1/05 | 1,150,000 | 1,206,895 | ||
6.15% 5/1/07 | 1,825,000 | 1,983,972 | ||
British Sky Broadcasting Group PLC (BSkyB) yankee 7.3% 10/15/06 | 2,350,000 | 2,602,625 | ||
Continental Cablevision, Inc. 8.3% 5/15/06 | 3,200,000 | 3,583,453 | ||
Cox Communications, Inc.: | ||||
6.875% 6/15/05 | 2,025,000 | 2,174,929 | ||
7.5% 8/15/04 | 1,450,000 | 1,509,102 | ||
7.75% 8/15/06 | 600,000 | 677,362 | ||
Cox Enterprises, Inc. 4.375% 5/1/08 (a) | 1,370,000 | 1,385,297 | ||
Liberty Media Corp. 2.64% 9/17/06 (d) | 3,000,000 | 3,001,740 | ||
News America, Inc. 6.625% 1/9/08 | 3,000,000 | 3,330,906 | ||
TCI Communications, Inc. 8% 8/1/05 | 3,610,000 | 3,941,579 | ||
Time Warner, Inc. 7.75% 6/15/05 | 3,050,000 | 3,305,337 | ||
Univision Communications, Inc. 3.875% 10/15/08 | 500,000 | 493,901 | ||
29,197,098 | ||||
Textiles Apparel & Luxury Goods - 0.1% | ||||
Jones Apparel Group, Inc. 7.5% 6/15/04 | 800,000 | 824,626 | ||
TOTAL CONSUMER DISCRETIONARY | 36,061,452 | |||
CONSUMER STAPLES - 1.0% | ||||
Food & Staples Retailing - 0.2% | ||||
Fred Meyer, Inc. 7.375% 3/1/05 | 1,510,000 | 1,612,858 | ||
Food Products - 0.3% | ||||
Kraft Foods, Inc. 5.25% 6/1/07 | 3,265,000 | 3,464,707 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
CONSUMER STAPLES - continued | ||||
Tobacco - 0.5% | ||||
Altria Group, Inc. 5.625% 11/4/08 | $ 4,000,000 | $ 3,979,720 | ||
Philip Morris Companies, Inc. 6.375% 2/1/06 | 2,000,000 | 2,079,156 | ||
6,058,876 | ||||
TOTAL CONSUMER STAPLES | 11,136,441 | |||
ENERGY - 0.8% | ||||
Energy Equipment & Services - 0.1% | ||||
Petroliam Nasional BHD (Petronas) yankee 8.875% 8/1/04 (a) | 1,135,000 | 1,194,709 | ||
Oil & Gas - 0.7% | ||||
Canada Occidental Petroleum Ltd. yankee 7.125% 2/4/04 | 1,550,000 | 1,571,282 | ||
Duke Energy Field Services LLC 5.75% 11/15/06 | 1,600,000 | 1,718,840 | ||
Kerr-McGee Corp. 5.375% 4/15/05 | 1,375,000 | 1,429,575 | ||
Mitchell Energy & Development Corp. 6.75% 2/15/04 | 1,425,000 | 1,440,832 | ||
Pemex Project Funding Master Trust 2.65% 1/7/05 (a)(d) | 1,700,000 | 1,708,981 | ||
7,869,510 | ||||
TOTAL ENERGY | 9,064,219 | |||
FINANCIALS - 11.0% | ||||
Capital Markets - 1.7% | ||||
ABN-AMRO Bank NV, Chicago 7.25% 5/31/05 | 610,000 | 659,758 | ||
Amvescap PLC: | ||||
5.9% 1/15/07 | 500,000 | 538,706 | ||
yankee 6.6% 5/15/05 | 600,000 | 638,221 | ||
Bank of New York Co., Inc.: | ||||
3.4% 3/15/13 (d) | 2,750,000 | 2,690,179 | ||
4.25% 9/4/12 (d) | 1,285,000 | 1,307,809 | ||
Goldman Sachs Group LP 7.2% 11/1/06 (a) | 500,000 | 563,791 | ||
Goldman Sachs Group, Inc. 4.125% 1/15/08 | 2,995,000 | 3,057,778 | ||
J.P. Morgan Chase & Co. 5.35% 3/1/07 | 1,775,000 | 1,905,558 | ||
Lehman Brothers Holdings, Inc.: | ||||
4% 1/22/08 | 300,000 | 304,363 | ||
6.25% 5/15/06 | 2,795,000 | 3,044,887 | ||
6.625% 2/5/06 | 120,000 | 130,692 | ||
7.75% 1/15/05 | 1,000,000 | 1,077,254 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Capital Markets - continued | ||||
Merrill Lynch & Co., Inc.: | ||||
3.7% 4/21/08 | $ 1,400,000 | $ 1,402,149 | ||
6.13% 5/16/06 | 515,000 | 560,224 | ||
Morgan Stanley 6.1% 4/15/06 | 1,800,000 | 1,950,772 | ||
19,832,141 | ||||
Commercial Banks - 1.0% | ||||
Australia & New Zealand Banking Group Ltd. yankee 7.55% 9/15/06 | 405,000 | 455,640 | ||
Bank of America Corp.: | ||||
3.875% 1/15/08 | 275,000 | 278,954 | ||
7.125% 9/15/06 | 1,750,000 | 1,957,916 | ||
Bank One Corp. 6.5% 2/1/06 | 2,085,000 | 2,277,160 | ||
Corporacion Andina de Fomento yankee 7.25% 3/1/07 | 965,000 | 1,076,217 | ||
First National Boston Corp. 7.375% 9/15/06 | 1,145,000 | 1,287,512 | ||
KeyCorp. 4.625% 5/16/05 | 1,060,000 | 1,104,146 | ||
Korea Development Bank 7.375% 9/17/04 | 810,000 | 848,346 | ||
Mellon Bank NA, Pittsburgh 6.5% 8/1/05 | 2,000,000 | 2,148,140 | ||
11,434,031 | ||||
Consumer Finance - 2.4% | ||||
American General Finance Corp. 4.5% 11/15/07 | 1,115,000 | 1,155,626 | ||
Ford Motor Credit Co.: | ||||
6.5% 1/25/07 | 4,215,000 | 4,348,991 | ||
6.875% 2/1/06 | 5,200,000 | 5,442,284 | ||
7.5% 3/15/05 | 600,000 | 630,371 | ||
General Motors Acceptance Corp.: | ||||
6.125% 2/1/07 | 400,000 | 420,032 | ||
6.125% 8/28/07 | 1,900,000 | 2,001,546 | ||
6.75% 1/15/06 | 4,250,000 | 4,531,363 | ||
7.5% 7/15/05 | 1,070,000 | 1,145,659 | ||
Household Finance Corp.: | ||||
4.625% 1/15/08 | 818,000 | 847,740 | ||
5.75% 1/30/07 | 1,450,000 | 1,565,517 | ||
Household International, Inc. 8.875% 2/15/08 | 2,025,000 | 2,291,032 | ||
John Deere Capital Corp. 1.74% 9/17/04 (d) | 1,300,000 | 1,305,243 | ||
Washington Mutual Finance Corp. 8.25% 6/15/05 | 2,000,000 | 2,191,382 | ||
27,876,786 | ||||
Diversified Financial Services - 2.9% | ||||
Citigroup, Inc. 6.75% 12/1/05 | 4,100,000 | 4,467,561 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Diversified Financial Services - continued | ||||
Delta Air Lines, Inc. pass thru trust certificates 7.379% 5/18/10 | $ 917,868 | $ 936,013 | ||
Deutsche Telekom International Finance BV: | ||||
3.875% 7/22/08 | 2,425,000 | 2,417,444 | ||
8.25% 6/15/05 | 4,190,000 | 4,577,868 | ||
NiSource Finance Corp.: | ||||
3.2% 11/1/06 | 1,085,000 | 1,083,503 | ||
7.5% 11/15/03 | 2,100,000 | 2,103,396 | ||
Pemex Project Funding Master Trust 6.125% 8/15/08 | 2,535,000 | 2,664,285 | ||
Powergen US Funding LLC 4.5% 10/15/04 | 4,240,000 | 4,329,807 | ||
Prime Property Funding II 6.25% 5/15/07 | 1,000,000 | 1,079,365 | ||
Sprint Capital Corp.: | ||||
6% 1/15/07 | 2,240,000 | 2,373,771 | ||
7.125% 1/30/06 | 1,925,000 | 2,081,293 | ||
Verizon Global Funding Corp. 6.125% 6/15/07 | 4,840,000 | 5,290,115 | ||
33,404,421 | ||||
Insurance - 0.3% | ||||
Allstate Corp. 7.875% 5/1/05 | 535,000 | 581,623 | ||
MetLife, Inc. 3.911% 5/15/05 | 2,750,000 | 2,839,903 | ||
Travelers Property Casualty Corp. 3.75% 3/15/08 | 530,000 | 528,521 | ||
3,950,047 | ||||
Real Estate - 2.3% | ||||
AMB Property LP 7.2% 12/15/05 | 1,000,000 | 1,097,117 | ||
Arden Realty LP 8.875% 3/1/05 | 2,045,000 | 2,216,946 | ||
AvalonBay Communities, Inc.: | ||||
5% 8/1/07 | 915,000 | 958,877 | ||
6.58% 2/15/04 | 705,000 | 715,003 | ||
BRE Properties, Inc. 5.95% 3/15/07 | 575,000 | 613,488 | ||
Camden Property Trust: | ||||
5.875% 6/1/07 | 580,000 | 622,892 | ||
7% 4/15/04 | 1,400,000 | 1,429,750 | ||
CarrAmerica Realty Corp. 5.25% 11/30/07 | 1,745,000 | 1,803,327 | ||
CenterPoint Properties Trust: | ||||
6.75% 4/1/05 | 470,000 | 496,868 | ||
7.125% 3/15/04 | 1,300,000 | 1,324,359 | ||
Duke Realty LP 6.875% 3/15/05 | 1,200,000 | 1,278,152 | ||
EOP Operating LP: | ||||
6.5% 1/15/04 | 750,000 | 757,003 | ||
6.625% 2/15/05 | 500,000 | 527,788 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
FINANCIALS - continued | ||||
Real Estate - continued | ||||
EOP Operating LP: - continued | ||||
6.763% 6/15/07 | $ 625,000 | $ 690,549 | ||
7.375% 11/15/03 | 1,100,000 | 1,101,757 | ||
8.375% 3/15/06 | 1,500,000 | 1,683,075 | ||
ERP Operating LP 7.1% 6/23/04 | 1,700,000 | 1,755,826 | ||
Gables Realty LP: | ||||
5.75% 7/15/07 | 1,220,000 | 1,290,575 | ||
7.25% 2/15/06 | 2,200,000 | 2,381,095 | ||
Mack-Cali Realty LP 7% 3/15/04 | 615,000 | 627,034 | ||
Merry Land & Investment Co., Inc. 7.25% 6/15/05 | 600,000 | 646,084 | ||
ProLogis 6.7% 4/15/04 | 1,405,000 | 1,440,000 | ||
Vornado Realty Trust 5.625% 6/15/07 | 750,000 | 792,159 | ||
26,249,724 | ||||
Thrifts & Mortgage Finance - 0.4% | ||||
Abbey National PLC 6.69% 10/17/05 | 200,000 | 217,585 | ||
Countrywide Home Loans, Inc.: | ||||
1.62% 6/2/06 (d) | 1,250,000 | 1,253,298 | ||
5.5% 8/1/06 | 1,290,000 | 1,376,199 | ||
5.625% 5/15/07 | 745,000 | 798,224 | ||
Washington Mutual, Inc. 7.5% 8/15/06 | 700,000 | 784,991 | ||
4,430,297 | ||||
TOTAL FINANCIALS | 127,177,447 | |||
INDUSTRIALS - 1.4% | ||||
Aerospace & Defense - 0.4% | ||||
Bombardier Capital, Inc. 6.125% 6/29/06 (a) | 2,050,000 | 2,173,000 | ||
Raytheon Co.: | ||||
4.5% 11/15/07 | 1,600,000 | 1,604,558 | ||
6.75% 8/15/07 | 900,000 | 986,134 | ||
4,763,692 | ||||
Air Freight & Logistics - 0.2% | ||||
Federal Express Corp. pass thru trust certificates 7.53% 9/23/06 | 867,605 | 929,690 | ||
FedEx Corp. 6.625% 2/12/04 | 900,000 | 912,253 | ||
1,841,943 | ||||
Commercial Services & Supplies - 0.1% | ||||
Boise Cascade Office Products Corp. 7.05% 5/15/05 | 1,100,000 | 1,141,237 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
INDUSTRIALS - continued | ||||
Industrial Conglomerates - 0.6% | ||||
Textron Financial Corp. 2.75% 6/1/06 | $ 1,005,000 | $ 998,438 | ||
Tyco International Group SA yankee 6.375% 6/15/05 | 6,100,000 | 6,397,375 | ||
7,395,813 | ||||
Road & Rail - 0.1% | ||||
Union Pacific Corp. 6.34% 11/25/03 | 820,000 | 822,025 | ||
TOTAL INDUSTRIALS | 15,964,710 | |||
INFORMATION TECHNOLOGY - 0.4% | ||||
Communications Equipment - 0.4% | ||||
Motorola, Inc. 6.75% 2/1/06 | 4,350,000 | 4,684,915 | ||
MATERIALS - 0.7% | ||||
Containers & Packaging - 0.1% | ||||
Sealed Air Corp.: | ||||
6.95% 5/15/09 (a) | 855,000 | 946,913 | ||
8.75% 7/1/08 (a) | 685,000 | 799,738 | ||
1,746,651 | ||||
Paper & Forest Products - 0.6% | ||||
Boise Cascade Corp.: | ||||
7.43% 10/10/05 | 1,540,000 | 1,611,893 | ||
7.5% 2/1/08 | 525,000 | 559,061 | ||
8% 2/24/06 | 745,000 | 792,960 | ||
Weyerhaeuser Co. 5.95% 11/1/08 | 3,245,000 | 3,472,426 | ||
6,436,340 | ||||
TOTAL MATERIALS | 8,182,991 | |||
TELECOMMUNICATION SERVICES - 2.8% | ||||
Diversified Telecommunication Services - 2.0% | ||||
AT&T Corp. 7% 11/15/06 | 3,950,000 | 4,374,270 | ||
British Telecommunications PLC: | ||||
2.445% 12/15/03 (d) | 1,350,000 | 1,351,585 | ||
7.875% 12/15/05 | 2,200,000 | 2,435,937 | ||
Citizens Communications Co. 8.5% 5/15/06 | 1,450,000 | 1,637,882 | ||
France Telecom SA 8.45% 3/1/06 | 2,250,000 | 2,519,809 | ||
GTE Hawaiian Telephone Co., Inc. 7.375% 9/1/06 | 1,250,000 | 1,397,731 | ||
Telecom Italia Capital 4% 11/15/08 (a) | 3,100,000 | 3,096,193 | ||
Telecomunicaciones de Puerto Rico, Inc. 6.65% 5/15/06 | 2,220,000 | 2,401,276 | ||
Nonconvertible Bonds - continued | ||||
Principal | Value | |||
TELECOMMUNICATION SERVICES - continued | ||||
Diversified Telecommunication Services - continued | ||||
Telefonica Europe BV 7.35% 9/15/05 | $ 180,000 | $ 196,260 | ||
TELUS Corp. yankee 7.5% 6/1/07 | 3,645,000 | 4,048,039 | ||
23,458,982 | ||||
Wireless Telecommunication Services - 0.8% | ||||
AT&T Wireless Services, Inc. 7.5% 5/1/07 | 6,190,000 | 6,943,131 | ||
Vodafone Group PLC yankee 7.625% 2/15/05 | 1,800,000 | 1,931,355 | ||
8,874,486 | ||||
TOTAL TELECOMMUNICATION SERVICES | 32,333,468 | |||
UTILITIES - 1.6% | ||||
Electric Utilities - 1.0% | ||||
Cleveland Electric Illuminating Co./Toledo Edison Co. 7.67% 7/1/04 | 1,535,000 | 1,591,735 | ||
DTE Energy Co. 6.45% 6/1/06 | 1,510,000 | 1,637,681 | ||
FirstEnergy Corp. 5.5% 11/15/06 | 1,635,000 | 1,718,164 | ||
FPL Group Capital, Inc. 3.25% 4/11/06 | 705,000 | 713,250 | ||
MidAmerican Energy Holdings, Inc. 4.625% 10/1/07 | 705,000 | 721,116 | ||
Monongahela Power Co. 5% 10/1/06 | 2,015,000 | 2,066,163 | ||
Progress Energy, Inc. 6.75% 3/1/06 | 1,500,000 | 1,632,309 | ||
Southwestern Public Service Co. 5.125% 11/1/06 | 650,000 | 690,494 | ||
Texas Utilities Electric Co. 8.25% 4/1/04 | 475,000 | 487,464 | ||
11,258,376 | ||||
Gas Utilities - 0.5% | ||||
Consolidated Natural Gas Co. 7.375% 4/1/05 | 1,100,000 | 1,181,067 | ||
Kinder Morgan Energy Partners LP 5.35% 8/15/07 | 1,400,000 | 1,492,679 | ||
Texas Eastern Transmission Corp. 5.25% 7/15/07 | 310,000 | 328,009 | ||
Williams Holdings of Delaware, Inc.: | ||||
6.125% 12/1/03 | 2,260,000 | 2,293,900 | ||
6.25% 2/1/06 | 530,000 | 543,250 | ||
5,838,905 | ||||
Multi-Utilities & Unregulated Power - 0.1% | ||||
Duke Energy Corp. 4.2% 10/1/08 | 1,140,000 | 1,138,610 | ||
TOTAL UTILITIES | 18,235,891 | |||
TOTAL NONCONVERTIBLE BONDS (Cost $254,979,122) | 262,841,534 | |||
U.S. Government and Government Agency Obligations - 10.8% | ||||
Principal | Value | |||
U.S. Government Agency Obligations - 3.7% | ||||
Fannie Mae 6% 5/15/08 | $ 16,824,000 | $ 18,628,576 | ||
Freddie Mac: | ||||
0% 3/4/04 (c) | 695,000 | 692,456 | ||
2.875% 9/15/05 | 22,907,000 | 23,248,841 | ||
Guaranteed Export Trust Certificates (assets of Trust guaranteed by U.S. Government through Export- | 352,941 | 359,778 | ||
Private Export Funding Corp. secured | 95,400 | 97,928 | ||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | 43,027,579 | |||
U.S. Treasury Obligations - 7.1% | ||||
U.S. Treasury Bonds: | ||||
10% 5/15/10 | 5,021,000 | 5,648,038 | ||
11.75% 2/15/10 | 1,625,000 | 1,834,981 | ||
12% 8/15/13 | 17,526,000 | 24,322,110 | ||
U.S. Treasury Notes: | ||||
2% 8/31/05 | 22,420,000 | 22,521,585 | ||
3.5% 11/15/06 | 185,000 | 190,940 | ||
4.375% 5/15/07 | 25,400,000 | 26,874,394 | ||
TOTAL U.S. TREASURY OBLIGATIONS | 81,392,048 | |||
TOTAL U.S. GOVERNMENT AND (Cost $124,889,542) | 124,419,627 | |||
U.S. Government Agency - Mortgage Securities - 12.3% | ||||
Fannie Mae - 11.9% | ||||
5.5% 8/1/14 to 3/1/18 | 16,351,429 | 16,859,870 | ||
6.5% 5/1/09 to 1/1/33 | 66,443,261 | 69,766,384 | ||
6.5% 11/1/18 to 11/1/33 (b) | 23,945,064 | 25,091,695 | ||
7% 4/1/07 to 5/1/33 | 23,786,992 | 25,082,247 | ||
7% 11/1/18 (b) | 485,000 | 515,161 | ||
7.5% 5/1/12 to 10/1/14 | 308,178 | 329,267 | ||
11.5% 11/1/15 | 148,492 | 170,073 | ||
TOTAL FANNIE MAE | 137,814,697 | |||
U.S. Government Agency - Mortgage Securities - continued | ||||
Principal | Value | |||
Freddie Mac - 0.0% | ||||
8.5% 5/1/26 to 7/1/28 | $ 556,784 | $ 605,561 | ||
12% 11/1/19 | 29,167 | 33,146 | ||
TOTAL FREDDIE MAC | 638,707 | |||
Government National Mortgage Association - 0.4% | ||||
7% 1/15/25 to 6/15/32 | 3,953,783 | 4,191,764 | ||
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $142,418,936) | 142,645,168 | |||
Asset-Backed Securities - 20.3% | ||||
ABSC NIMS Trust Series 2002-HE3 Class A, 7% 10/17/32 (a) | 351,178 | 351,947 | ||
Accredited Mortgage Loan Trust Series 2003-2 | 2,270,000 | 2,268,268 | ||
ACE Securities Corp.: | ||||
Series 2002-HE1, Class A, 1.46% 6/25/32 (d) | 1,086,708 | 1,086,891 | ||
Series 2002-HE2 Class A2, 1.55% 8/25/32 (d) | 1,059,755 | 1,061,373 | ||
Series 2003-HE1: | ||||
Class A2, 1.53% 11/25/33 (d) | 3,600,000 | 3,600,000 | ||
Class M1 1.77% 11/25/33 (d) | 430,000 | 430,000 | ||
Class M2, 2.82% 11/25/33 (d) | 270,000 | 270,000 | ||
Series 2003-NC1 Class A2A, 1.54% 7/25/33 (d) | 4,200,000 | 4,206,300 | ||
ACE Securities Corp. NIMS Trust Series 2002-HE1N Class N, 8.85% 7/25/12 | 131,532 | 131,204 | ||
American Express Credit Account Master Trust | 1,600,000 | 1,712,900 | ||
AmeriCredit Automobile Receivables Trust: | ||||
Series 1999-D Class A3, 7.02% 12/12/05 | 756,982 | 760,585 | ||
Series 2001-B Class A4, 5.37% 6/12/08 | 2,700,000 | 2,785,923 | ||
Series 2001-C Class A4, 5.01% 7/14/08 | 2,500,000 | 2,584,734 | ||
Series 2001-D Class A4 4.41% 11/12/08 | 2,350,000 | 2,414,665 | ||
Series 2002-A Class A4, 4.61% 1/12/09 | 3,675,000 | 3,825,892 | ||
Series 2002-B: | ||||
Class A3, 3.78% 2/12/07 | 3,880,000 | 3,934,582 | ||
Class A4, 4.46% 4/12/09 | 980,000 | 1,009,120 | ||
Series 2003-AM Class A4A, 3.1% 11/6/09 | 875,000 | 877,450 | ||
Series 2003-BX: | ||||
Class A3, 2.11% 8/6/07 | 740,000 | 741,786 | ||
Class A4A, 2.72% 1/6/10 | 1,105,000 | 1,092,072 | ||
Series 2003-CF Class A4, 3.48% 5/6/10 | 1,810,000 | 1,826,109 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
AmeriCredit Automobile Receivables Trust: - continued | ||||
Series 2003-DM Class A4, 2.84% 8/6/10 | $ 1,580,000 | $ 1,560,250 | ||
Ameriquest Mortgage Securities, Inc.: | ||||
Series 2002-4 Class A2, 1.56% 2/25/33 (d) | 692,514 | 693,785 | ||
Series 2002-AR1 Class M1, 1.83% 9/25/32 (d) | 1,100,000 | 1,095,875 | ||
Series 2003-3 Class S, 5% 9/25/05 (f) | 4,753,191 | 250,100 | ||
Series 2003-7 Class M1, 1.97% 8/25/33 (d) | 625,000 | 627,097 | ||
Amortizing Residential Collateral Trust: | ||||
Series 2002-BC3 Class A, 1.45% 6/25/32 (d) | 1,236,215 | 1,235,256 | ||
Series 2002-BC3N Class B2, 7% 6/25/32 (a) | 85,741 | 85,098 | ||
Series 2002-BC6 Class AIO, 6% 8/25/04 (f) | 12,937,273 | 452,378 | ||
Series 2002-BC7: | ||||
Class AIO, 6% 9/25/04 (f) | 8,750,000 | 348,626 | ||
Class M1, 1.92% 10/25/32 (d) | 1,100,000 | 1,100,000 | ||
Series 2002-BC9 Class A2, 1.6% 12/25/32 (d) | 986,359 | 989,113 | ||
AQ Finance NIMS Trust Series 2003-N1 Class NOTE, 9.37% 3/25/33 (a) | 777,998 | 777,979 | ||
Arcadia Automobile Receivables Trust Series 1999-C Class A3, 7.2% 6/15/07 | 881,029 | 883,003 | ||
Argent Securities, Inc.: | ||||
Series 2003-W3: | ||||
Class AV1B, 1.57% 9/25/33 (d) | 367,511 | 367,511 | ||
Class AV2, 1.52% 9/25/33 (d) | 415,401 | 415,401 | ||
Class M2, 2.92% 9/25/33 (d) | 3,100,000 | 3,100,000 | ||
Series 2003-W6 Class AV2, 1.49% 1/25/34 (b)(d) | 3,800,000 | 3,800,000 | ||
Series 2003-W7: | ||||
Class A2, 1.51% 3/25/34 (b)(d) | 2,900,000 | 2,900,000 | ||
Class M1, 1.81% 3/25/34 (b)(d) | 2,500,000 | 2,500,000 | ||
Asset Backed Securities Corp. Home Equity Loan Trust: | ||||
Series 2001-HE3 Class A1, 1.39% 11/15/31 (d) | 702,238 | 702,039 | ||
Series 2002-HE3 Class 2A, 1.52% 10/15/32 (d) | 542,298 | 544,024 | ||
Series 2003-HE2 Class A2, 1.5% 4/15/33 (d) | 2,261,410 | 2,257,548 | ||
Series 2003-HE3 Class A2, 1.47% 6/15/33 (d) | 417,897 | 417,234 | ||
Series 2003-HE4 Class A3, 1.34% 8/15/33 (d) | 1,111,052 | 1,110,879 | ||
Series 2003-HE5 Class A2B, 4.5% 8/15/33 | 949,750 | 949,719 | ||
Series 2003-HE7 Class A3, 1.53% 12/15/33 (b)(d) | 2,710,000 | 2,710,000 | ||
Associates Automobile Receivables Trust: | ||||
Series 2000-1 Class B, 7.83% 8/15/07 | 2,345,000 | 2,431,161 | ||
Series 2000-2 Class A4, 6.9% 8/15/05 | 971,948 | 982,123 | ||
Bank One Issuance Trust Series 2002-B2 Class B2, 1.46% 5/15/08 (d) | 1,100,000 | 1,102,664 | ||
Bayview Commercial Asset Trust Series 2003-2 Class A, 1.7% 12/25/33 (a)(d) | 4,225,000 | 4,225,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
BMW Vehicle Owner Trust Series 2002-A Class A3, 3.8% 5/25/06 | $ 1,145,442 | $ 1,157,434 | ||
Capital Auto Receivables Asset Trust: | ||||
Series 2002-4, Class CTFS, 2.62% 3/17/08 | 2,097,005 | 2,109,736 | ||
Series 2002-5 Class B, 2.8% 4/15/08 | 1,772,039 | 1,786,073 | ||
Capital One Auto Finance Trust Series 2002-A Class A4, 4.79% 1/15/09 | 1,900,000 | 1,979,518 | ||
Capital One Master Trust: | ||||
Series 1999-3 Class B, 1.6% 9/15/09 (d) | 1,000,000 | 999,462 | ||
Series 2001-1 Class B, 1.63% 12/15/10 (d) | 1,700,000 | 1,674,500 | ||
Series 2001-8A Class A, 4.6% 8/17/09 | 1,390,000 | 1,431,019 | ||
Series 2002-3A Class B, 4.55% 2/15/08 | 2,250,000 | 2,310,075 | ||
Capital One Multi-Asset Execution Trust: | ||||
Series 2002-B1 Class B1, 1.8% 7/15/08 (d) | 1,495,000 | 1,499,440 | ||
Series 2003-B1 Class B1, 2.29% 2/17/09 (d) | 5,715,000 | 5,779,294 | ||
CDC Mortgage Capital Trust: | ||||
Series 2001-HE1 Class A, 1.46% 1/25/32 (d) | 1,933,560 | 1,928,337 | ||
Series 2002-HE2: | ||||
Class A, 1.41% 1/25/33 (d) | 541,178 | 540,657 | ||
Class M1, 1.82% 1/25/33 (d) | 899,998 | 900,740 | ||
Series 2003-HE4 Class A2, 1.35% 3/25/34 (b)(d) | 5,000,000 | 5,000,000 | ||
Chase Credit Card Master Trust Series 2003-6 Class B, 1.47% 2/15/11 (b)(d) | 2,150,000 | 2,148,259 | ||
Chase Manhattan Auto Owner Trust: | ||||
Series 2000-A Class CTFS, 6.48% 6/15/07 | 320,212 | 327,386 | ||
Series 2001-A: | ||||
Class A3, 4.55% 8/15/05 | 531,045 | 534,705 | ||
Class CTFS, 5.06% 2/15/08 | 142,993 | 146,698 | ||
Citibank Credit Card Issuance Trust Series 2001-A8 Class A8, 4.1% 12/7/06 | 3,000,000 | 3,082,419 | ||
Countrywide Home Loans, Inc. Series 2002-3NIM Class NOTE, 9% 9/25/32 (a) | 117,748 | 118,339 | ||
CS First Boston Mortgage Securities Corp. NIMS Trust: | ||||
Series 2001-H30N Class A, 8% 7/27/32 (a) | 166,946 | 165,694 | ||
Series 2001-HE22N Class A, 8% 3/27/32 | 34,820 | 34,733 | ||
Series 2002-H10N Class A, 8% 11/27/32 (a) | 1,131,329 | 1,114,359 | ||
Series 2002-H16N Class A, 8% 11/27/32 (a) | 789,530 | 777,687 | ||
Series 2002-H1N Class A, 8% 8/27/32 (a) | 65,606 | 64,950 | ||
Series 2002-H4N Class A, 8% 8/27/32 (a) | 352,937 | 349,408 | ||
DaimlerChrysler Auto Trust Series 2001-A Class A3, 5.16% 1/6/05 | 388,006 | 388,649 | ||
Discover Card Master Trust I: | ||||
Series 1999-6 Class A, 6.85% 7/17/07 | 1,400,000 | 1,485,251 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Discover Card Master Trust I: - continued | ||||
Series 2001-5 Class B, 5.65% 11/15/06 | $ 700,000 | $ 717,869 | ||
First USA Credit Card Master Trust Series 1997-1 | 2,170,000 | 2,170,786 | ||
Fleet Credit Card Master Trust II Series 2001-C Class A, 3.86% 3/15/07 | 2,045,000 | 2,085,163 | ||
Ford Credit Auto Owner Trust: | ||||
Series 2001-B Class B, 5.71% 9/15/05 | 290,000 | 297,431 | ||
Series 2001-C Class A4, 4.83% 2/15/05 | 527,296 | 531,580 | ||
Series 2002-A Class A3A, 3.62% 1/15/06 | 2,967,908 | 2,998,407 | ||
GS Mortgage Securities Corp. Series 2003-HE2 Class M1, 1.77% 8/25/33 (d) | 650,000 | 645,957 | ||
GSAMP Trust Series 2002-NC1 Class A2, 1.44% 7/25/32 (d) | 875,070 | 874,174 | ||
Harley-Davidson Motorcycle Trust Series 2001-2 Class A1, 3.77% 4/17/06 | 39,068 | 39,106 | ||
Home Equity Asset Trust: | ||||
Series 2002-2 Class A4, 1.47% 6/25/32 (d) | 1,392,152 | 1,392,152 | ||
Series 2002-5 Class A3, 1.64% 5/25/33 (d) | 2,562,376 | 2,571,350 | ||
Series 2003-3 Class A4, 1.58% 2/25/33 (d) | 2,100,000 | 2,100,000 | ||
Series 2003-5 Class A2, 1.47% 12/25/33 (d) | 3,449,402 | 3,458,026 | ||
Series 2003-5N Class A, 7.5% 1/27/34 (a) | 200,000 | 199,090 | ||
Series 2003-7 Class A2, 1.5% 3/25/34 (b)(d) | 4,100,000 | 4,100,000 | ||
Home Equity Asset Trust NIMS Trust: | ||||
Series 2002-2N Class A, 8% 1/27/33 (a) | 189,173 | 187,281 | ||
Series 2002-3N Class A, 8% 3/25/33 (a) | 418,711 | 410,336 | ||
Series 2002-4N Class A, 8% 5/27/33 (a) | 404,271 | 396,186 | ||
Series 2003-2N Class A, 8% 9/27/33 (a) | 608,949 | 596,161 | ||
Series 2003-3N Class A, 8% 9/27/33 (a) | 1,448,860 | 1,419,882 | ||
Honda Auto Receivables Owner Trust Series 2001-2 Class A3, 4.67% 3/18/05 | 263,602 | 265,708 | ||
Household Automotive Trust: | ||||
Series 2001-1 Class A4, 5.57% 11/19/07 | 1,500,000 | 1,557,121 | ||
Series 2001-2 Class A4, 5.39% 8/17/08 | 1,000,000 | 1,042,996 | ||
Series 2002-2 Class A3, 2.85% 3/19/07 | 2,700,000 | 2,725,171 | ||
Household Home Equity Loan Trust: | ||||
Series 2002-1 Class A, 1.49% 12/22/31 (d) | 735,740 | 736,445 | ||
Series 2002-3 Class A, 1.57% 7/20/32 (d) | 1,138,609 | 1,138,315 | ||
Series 2003-1 Class A, 1.47% 10/20/32 (d) | 2,807,978 | 2,807,976 | ||
Household Mortgage Loan Trust Series 2003-HC2: | ||||
Class A2, 1.45% 6/20/33 (d) | 2,360,000 | 2,360,000 | ||
Class M, 1.72% 6/20/33 (d) | 1,925,000 | 1,925,000 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Household Private Label Credit Card Master Note Trust I: | ||||
Series 2001-2 Class A, 4.95% 6/16/08 | $ 1,600,000 | $ 1,642,093 | ||
Series 2002-2 Class B, 1.67% 1/18/11 (d) | 1,000,000 | 1,004,961 | ||
Series 2002-3 Class B, 2.37% 9/15/09 (d) | 975,000 | 975,787 | ||
IndyMac NIMS Trust Series 2001-B Class A, 8.47% 8/25/31 (a)(d) | 23,019 | 22,789 | ||
Isuzu Auto Owner Trust Series 2001-1 Class A3, 4.88% 11/22/04 | 159,286 | 160,065 | ||
JCPenney Master Credit Card Trust Series E Class A, 5.5% 6/15/07 | 1,100,000 | 1,101,760 | ||
Long Beach Asset Holdings Corp. NIMS Trust Series 2002-3 Class NOTE, 1.67% 8/25/09 (a)(d) | 1,145,094 | 1,144,736 | ||
MBNA Credit Card Master Note Trust: | ||||
Series 2001-B1 Class B1, 1.495% 10/15/08 (d) | 1,350,000 | 1,351,875 | ||
Series 2001-B2 Class B2, 1.48% 1/15/09 (d) | 4,750,000 | 4,765,816 | ||
Series 2002-B1 Class B1, 5.15% 7/15/09 | 1,025,000 | 1,085,476 | ||
Series 2002-B2 Class B2, 1.5% 10/15/09 (d) | 3,600,000 | 3,611,250 | ||
Series 2002-B3 Class B3, 1.52% 1/15/08 (d) | 1,100,000 | 1,103,156 | ||
MBNA Master Credit Card Trust II: | ||||
Series 1998-E Class B, 1.48% 9/15/10 (d) | 1,500,000 | 1,504,095 | ||
Series 1998-G Class B, 1.52% 2/17/09 (d) | 1,550,000 | 1,553,096 | ||
Series 1999-G Class A, 6.35% 12/15/06 | 1,000,000 | 1,035,079 | ||
Series 2000-L Class B, 1.62% 4/15/10 (d) | 650,000 | 653,877 | ||
Merrill Lynch Mortgage Investments, Inc. Series 2003-HE1 Class A1, 1.57% 7/25/34 (d) | 4,200,000 | 4,200,000 | ||
Morgan Stanley ABS Capital I, Inc. Series 2002-NC6N Class NOTE, 9.5% 9/25/32 (a) | 233,813 | 233,891 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
Series 2001-NC4N Class NOTE, 8.5% 1/25/32 (a) | 37,896 | 37,919 | ||
Series 2002-AM3 Class A3, 1.61% 2/25/33 (d) | 1,188,082 | 1,191,565 | ||
Series 2002-HE2 Class M1, 1.82% 8/25/32 (d) | 1,150,000 | 1,150,346 | ||
Series 2002-HE2N Class NOTE, 9.5% 8/25/32 (a) | 228,139 | 228,241 | ||
Series 2002-NC3N Class NOTE, 9.5% 8/25/32 (a) | 153,065 | 153,171 | ||
Series 2002-NC5N Class NOTE, 9.5% 9/25/32 (a) | 593,988 | 594,229 | ||
Series 2002-OP1N Class NOTE, 9.5% 9/25/32 (a) | 107,881 | 107,986 | ||
Series 2003-NC2 Class M2, 3.12% 2/25/33 (d) | 615,000 | 620,687 | ||
Morgan Stanley Dean Witter Capital I, Inc.: | ||||
Series 2002-AM3N Class NOTE, 9.5% 2/25/33 (a) | 443,218 | 443,636 | ||
Series 2003-NC1N Class NOTE, 9.5% 11/25/32 (a) | 2,001,487 | 2,000,948 | ||
Series 2003-NC2N Class NOTE, 9.5% 12/25/32 (a) | 1,668,372 | 1,667,719 | ||
Mortgage Asset Backed Securities Trust Series 2002-NC1 Class M1, 1.97% 10/25/32 (d) | 1,600,000 | 1,605,250 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
New Century Home Equity Loan Trust Series 2003-2 Class AIO, 5.5% 3/25/05 (f) | $ 25,823,160 | $ 1,451,262 | ||
Nissan Auto Lease Trust Series 2003-A Class A3A, 1.26% 6/15/09 (d) | 3,400,000 | 3,400,000 | ||
Onyx Acceptance Owner Trust: | ||||
Series 2000-C Class A4, 7.26% 5/15/07 | 1,185,669 | 1,223,895 | ||
Series 2000-D Class A4, 6.85% 8/15/07 | 1,467,092 | 1,502,622 | ||
Series 2001-D Class A3, 3.63% 12/15/05 | 699,702 | 704,213 | ||
Series 2002-A Class A3, 3.75% 4/15/06 | 508,570 | 513,911 | ||
Series 2002-C: | ||||
Class A3, 3.29% 9/15/06 | 1,158,684 | 1,171,168 | ||
Class A4, 4.07% 4/15/09 | 970,000 | 1,002,770 | ||
Series 2003-D Class A3, 2.4% 12/15/07 | 1,685,000 | 1,686,580 | ||
Option One Mortgage Securities Corp. NIMS Trust: | ||||
Series 2002-2A Class CFTS, 8.83% 6/26/32 (a) | 82,087 | 82,139 | ||
Series 2002-4 Class CTFS, 8.35% 7/25/32 (a) | 115,398 | 114,244 | ||
PP&L Transition Bonds LLC Series 1999-1 Class A5, 6.83% 3/25/07 | 1,600,000 | 1,666,692 | ||
Providian Gateway Master Trust Series 2002-B Class A, 1.82% 6/15/09 (a)(d) | 1,400,000 | 1,409,380 | ||
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 Class A1, 3.6% 4/25/33 | 2,033,866 | 2,008,284 | ||
Salomon Brothers Mortgage Securities VII, Inc. Series 2003-UP1 Class A, 3.45% 4/25/32 (a) | 1,635,779 | 1,627,371 | ||
Sears Credit Account Master Trust II: | ||||
Series 1996-3 Class A, 7% 7/15/08 | 243,750 | 248,781 | ||
Series 2000-1: | ||||
Class A, 7.25% 11/15/07 | 250,000 | 250,571 | ||
Class B, 7.5% 11/15/07 | 1,700,000 | 1,703,505 | ||
Series 2001-2 Class B, 1.41% 6/16/08 (d) | 1,200,000 | 1,197,778 | ||
Series 2002-4 Class B, 1.545% 8/18/09 (d) | 1,100,000 | 1,097,934 | ||
Series 2002-5 Class B, 2.37% 11/17/09 (d) | 2,200,000 | 2,204,892 | ||
Superior Wholesale Inventory Financing Trust VII Series 2003-A8 Class CTFS, 1.57% 3/15/11 (a)(d) | 2,520,000 | 2,520,000 | ||
Terwin Mortgage Trust Series 2003-4HE Class A1, 1.55% 9/25/34 (d) | 4,200,000 | 4,200,000 | ||
Toyota Auto Receivables 2000-A Owner Trust Series 2000-A Class A4, 7.21% 4/15/07 | 1,490,734 | 1,511,589 | ||
Triad Auto Receivables Owner Trust Series 2002-A: | ||||
Class A3, 2.62% 2/12/07 | 2,600,000 | 2,619,500 | ||
Asset-Backed Securities - continued | ||||
Principal | Value | |||
Triad Auto Receivables Owner Trust Series 2002-A: - continued | ||||
Class A4, 3.24% 8/12/09 | $ 1,505,000 | $ 1,526,031 | ||
Wells Fargo Auto Trust Series 2001-A Class A3, 4.68% 2/15/05 | 151,442 | 152,024 | ||
TOTAL ASSET-BACKED SECURITIES (Cost $233,942,535) | 234,918,790 | |||
Collateralized Mortgage Obligations - 5.3% | ||||
Private Sponsor - 1.4% | ||||
Countrywide Home Loans, Inc. sequential pay: | ||||
Series 2002-25 Class 2A1, 5.5% 11/27/17 | 1,499,272 | 1,523,313 | ||
Series 2002-32 Class 2A3, 5% 1/25/18 | 723,951 | 730,158 | ||
Merrill Lynch Mortgage Investments, Inc.: | ||||
floater Series 2003-A Class 2A1, 1.51% 3/25/28 (d) | 3,456,774 | 3,454,047 | ||
Series 2003-E Class XA1, 1% 10/25/28 (d)(f) | 21,327,719 | 339,966 | ||
Residential Asset Mortgage Products, Inc. Series 2003-SL1 Class 3A1, 7.125% 5/25/31 (b) | 3,695,000 | 3,810,180 | ||
Sequoia Mortgage Funding Trust Series 2003-A | 78,320,000 | 892,848 | ||
Sequoia Mortgage Trust: | ||||
floater Series 2003-5 Class A2, 1.5313% 9/20/33 (d) | 1,492,606 | 1,489,302 | ||
Series 2003-6 Class A2, 1.5513% 11/20/33 (d) | 3,390,000 | 3,390,000 | ||
Washington Mutual Mortgage Securities Corp. Series 2002-MS2 Class 1A32, 6.5% 4/25/32 | 214,118 | 214,854 | ||
TOTAL PRIVATE SPONSOR | 15,844,668 | |||
U.S. Government Agency - 3.9% | ||||
Fannie Mae: | ||||
planned amortization class: | ||||
Series 1993-183 Class J, 6.5% 11/25/22 | 2,845,000 | 2,916,483 | ||
Series 1993-206 Class KA, 6.5% 12/25/22 | 507,126 | 517,444 | ||
Series 1993-78 Class G, 6.5% 11/25/07 | 213,760 | 216,452 | ||
Series 1994-51 Class PH, 6.5% 1/25/23 | 301,769 | 305,763 | ||
Series 1994-63 Class PH, 7% 6/25/23 | 1,010,447 | 1,033,185 | ||
Series 1993-187 Class L, 6.5% 7/25/23 | 2,265,000 | 2,418,894 | ||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||
planned amortization class: | ||||
Series 2001-53 Class OH, 6.5% 6/25/30 | 784,905 | 801,228 | ||
Series 2001-71 Class QD, 6% 4/25/15 | 2,600,000 | 2,661,166 | ||
Collateralized Mortgage Obligations - continued | ||||
Principal | Value | |||
U.S. Government Agency - continued | ||||
Fannie Mae guaranteed REMIC pass thru certificates: - continued | ||||
planned amortization class: | ||||
Series 2001-80 Class PH, 6% 12/25/27 | $ 1,055,243 | $ 1,066,743 | ||
Series 2002-55 Class PA, 5.5% 3/25/18 | 672,361 | 673,946 | ||
Series 2003-16 Class PA, 4.5% 11/25/09 | 530,000 | 541,246 | ||
sequential pay: | ||||
Series 2001-9 Class PB, 6.5% 5/25/27 | 913,733 | 921,692 | ||
Series 2002-28 Class VB, 6.5% 3/25/20 | 1,170,000 | 1,185,664 | ||
Series 2002-38 Class QB, 5.75% 7/25/13 | 1,542,217 | 1,546,051 | ||
Series 2003-19 Class MJ, 4.25% 5/25/30 | 3,871,108 | 3,878,347 | ||
Freddie Mac planned amortization class: | ||||
Series 2115 Class PC, 6% 5/15/11 | 45,579 | 45,572 | ||
Series 2162 Class TF, 6% 11/15/24 | 1,117,097 | 1,122,748 | ||
Series 2355 Class CD, 6.5% 6/15/30 | 428,011 | 434,444 | ||
Freddie Mac Manufactured Housing participation certificates guaranteed planned amortization class Series 32 Class TH, 7% 9/25/22 | 766,384 | 770,630 | ||
Freddie Mac Multi-class participation certificates guaranteed: | ||||
planned amortization class: | ||||
Series 1714 Class H, 6.75% 5/15/23 | 1,023,102 | 1,045,270 | ||
Series 2134 Class PC, 5.725% 4/15/11 | 31,366 | 31,350 | ||
Series 2322 Class HC, 6.5% 3/15/30 | 242,794 | 247,525 | ||
Series 2489 Class PD, 6% 2/15/31 | 2,525,000 | 2,637,517 | ||
sequential pay: | ||||
Series 2230 Class VB, 8% 2/15/16 | 652,082 | 657,030 | ||
Series 2447 Class LG, 5.5% 12/15/13 | 225,163 | 226,525 | ||
Series 2458 Class VK, 6.5% 3/15/13 | 2,313,087 | 2,427,240 | ||
Series 2489 Class MA, 5% 12/15/12 | 426,004 | 428,198 | ||
Series 1803 Class A, 6% 12/15/08 | 690,674 | 713,695 | ||
Series 2496 Class OC, 5.5% 9/15/14 | 10,260,000 | 10,665,743 | ||
Series 2628 Class AZ, 4.5% 6/15/18 | 2,222,284 | 2,222,284 | ||
Ginnie Mae guaranteed REMIC pass thru securities Series 2001-53 Class TA, 6% 12/20/30 | 1,383,429 | 1,415,046 | ||
TOTAL U.S. GOVERNMENT AGENCY | 45,775,121 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $62,161,077) | 61,619,789 | |||
Commercial Mortgage Securities - 8.4% | ||||
Principal | Value | |||
280 Park Avenue Trust floater Series 2001-280 | $ 15,667,010 | $ 833,595 | ||
Asset Securitization Corp.: | ||||
sequential pay Series 1995-MD4 Class A1, 7.1% 8/13/29 | 521,274 | 561,158 | ||
Series 1997-D5 Class PS1, 1.7257% 2/14/43 (d)(f) | 11,395,532 | 752,283 | ||
Banc America Commercial Mortgage, Inc.: | ||||
Series 2002-2 Class XP, 1.803% 7/11/43 (a)(d)(f) | 8,205,000 | 696,143 | ||
Series 2003-1 Class XP1, 1.475% 9/11/36 (a)(d)(f) | 52,955,000 | 1,911,347 | ||
Banc America Large Loan, Inc. floater Series 2002-FL2A Class A2, 1.44% 9/8/14 (a)(d) | 2,100,000 | 2,100,656 | ||
Bear Stearns Commercial Mortgage Securities, Inc.: | ||||
Series 2002-TOP8 Class X2, 2.3371% 8/15/38 (a)(d)(f) | 9,053,000 | 948,583 | ||
Series 2003-PWR2 Class X2, 0.721% 5/11/39 (a)(d)(f) | 23,310,000 | 764,859 | ||
Series 2003-T12 Class X2, 0.9251% 8/13/39 (a)(d)(f) | 15,835,000 | 566,597 | ||
Chase Commercial Mortgage Securities Corp.: | ||||
floater Series 2000-FL1A Class B, 1.57% 12/12/13 (a)(d) | 467,326 | 466,829 | ||
sequential pay: | ||||
Series 1998-1 Class A2, 6.56% 5/18/30 | 5,500,000 | 6,111,511 | ||
Series 1999-2 Class A1, 7.032% 1/15/32 | 665,180 | 730,602 | ||
Series 2000-3 Class A1, 7.093% 10/15/32 | 1,253,742 | 1,383,237 | ||
COMM floater: | ||||
Series 2000-FL3A Class C, 1.88% 11/15/12 (a)(d) | 2,470,000 | 2,452,080 | ||
Series 2001-FL5A: | ||||
Class A2, 1.67% 11/15/13 (a)(d) | 1,898,511 | 1,899,267 | ||
Class D, 2.37% 11/15/13 (a)(d) | 1,350,000 | 1,348,909 | ||
Series 2002-FL6 Class G, 3.02% 6/14/14 (a)(d) | 800,000 | 788,000 | ||
Series 2002-FL7: | ||||
Class H, 3.37% 11/15/14 (a)(d) | 1,232,000 | 1,218,202 | ||
Class MPP, 3.52% 11/15/14 (a)(d) | 850,000 | 850,000 | ||
Commercial Resecuritization Trust sequential pay Series 1999-ABC1 Class A, 6.74% 1/27/09 (a) | 848,590 | 896,456 | ||
CS First Boston Mortgage Securities Corp.: | ||||
floater Series 2001-TFLA Class H230, 3.07% 9/15/11 (a)(d) | 700,000 | 693,000 | ||
sequential pay: | ||||
Series 1997-C2 Class A2, 6.52% 1/17/35 | 794,450 | 834,251 | ||
Series 2000-C1 Class A1, 7.325% 4/14/62 | 951,203 | 1,045,598 | ||
Series 2000-FL1A Class A2, 1.52% 12/15/09 (a)(d) | 1,044,572 | 1,044,650 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
CS First Boston Mortgage Securities Corp.: - continued | ||||
sequential pay: | ||||
Series 2001-CK3 Class A2, 6.04% 6/15/34 | $ 1,050,000 | $ 1,128,601 | ||
Series 2001-CK6 Class AX, 0.645% 9/15/18 (f) | 20,329,059 | 817,686 | ||
Series 2003-C3 Class ASP, 2.1423% 5/15/38 (a)(d)(f) | 26,520,000 | 2,248,047 | ||
Series 2003-C4 Class ASP, 0.6007% 8/15/36 (a)(d)(f) | 19,040,000 | 477,695 | ||
Series 2003-TF2A: | ||||
Class A2, 1.44% 11/15/14 (b)(d) | 1,200,000 | 1,200,000 | ||
Class C, 1.72% 11/15/14 (b)(d) | 240,000 | 240,000 | ||
Class E, 2.17% 11/15/14 (b)(d) | 190,000 | 190,000 | ||
Class H, 3.12% 11/15/14 (b)(d) | 235,000 | 235,000 | ||
Class K, 4.37% 11/15/14 (a)(b)(d) | 350,000 | 350,000 | ||
Deutsche Mortgage & Asset Receiving Corp. sequential pay Series 1998-C1: | ||||
Class A2, 6.538% 6/15/31 | 895,000 | 979,060 | ||
Class D, 7.231% 6/15/31 | 485,000 | 492,760 | ||
DLJ Commercial Mortgage Corp. sequential pay Series 2000-CF1 Class A1A, 7.45% 6/10/33 | 905,229 | 997,613 | ||
Equitable Life Assurance Society of the United States sequential pay Series 174 Class A1, 7.24% 5/15/06 (a) | 1,000,000 | 1,102,501 | ||
First Union-Lehman Brothers Commercial Mortgage Trust sequential pay: | ||||
Series 1997-C1 Class A2, 7.3% 4/18/29 | 330,766 | 332,619 | ||
Series 1997-C2 Class A3, 6.65% 11/18/29 | 2,780,000 | 3,068,020 | ||
FMAC Loan Receivables Trust sequential pay Series 1998-CA Class A1, 5.99% 11/15/04 (a) | 133,834 | 120,451 | ||
Franchise Loan Trust sequential pay Series 1998-I | 239,691 | 215,722 | ||
GE Capital Commercial Mortgage Corp. Series 2001-1 Class X1, 0.791% 5/15/33 (a)(d)(f) | 11,944,206 | 489,880 | ||
GGP Mall Properties Trust floater Series 2001-C1A: | ||||
Class A1, 1.72% 11/15/11 (a)(d) | 702,925 | 702,631 | ||
Class A3 1.82% 2/15/14 (a)(d) | 949,480 | 957,184 | ||
GMAC Commercial Mortgage Securities, Inc.: | ||||
Series 2001-WTCA: | ||||
Class A1, 1.34% 9/9/15 (a)(d) | 431,416 | 426,361 | ||
Class A2, 1.49% 9/9/15 (a)(d) | 2,750,000 | 2,701,875 | ||
Class C, 2.22% 9/9/15 (a)(d) | 2,150,000 | 2,066,352 | ||
Class E, 3.02% 9/9/15 (a)(d) | 650,000 | 622,781 | ||
Class X1, 0.8% 9/1/15 (a)(f) | 15,876,316 | 19,845 | ||
Series 2003-C2 Class X2, 0.3887% 4/10/40 (f) | 56,940,000 | 721,601 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Greenwich Capital Commercial Funding Corp.: | ||||
Series 2002-C1 Class SWDB 5.857% 11/11/19 (a) | $ 1,150,000 | $ 1,155,391 | ||
Series 2003-C1 Class XP, 2.4429% 7/5/35 (a)(d)(f) | 13,440,000 | 1,314,600 | ||
GS Mortgage Securities Corp. Series 2003-HE1 Class M2, 3.02% 6/20/33 (d) | 1,810,000 | 1,811,429 | ||
GS Mortgage Securities Corp. II Series 2003-C1 Class A2A, 3.59% 1/10/40 | 1,705,000 | 1,702,574 | ||
GS Mortgage Trust II floater Series 2001-FL4A Class D, 2.03% 12/15/10 (a)(d) | 136,502 | 136,173 | ||
Hilton Hotel Pool Trust sequential pay Series 2000-HLTA Class A1, 7.055% 10/3/15 (a) | 792,358 | 863,480 | ||
Host Marriot Pool Trust sequential pay Series 1999-HMTA Class A, 6.98% 8/3/15 (a) | 670,988 | 730,752 | ||
J.P. Morgan Chase Commercial Mortgage Securities Corp.: | ||||
Series 2002-C3 Class X2, 1.3645% 7/12/35 (a)(d)(f) | 7,395,000 | 387,646 | ||
Series 2003-LN1 Class X2, 0.7861% 10/15/37 (a)(d)(f) | 29,610,000 | 1,051,451 | ||
J.P. Morgan Commercial Mortgage Finance Corp. sequential pay Series 1997-C5 Class A2, 7.069% 9/15/29 | 751,453 | 787,829 | ||
Kansas Mortgage Capital LP Series 1995-1 Class E, 8.2532% 2/20/30 (a)(d) | 788,585 | 787,485 | ||
LB-UBS Commercial Mortgage Trust: | ||||
sequential pay: | ||||
Series 2003-C3 Class A2, 3.086% 5/15/27 | 1,465,000 | 1,422,557 | ||
Series 2003-C5 Class A2, 3.478% 7/15/27 | 4,605,000 | 4,540,383 | ||
Series 2002-C4 Class XCP, 1.6957% 10/15/35 (a)(d)(f) | 13,355,000 | 927,518 | ||
Series 2002-C7 Class XCP, 1.1897% 1/15/36 (a)(f) | 14,590,000 | 694,513 | ||
Series 2003-C1 Class XCP, 1.6571% 12/15/36 (a)(d)(f) | 7,565,000 | 483,882 | ||
Lehman Brothers Floating Rate Commercial Mortgage Trust floater: | ||||
Series 2001-LLFA Class A, 1.36% 8/16/13 (a)(d) | 1,641,635 | 1,641,571 | ||
Series 2002-LLFA Class A, 1.41% 6/14/17 (a)(d) | 862,745 | 862,717 | ||
Merrill Lynch Mortgage Trust Series 2002-MW1 | 6,130,159 | 428,488 | ||
Morgan Stanley Capital I, Inc.: | ||||
sequential pay: | ||||
Series 1999-CAM1 Class A2, 6.76% 3/15/32 | 187,878 | 203,592 | ||
Series 1999-LIFE Class A1, 6.97% 4/15/33 | 734,901 | 805,488 | ||
Series 1997-RR: | ||||
Class B, 7.3089% 4/30/39 (a)(d) | 1,079,770 | 1,122,615 | ||
Commercial Mortgage Securities - continued | ||||
Principal | Value | |||
Morgan Stanley Capital I, Inc.: - continued | ||||
Series 1997-RR: | ||||
Class C, 7.4389% 4/30/39 (a)(d) | $ 1,275,066 | $ 1,341,343 | ||
Series 1999-1NYP Class F, 7.2465% 5/3/30 (a)(d) | 910,000 | 974,968 | ||
Series 2003-IQ5 Class X2, 1.13% 4/15/38 (a)(d)(f) | 10,090,000 | 545,261 | ||
Morgan Stanley Dean Witter Capital I Trust: | ||||
floater Series 2002-XLF: | ||||
Class D, 2.02% 8/5/14 (a)(d) | 1,893,158 | 1,893,149 | ||
Class F, 3.27% 8/5/14 (a)(d) | 2,820,204 | 2,820,176 | ||
Series 2003-HQ2 Class X2, 1.579% 3/12/35 (a)(d)(f) | 15,050,000 | 1,067,602 | ||
Series 2003-TOP9 Class X2, 1.524% 11/13/36 (a)(d)(f) | 8,960,000 | 679,697 | ||
Mortgage Capital Funding, Inc. sequential pay | 800,681 | 879,448 | ||
Nationslink Funding Corp. sequential pay: | ||||
Series 1999-1 Class A1, 6.042% 1/20/31 | 514,258 | 539,087 | ||
Series 1999-2 Class A1C, 7.03% 6/20/31 | 859,473 | 933,468 | ||
Salomon Brothers Mortgage Securities VII, Inc. floater Series 2001-CDCA Class C, 1.92% 2/15/13 (a)(d) | 1,364,000 | 1,344,502 | ||
Thirteen Affiliates of General Growth Properties, Inc. sequential pay Series 1 Class A1, 6.537% 11/15/04 (a) | 4,780,000 | 4,986,588 | ||
Trizechahn Office Properties Trust Series 2001-TZHA Class E3, 7.253% 3/15/13 (a) | 1,555,000 | 1,626,642 | ||
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $96,937,663) | 97,296,163 | |||
Foreign Government and Government Agency Obligations - 0.4% | ||||
Chilean Republic 5.625% 7/23/07 | 740,000 | 789,950 | ||
United Mexican States 4.625% 10/8/08 | 3,190,000 | 3,197,975 | ||
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $3,904,708) | 3,987,925 | |||
Fixed-Income Funds - 14.0% | |||
Shares | |||
Fidelity Ultra-Short Central Fund (e) | 1,626,147 | 161,752,842 | |
Cash Equivalents - 10.9% | |||
Maturity | Value | ||
Investments in repurchase agreements (Collateralized by U.S. Government Obligations, in a joint trading account at 1.07%, dated 10/31/03 due 11/3/03) | $ 125,873,224 | $ 125,862,000 | |
TOTAL INVESTMENT PORTFOLIO - 105.2% (Cost $1,206,695,634) | 1,215,343,838 | ||
NET OTHER ASSETS - (5.2)% | (59,852,695) | ||
NET ASSETS - 100% | $ 1,155,491,143 | ||
Futures Contracts | |||||
Expiration | Underlying | Unrealized | |||
Purchased | |||||
Eurodollar Contracts | |||||
102 Eurodollar 90 Day Index Contracts | June 2005 | $ 81,335,846 | $ 83,225 | ||
102 Eurodollar 90 Day Index Contracts | Sept. 2005 | 86,336,447 | 57,800 | ||
102 Eurodollar 90 Day Index Contracts | Dec. 2005 | 97,278,073 | 43,413 | ||
102 Eurodollar 90 Day Index Contracts | March 2006 | 90,074,905 | 27,838 | ||
102 Eurodollar 90 Day Index Contracts | June 2006 | 91,987,803 | 5,076 | ||
102 Eurodollar 90 Day Index Contracts | Sept. 2006 | 91,964,728 | (79,237) | ||
102 Eurodollar 90 Day Index Contracts | Dec. 2006 | 98,985,108 | (94,112) | ||
102 Eurodollar 90 Day Index Contracts | March 2007 | 91,960,282 | 48,667 | ||
92,670 | |||||
Swap Agreements | |||||
Expiration | Notional | Unrealized | |||
Credit Default Swap | |||||
Receive from Morgan Stanley, Inc., upon default of Vornado Realty Trust, par value of the notional amount of Vornado Realty Trust 5.625% 6/15/07, and pay quarterly notional amount multiplied by 1.37% | June 2007 | $ 750,000 | $ (15,526) | ||
Receive quarterly notional amount multiplied by .62% and pay Goldman Sachs upon default of SLM Corp., par value of the notional amount of SLM Corp. 1.1106% 7/25/35 | August 2007 | 400,000 | 3,530 | ||
Receive quarterly notional amount multiplied by 1.12% and pay Morgan Stanley, Inc. upon default of Comcast Cable Communications, Inc., par value of the notional amount of Comcast Cable Communications, Inc. 6.75% 1/30/11 | June 2006 | 1,600,000 | 28,701 | ||
TOTAL CREDIT DEFAULT SWAP | 2,750,000 | 16,705 | |||
Interest Rate Swap | |||||
Receive quarterly a fixed rate equal to 2.3192% and pay quarterly a floating rate based on 3-month LIBOR with Lehman Brothers, Inc. | April 2006 | 11,000,000 | (44,305) | ||
Receive quarterly a fixed rate equal to 3.098% and pay quarterly a floating rate based on 3-month LIBOR with Morgan Stanley, Inc. | April 2007 | 21,470,000 | 56,640 | ||
Receive quarterly a fixed rate equal to 3.1422% and pay quarterly a floating rate based on 3-month LIBOR with JPMorgan Chase, Inc. | April 2007 | 18,280,000 | 82,335 | ||
TOTAL INTEREST RATE SWAP | 50,750,000 | 94,670 | |||
$ 53,500,000 | $ 111,375 | ||||
Legend |
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $98,237,974 or 8.5% of net assets. |
(b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. |
(c) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $692,456. |
(d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) A complete listing of the fund's holdings as of its most recent fiscal year end is available upon request. |
(f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. |
Other Information |
Purchases and sales of securities, other than short-term securities, aggregated $1,270,580,605 and $1,004,667,969, respectively, of which long-term U.S. government and government agency obligations aggregated $747,785,252 and $683,634,977, respectively. |
The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which loans were outstanding amounted to $7,303,500. The weighted average interest rate was 1.3%. Interest earned from the interfund lending program amounted to $526 and is included in interest income on the Statement of Operations. At period end there were no interfund loans outstanding. |
Income Tax Information |
At October 31, 2003, the fund had a capital loss carryforward of approximately $11,617,000 of which $2,265,000, $3,149,000, $2,459,000 and $3,744,000 will expire on October 31, 2004, 2005, 2007 and 2008, respectively. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
October 31, 2003 | ||
Assets | ||
Investment in securities, at value (including repurchase agreements of $125,862,000) (cost $1,206,695,634) - See accompanying schedule | $ 1,215,343,838 | |
Cash | 329,683 | |
Receivable for investments sold | 6,621,432 | |
Receivable for fund shares sold | 3,365,887 | |
Interest receivable | 8,558,517 | |
Receivable for daily variation on futures contracts | 33,000 | |
Unrealized gain on swap agreements | 111,375 | |
Prepaid expenses | 6,042 | |
Total assets | 1,234,369,774 | |
Liabilities | ||
Payable for investments purchased | $ 16,631,057 | |
Delayed delivery | 54,876,066 | |
Payable for fund shares redeemed | 5,867,885 | |
Distributions payable | 416,050 | |
Accrued management fee | 412,740 | |
Distribution fees payable | 422,301 | |
Other payables and accrued expenses | 252,532 | |
Total liabilities | 78,878,631 | |
Net Assets | $ 1,155,491,143 | |
Net Assets consist of: | ||
Paid in capital | $ 1,164,427,662 | |
Undistributed net investment income | 1,900,936 | |
Accumulated undistributed net realized gain (loss) on investments | (19,689,704) | |
Net unrealized appreciation (depreciation) on investments | 8,852,249 | |
Net Assets | $ 1,155,491,143 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
October 31, 2003 | ||
Calculation of Maximum Offering Price | ||
Class A: | $ 9.55 | |
Maximum offering price per share (100/98.50 of $9.55) | $ 9.70 | |
Class T: | $ 9.55 | |
Maximum offering price per share (100/98.50 of $9.55) | $ 9.70 | |
Class B: | $ 9.56 | |
Class C: | $ 9.55 | |
Institutional Class: | $ 9.55 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended October 31, 2003 | ||
Investment Income | ||
Interest | $ 37,626,420 | |
Security lending | 4,582 | |
Total income | 37,631,002 | |
Expenses | ||
Management fee | $ 4,558,204 | |
Transfer agent fees | 1,850,399 | |
Distribution fees | 4,647,516 | |
Accounting and security lending fees | 247,552 | |
Non-interested trustees' compensation | 4,470 | |
Custodian fees and expenses | 45,274 | |
Registration fees | 187,418 | |
Audit | 53,631 | |
Legal | 7,965 | |
Miscellaneous | 9,119 | |
Total expenses before reductions | 11,611,548 | |
Expense reductions | (9,030) | 11,602,518 |
Net investment income (loss) | 26,028,484 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities | 11,803,676 | |
Futures contracts | 857,562 | |
Swap agreements | (137,101) | |
Total net realized gain (loss) | 12,524,137 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (2,474,863) | |
Futures contracts | (333,915) | |
Swap agreements | 51,702 | |
Delayed delivery commitments | 39,356 | |
Total change in net unrealized appreciation (depreciation) | (2,717,720) | |
Net gain (loss) | 9,806,417 | |
Net increase (decrease) in net assets resulting from operations | $ 35,834,901 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 26,028,484 | $ 23,776,366 |
Net realized gain (loss) | 12,524,137 | 770,168 |
Change in net unrealized appreciation (depreciation) | (2,717,720) | 398,471 |
Net increase (decrease) in net assets resulting | 35,834,901 | 24,945,005 |
Distributions to shareholders from net investment income | (27,246,649) | (24,339,852) |
Share transactions - net increase (decrease) | 300,204,128 | 375,108,953 |
Total increase (decrease) in net assets | 308,792,380 | 375,714,106 |
Net Assets | ||
Beginning of period | 846,698,763 | 470,984,657 |
End of period (including undistributed net investment income of $1,900,936 and undistributed net | $ 1,155,491,143 | $ 846,698,763 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.44 | $ 9.49 | $ 9.12 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .261 | .381F | .523 | .551 | .518 |
Net realized and unrealized gain (loss) | .128 | (.034)D,F | .386 | (.028) | (.233) |
Total from investment operations | .389 | .347 | .909 | .523 | .285 |
Distributions from net investment income | (.279) | (.397) | (.539) | (.553) | (.515) |
Net asset value, end of period | $ 9.55 | $ 9.44 | $ 9.49 | $ 9.12 | $ 9.15 |
Total ReturnA,B | 4.16% | 3.78% | 10.22% | 5.91% | 3.12% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | .81% | .80% | .85% | .83% | .82% |
Expenses net of voluntary | .81% | .80% | .85% | .83% | .82% |
Expenses net of all reductions | .81% | .80% | .84% | .83% | .80% |
Net investment income (loss) | 2.74% | 4.09%F | 5.63% | 6.05% | 5.68% |
Supplemental Data | |||||
Net assets, end of period | $ 186,290 | $ 106,018 | $ 38,240 | $ 16,698 | $ 17,835 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .261 | .381F | .525 | .550 | .523 |
Net realized and unrealized gain (loss) | .118 | (.036)D,F | .383 | (.019) | (.238) |
Total from investment operations | .379 | .345 | .908 | .531 | .285 |
Distributions from net investment income | (.279) | (.395) | (.538) | (.551) | (.515) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 |
Total ReturnA,B | 4.04% | 3.75% | 10.21% | 6.00% | 3.12% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | .82% | .82% | .85% | .84% | .84% |
Expenses net of voluntary | .82% | .82% | .85% | .84% | .84% |
Expenses net of all reductions | .82% | .82% | .85% | .83% | .83% |
Net investment income (loss) | 2.73% | 4.07%F | 5.62% | 6.05% | 5.64% |
Supplemental Data | |||||
Net assets, end of period | $ 468,931 | $ 388,495 | $ 309,958 | $ 279,306 | $ 309,670 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended October 31, | 2003 | 2002G |
Selected Per-Share Data | ||
Net asset value, beginning of period | $ 9.46 | $ 9.43 |
Income from Investment Operations | ||
Net investment income (loss)E | .183 | .281I |
Net realized and unrealized gain (loss) | .120 | (.234)F,I |
Total from investment operations | .303 | .047 |
Distributions from net investment income | (.203) | (.017) |
Net asset value, end of period | $ 9.56 | $ 9.46 |
Total ReturnB,C,D | 3.23% | .50% |
Ratios to Average Net AssetsH | ||
Expenses before expense reductions | 1.61% | 1.86%A |
Expenses net of voluntary waivers, if any | 1.61% | 1.65%A |
Expenses net of all reductions | 1.61% | 1.65%A |
Net investment income (loss) | 1.94% | 3.59%A,I |
Supplemental Data | ||
Net assets, end of period (000 omitted) | $ 49,353 | $ 3,811 |
Portfolio turnover rate | 102% | 111% |
A Annualized
B Total returns 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.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
G For the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
I Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.16 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)C | .182 | .304F | .448 | .467 | .434 |
Net realized and unrealized gain (loss) | .118 | (.037)D,F | .383 | (.021) | (.222) |
Total from investment operations | .300 | .267 | .831 | .446 | .212 |
Distributions from net investment income | (.200) | (.317) | (.461) | (.476) | (.432) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.16 |
Total ReturnA,B | 3.19% | 2.90% | 9.30% | 5.01% | 2.31% |
Ratios to Average Net AssetsE | |||||
Expenses before expense | 1.64% | 1.64% | 1.68% | 1.68% | 1.73% |
Expenses net of voluntary | 1.64% | 1.64% | 1.68% | 1.68% | 1.73% |
Expenses net of all reductions | 1.64% | 1.63% | 1.68% | 1.67% | 1.72% |
Net investment income (loss) | 1.91% | 3.25%F | 4.80% | 5.21% | 4.75% |
Supplemental Data | |||||
Net assets, end of period | $ 359,779 | $ 283,046 | $ 99,486 | $ 50,824 | $ 30,428 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended October 31, | 2003 | 2002 | 2001 | 2000 | 1999 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 | $ 9.38 |
Income from Investment Operations | |||||
Net investment income (loss)B | .278 | .397E | .540 | .564 | .534 |
Net realized and unrealized gain (loss) | .119 | (.034)C,E | .387 | (.015) | (.236) |
Total from investment operations | .397 | .363 | .927 | .549 | .298 |
Distributions from net investment income | (.297) | (.413) | (.557) | (.569) | (.528) |
Net asset value, end of period | $ 9.55 | $ 9.45 | $ 9.50 | $ 9.13 | $ 9.15 |
Total ReturnA | 4.24% | 3.95% | 10.43% | 6.21% | 3.27% |
Ratios to Average Net AssetsD | |||||
Expenses before expense | .63% | .64% | .66% | .67% | .71% |
Expenses net of voluntary | .63% | .64% | .66% | .67% | .71% |
Expenses net of all reductions | .63% | .63% | .66% | .67% | .70% |
Net investment income (loss) | 2.92% | 4.25%E | 5.81% | 6.21% | 5.77% |
Supplemental Data | |||||
Net assets, end of period | $ 91,138 | $ 65,330 | $ 23,301 | $ 7,655 | $ 6,805 |
Portfolio turnover rate | 102% | 111% | 145% | 115% | 139% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of any voluntary waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended October 31, 2003
1. Significant Accounting Policies.
Fidelity Advisor Short Fixed-Income Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of four years from the initial date of purchase. 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 differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the fund:
Security Valuation. Net asset value per share (NAV calculation) is calculated as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Debt securities for which quotations are readily available are valued at their most recent bid prices (sales prices if the principal market is an exchange) in the principal market in which such securities are normally traded, as determined by recognized dealers in such securities, or securities are valued on the basis of information provided by a pricing service. Pricing services use valuation matrices that incorporate both dealer-supplied valuations and valuation models. If an event that is expected to materially affect the value of a security occurs after the close of an exchange or market on which that security trades, but prior to the NAV calculation, then that security will be fair valued taking the event into account. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Price movements in futures contracts and ADRs, market and trading trends, the bid/ask quotes of brokers and off-exchange institutional trading may be reviewed in the course of making a good faith determination of a security's fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued on the basis of amortized cost. Investments in open-end investment companies are valued at their net asset value each business day.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities, which is accrued using the interest method.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust.
Income Tax Information and Distributions to Shareholders. Each year the fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Income dividends and capital gain distributions are declared separately for each class. Dividends are declared daily and paid monthly from net investment income. Distributions from realized gains, if any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Capital accounts within the financial statements are adjusted for permanent and temporary book and tax differences. These adjustments have no impact on net assets or the results of operations. Temporary differences will reverse in a subsequent period. These differences are primarily due to futures transactions, prior period premium and discount on debt securities, market discount, financing transactions, capital loss carryforwards, expiring capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 8,823,368 | | |
Unrealized depreciation | (4,308,280) | |
Net unrealized appreciation (depreciation) | 4,515,088 | |
Capital loss carryforward | (11,616,827) | |
Cost for federal income tax purposes | $ 1,210,828,750 |
The tax character of distributions paid was as follows:
October 31, | October 31, | |
Ordinary Income | $ 27,246,649 | $ 24,339,852 |
Annual Report
2. Operating Policies.
Repurchase Agreements. Fidelity Management & Research Company (FMR) has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts. These accounts are then invested in repurchase agreements that are collateralized by U.S. Treasury or Government obligations. The fund may also invest directly with institutions, in repurchase agreements that are collateralized by commercial paper obligations and corporate obligations. Collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. Collateral is marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest).
Delayed Delivery Transactions and When-Issued Securities. The fund may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked-to-market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the fund's Schedule of Investments. The fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or 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 any 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 counter-parties 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.
Annual Report
Notes to Financial Statements - continued
2. Operating Policies - continued
Restricted Securities. The fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. The net receivable or payable is accrued daily and is included in interest income in the accompanying Statement of Operations. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact the fund.
Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a "guarantor" receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The fund may enter into credit default swaps in which the fund or its counterparty act as guarantors. By acting as the guarantor of a swap, the fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value. Premiums paid to or by the fund are accrued daily and included in interest income in the accompanying Statement of Operations.
Swaps are marked-to-market daily based on dealer-supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the fund's custodian in compliance with swap contracts. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. These risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the fund's Schedule of Investments under the caption "Swap Agreements."
Annual Report
2. Operating Policies - continued
Financing Transactions. To earn additional income, the fund may employ trading strategies which involve the sale and simultaneous agreement to repurchase similar securities ("mortgage dollar rolls") or the purchase and simultaneous agreement to sell similar securities ("reverse mortgage dollar rolls"). The securities traded are mortgage securities and bear the same interest rate but will be collateralized by different pools of mortgages. During the period between the sale and repurchase in a mortgage dollar roll transaction, a fund will not be entitled to receive interest and principal payments on the securities sold but will invest the proceeds of the sale in other securities which may enhance the yield and total return. In addition, the difference between the sale price and the future purchase price is recorded as an adjustment to investment income. During the period between the purchase and subsequent sale in a reverse mortgage dollar roll transaction a fund is entitled to interest and principal payments on the securities purchased. The price differential between the purchase and sale is recorded as an adjustment to investment income. Losses may arise due to changes in the value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Information regarding purchases and sales of securities is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment management related services for which the fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the fund's average net assets and a group fee rate that averaged .13% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .43% of the fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
each class' average net assets. In addition FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .15% | $ 221,961 | $ - |
Class T | 0% | .15% | 678,832 | 19,897 |
Class B | .65% | .25% | 269,955 | 194,969 |
Class C | .75% | .25% | 3,476,768 | 1,865,951 |
$ 4,647,516 | $ 2,080,817 |
Sales Load. FDC receives a front-end sales charge of up to 1.50% for selling Class A and Class T shares of the fund. FDC receives the proceeds of a contingent deferred sales charges levied on Class A, Class T, Class B and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 3% to 1% for Class B, 1% for Class C and .25% for certain purchases of Class A and Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 125,622 |
Class T | 107,198 |
Class B* | 70,625 |
Class C* | 284,065 |
$ 587,510 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent (collectively referred to as the transfer agent) for each class of the fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FIIOC pays for
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
typesetting, printing and mailing of all shareholder reports, except proxy statements. For the period, the following amounts were paid to FIIOC:
Amount | % of | |
Class A | $ 264,029 | .18 |
Class T | 839,823 | .19 |
Class B | 68,388 | .23 |
Class C | 556,107 | .16 |
Institutional Class | 122,052 | .15 |
$ 1,850,399 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses.
Central Funds. The fund may invest in affiliated Central Funds managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Central Funds are open-end investment companies available only to investment companies and other accounts managed by FMR and its affiliates. The Central Funds seek preservation of capital and current income and do not pay a management fee. Income distributions earned by the fund are recorded as income in the accompanying financial statements and totaled $2,135,744 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the fund, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. Information regarding the fund's participation in the program is included under the caption "Other Information" at the end of the fund's Schedule of Investments.
5. Security Lending.
The fund lends portfolio securities from time to time in order to earn additional income. The fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the fund
Annual Report
Notes to Financial Statements - continued
5. Security Lending - continued
and any additional required collateral is delivered to the fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. At period end there were no security loans outstanding.
6. Expense Reductions.
Through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the fund's expenses. During the period, these credits reduced the fund's custody expenses by $9,030.
7. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended October 31, | ||
2003 | 2002 A | |
From net investment income | ||
Class A | $ 4,157,590 | $ 2,835,721 |
Class T | 13,023,102 | 13,908,158 |
Class B | 541,261 | 3,116 |
Class C | 7,051,516 | 5,924,153 |
Institutional Class | 2,473,180 | 1,668,704 |
Total | $ 27,246,649 | $ 24,339,852 |
A Distributions for Class B are for the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
2003 | 2002A | 2003 | 2002 A | |
Class A | ||||
Shares sold | 20,802,909 | 12,401,366 | $ 198,897,539 | $ 116,092,388 |
Reinvestment of distributions | 344,259 | 233,387 | 3,291,947 | 2,185,806 |
Shares redeemed | (12,855,965) | (5,438,298) | (122,878,485) | (50,877,139) |
Net increase (decrease) | 8,291,203 | 7,196,455 | $ 79,311,001 | $ 67,401,055 |
Annual Report
8. Share Transactions - continued
Shares | Dollars | |||
2003 | 2002A | 2003 | 2002 A | |
Class T | ||||
Shares sold | 37,820,298 | 28,672,077 | $ 361,699,855 | $ 268,734,836 |
Reinvestment of distributions | 1,149,084 | 1,219,862 | 10,991,925 | 11,429,888 |
Shares redeemed | (30,982,503) | (21,422,615) | (296,311,977) | (200,548,069) |
Net increase (decrease) | 7,986,879 | 8,469,324 | $ 76,379,803 | $ 79,616,655 |
Class B | ||||
Shares sold | 6,189,378 | 414,351 | $ 59,258,449 | $ 3,894,764 |
Reinvestment of distributions | 45,938 | 267 | 440,440 | 2,527 |
Shares redeemed | (1,475,998) | (11,738) | (14,147,798) | (109,887) |
Net increase (decrease) | 4,759,318 | 402,880 | $ 45,551,091 | $ 3,787,404 |
Class C | ||||
Shares sold | 23,921,233 | 28,343,213 | $ 228,874,396 | $ 265,589,128 |
Reinvestment of distributions | 469,309 | 434,745 | 4,490,147 | 4,075,779 |
Shares redeemed | (16,674,118) | (9,309,604) | (159,470,102) | (87,172,345) |
Net increase (decrease) | 7,716,424 | 19,468,354 | $ 73,894,441 | $ 182,492,562 |
Institutional Class | ||||
Shares sold | 8,171,676 | 7,208,504 | $ 78,200,044 | $ 67,548,577 |
Reinvestment of distributions | 141,892 | 119,045 | 1,357,285 | 1,116,186 |
Shares redeemed | (5,685,068) | (2,868,304) | (54,489,537) | (26,853,486) |
Net increase (decrease) | 2,628,500 | 4,459,245 | $ 25,067,792 | $ 41,811,277 |
A Share transactions for Class B are for the period October 9, 2002 (commencement of sale of shares) to October 31, 2002.
9. Other Information.
At the end of the period, one unaffiliated shareholder was the owner of record of 12% of the total outstanding shares of the fund.
Annual Report
Independent Auditors' Report
To the Trustees of Fidelity Advisor Series II and Shareholders of Fidelity Advisor Short Fixed-Income Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Short Fixed-Income Fund (the Fund), a fund of Fidelity Advisor Series II, including the portfolio of investments, as of October 31, 2003, 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 for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Short Fixed-Income Fund as of October 31, 2003, and 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 its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 12, 2003
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 289 funds advised by FMR or an affiliate. Mr. McCoy oversees 291 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. In any event, each non-interested Trustee shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an "interested person" (as defined in the 1940 Act) may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (73)** | |
Year of Election or Appointment: 1986 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as Chief Executive Officer, Chairman, and a Director of FMR Corp.; a Director and Chairman of the Board and of the Executive Committee of FMR; Chairman and a Director of Fidelity Management & Research (Far East) Inc.; Chairman (1998) and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001) and a Director (2000) of FMR Co., Inc. | |
Abigail P. Johnson (41)** | |
Year of Election or Appointment: 2001 Senior Vice President of Advisor Short Fixed-Income (2001). Ms. Johnson also serves as Senior Vice President of other Fidelity funds (2001). She is President and a Director of FMR (2001), Fidelity Investments Money Management, Inc. (2001), FMR Co., Inc. (2001), and a Director of FMR Corp. Previously, Ms. Johnson managed a number of Fidelity funds. | |
Laura B. Cronin (49) | |
Year of Election or Appointment: 2003 Ms. Cronin is an Executive Vice President (2002) and Chief Financial Officer (2002) of FMR Corp. and is a member of the Fidelity Management Committee (2003). Previously, Ms. Cronin served as Vice President of Finance of FMR (1997-1999), and Chief Financial Officer of FMR (1999-2001), Fidelity Personal Investments (2001), and Fidelity Brokerage Company (2001-2002). | |
Robert L. Reynolds (51) | |
Year of Election or Appointment: 2003 Mr. Reynolds is a Director (2003) and Chief Operating Officer (2002) of FMR Corp. and is the head of the Fidelity Management Committee (2003). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
** Edward C. Johnson 3d, Trustee, is Abigail P. Johnson's father.
Annual Report
Non-Interested Trustees:
Correspondence intended for each non-interested Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
J. Michael Cook (61) | |
Year of Election or Appointment: 2001 Prior to Mr. Cook's retirement in May 1999, he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP (accounting/consulting), Chairman of the Deloitte & Touche Foundation, and a member of the Board of Deloitte Touche Tohmatsu. He currently serves as a Director of Comcast (telecommunications, 2002), International Flavors & Fragrances, Inc. (2000), Rockwell Automation (2000) and The Dow Chemical Company (2000). He is a Member of the Diversity Advisory Council of Marakon (2003) and the Advisory Board of the Directorship Search Group, Chairman Emeritus of the Board of Catalyst (a leading organization for the advancement of women in business), and is Chairman of the Accountability Advisory Council to the Comptroller General of the United States. He also serves as a Member of the Advisory Board of the Graduate School of Business of the University of Florida, his alma mater. | |
Ralph F. Cox (71) | |
Year of Election or Appointment: 1991 Mr. Cox is President of RABAR Enterprises (management consulting for the petroleum industry). Prior to February 1994, he was President of Greenhill Petroleum Corporation (petroleum exploration and production). Until March 1990, Mr. Cox was President and Chief Operating Officer of Union Pacific Resources Company (exploration and production). He is a Director of CH2M Hill Companies (engineering), and Abraxas Petroleum (petroleum exploration and production, 1999). In addition, he is a member of advisory boards of Texas A&M University and the University of Texas at Austin. | |
Phyllis Burke Davis (71) | |
Year of Election or Appointment: 1992 Mrs. Davis is retired from Avon Products, Inc. (consumer products) where she held various positions including Senior Vice President of Corporate Affairs and Group Vice President of U.S. product marketing, sales, distribution, and manufacturing. Mrs. Davis is a member of the Board of Directors of the Southampton Hospital in Southampton, N.Y. (1998). Previously, she served as a Director of BellSouth Corporation (telecommunications), Eaton Corporation (diversified industrial), the TJX Companies, Inc. (retail stores), Hallmark Cards, Inc., and Nabisco Brands, Inc. | |
Robert M. Gates (60) | |
Year of Election or Appointment: 1997 Dr. Gates is President of Texas A&M University (2002). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), and Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001). He also serves as a member of the Advisory Board of VoteHere.net (secure internet voting, 2001). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). Dr. Gates also is a Trustee of the Forum for International Policy. | |
Donald J. Kirk (70) | |
Year of Election or Appointment: 1987 Mr. Kirk is a Governor of the American Stock Exchange (2001), a Trustee and former Chairman of the Board of Trustees of the Greenwich Hospital Association, a Director of the Yale-New Haven Health Services Corp. (1998), and a Director Emeritus and former Chairman of the Board of Directors of National Arts Strategies Inc. Mr. Kirk was an Executive-in-Residence (1995-2000) and a Professor (1987-1995) at Columbia University Graduate School of Business. Prior to 1987, he was Chairman of the Financial Accounting Standards Board. Previously, Mr. Kirk served as a Governor of the National Association of Securities Dealers, Inc. (1996-2002), a member and Vice Chairman of the Public Oversight Board of the American Institute of Certified Public Accountants' SEC Practice Section (1995-2002), a Director of General Re Corporation (reinsurance, 1987-1998) and as a Director of Valuation Research Corp. (appraisals and valuations). | |
Marie L. Knowles (57) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing), URS Corporation (multidisciplinary engineering, 1999), and McKesson Corporation (healthcare service, 2002). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (59) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. He was most recently Senior Vice President and Group Executive of Worldwide Sales and Services. From 1993 to 1995, he was Chairman of IBM World Trade Corporation, and from 1994 to 1998 was a member of IBM's Corporate Executive Committee. Mr. Lautenbach serves as Chairman and as a Director (1998) of Acterna Corporation (communications test equipment). He is also Co-Chairman of Covansys, Inc. (global provider of business and technology solutions, 2000). In addition, he is a Director of Eaton Corporation (diversified industrial) and the Philharmonic Center for the Arts in Naples, Florida (1999). He also is a member of the Council on Foreign Relations. | |
Marvin L. Mann (70) | |
Year of Election or Appointment: 1993 Mr. Mann is Chairman of the non-interested Trustees (2001). He is Chairman Emeritus of Lexmark International, Inc. (computer peripherals) where he served as CEO until April 1998 and retired as Chairman May 1999, and remains a member of the Board. Prior to 1991, he held the positions of Vice President of International Business Machines Corporation (IBM) and President and General Manager of various IBM divisions and subsidiaries. Mr. Mann is a Board member of Imation Corp. (imaging and information storage) and Acterna Corporation (communications test equipment, 1999). He is also a member of the Director Services Committee of the Investment Company Institute. In addition, Mr. Mann is a member of the President's Cabinet at the University of Alabama and the Board of Visitors of the Culverhouse College of Commerce and Business Administration at the University of Alabama. | |
William O. McCoy (70) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Liberty Corporation (holding company), Duke Realty Corporation (real estate), Progress Energy, Inc. (electric utility), and Acterna Corporation (communications test equipment, 1999). He is also a partner of Franklin Street Partners (private investment management firm) and a member of the Research Triangle Foundation Board. In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors (1994-1998) for the University of North Carolina at Chapel Hill and currently serves on the Board of Directors of the University of North Carolina Health Care System and the Board of Visitors of the Kenan-Flagler Business School (University of North Carolina at Chapel Hill). He also served as Vice President of Finance for the University of North Carolina (16-school system, 1995-1998). | |
William S. Stavropoulos (64) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman of the Board, President and CEO (2002), and Chairman of the Executive Committee (2000) and a Director of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000) and Chief Executive Officer (1995-2000). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, and Maersk Inc. (industrial conglomerate, 2002). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council, World Business Council for Sustainable Development, and the University of Notre Dame Advisory Council for the College of Science. | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Dr. Heilmeier may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
George H. Heilmeier (67) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Advisor Series II. Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), INET Technologies Inc. (telecommunications network surveillance, 2001) and Teletech Holdings (customer management services, 1998). He is Chairman of the General Motors Technology Advisory Committee and a Life Fellow of the IEEE (2000). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences and The Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002) and Compaq (1994-2002). | |
Peter S. Lynch (60) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Advisor Series II. Vice Chairman and a Director of FMR, and Vice Chairman (2001) and a Director (2000) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). Prior to May 31, 1990, he was a Director of FMR and Executive Vice President of FMR (a position he held until March 31, 1991), Vice President of Fidelity® Magellan® Fund and FMR Growth Group Leader, and Managing Director of FMR Corp. Mr. Lynch was also Vice President of Fidelity Investments Corporate Services. In addition, he serves as a Trustee of Boston College, Massachusetts Eye & Ear Infirmary, Historic Deerfield, John F. Kennedy Library, and the Museum of Fine Arts of Boston. | |
Dwight D. Churchill (49) | |
Year of Election or Appointment: 1997 Vice President of Advisor Short Fixed-Income. He serves as Head of Fidelity's Fixed-Income Division (2000), Vice President of Fidelity's Money Market Funds (2000), Vice President of Fidelity's Bond Funds (1997), and Senior Vice President of FIMM (2000) and FMR (1997). Mr. Churchill joined Fidelity in 1993 as Vice President and Group Leader of Taxable Fixed-Income Investments. | |
Charles S. Morrison (42) | |
Year of Election or Appointment: 2002 Vice President of Advisor Short Fixed-Income. Mr. Morrison also serves as Vice President of Fidelity's Bond Funds (2002), and Vice President of certain Asset Allocation and Balanced Funds (2002). He serves as Vice President (2002) and Bond Group Leader (2002) of Fidelity Investments Fixed Income Division. Mr. Morrison is also Vice President of FIMM (2002) and FMR (2002). Mr. Morrison joined Fidelity in 1987 as a Corporate Bond Analyst in the Fixed Income Research Division. | |
Andrew Dudley (38) | |
Year of Election or Appointment: 1997 Vice President of Advisor Short Fixed-Income. Mr. Dudley is also Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Dudley managed a variety of Fidelity funds. | |
Eric D. Roiter (54) | |
Year of Election or Appointment: 1998 Secretary of Advisor Short Fixed-Income. He also serves as Secretary of other Fidelity funds (1998); Vice President, General Counsel, and Clerk of FMR Co., Inc. (2001) and FMR (1998); Vice President and Clerk of FDC (1998); Assistant Clerk of Fidelity Management & Research (U.K.) Inc. (2001) and Fidelity Management & Research (Far East) Inc. (2001); and Assistant Secretary of Fidelity Investments Money Management Inc. (2001). Prior to joining Fidelity, Mr. Roiter was with the law firm of Debevoise & Plimpton, as an associate (1981-1984) and as a partner (1985-1997), and served as an Assistant General Counsel of the U.S. Securities and Exchange Commission (1979-1981). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003). | |
Stuart Fross (44) | |
Year of Election or Appointment:2003 Assistant Secretary of Advisor Short Fixed-Income . Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003) and is an employee of FMR. | |
Maria F. Dwyer (44) | |
Year of Election or Appointment: 2002 President and Treasurer of Advisor Short Fixed-Income. Ms. Dwyer also serves as President and Treasurer of other Fidelity funds (2002) and is a Vice President (1999) and an employee (1996) of FMR. Prior to joining Fidelity, Ms. Dwyer served as Director of Compliance for MFS Investment Management. | |
Timothy F. Hayes (52) | |
Year of Election or Appointment: 2002 Chief Financial Officer of Advisor Short Fixed-Income. Mr. Hayes also serves as Chief Financial Officer of other Fidelity funds (2002). Recently he was appointed President of Fidelity Service Company (2003) where he also serves as a Director. Mr. Hayes also serves as President of Fidelity Investments Operations Group (FIOG, 2002), which includes Fidelity Pricing and Cash Management Services Group (FPCMS), where he was appointed President in 1998. Previously, Mr. Hayes served as Chief Financial Officer of Fidelity Investments Corporate Systems and Service Group (1998) and Fidelity Systems Company (1997-1998). | |
Jennifer S. Taub (36) | |
Year of Election or Appointment: 2003 Assistant Vice President of Advisor Short Fixed-Income. Ms. Taub is Assistant Vice President of Fidelity's Fixed-Income Funds (2003), Assistant Secretary of FIMM (2003), and is an employee of FMR. | |
John R. Hebble (45) | |
Year of Election or Appointment: 2003 Deputy Treasurer of Advisor Short Fixed-Income. Mr. Hebble also serves as Deputy Treasurer of other Fidelity funds (2003), and is an employee of FMR. Before joining Fidelity Investments, Mr. Hebble worked at Deutsche Asset Management where he served as Director of Fund Accounting (2002-2003) and Assistant Treasurer of the Scudder Funds (1998-2003). | |
John H. Costello (57) | |
Year of Election or Appointment: 1987 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Francis V. Knox, Jr. (56) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Knox also serves as Assistant Treasurer of other Fidelity funds (2002), and is a Vice President and an employee of FMR. Previously, Mr. Knox served as Vice President of Investment & Advisor Compliance (1990-2001), and Compliance Officer of Fidelity Management & Research (U.K.) Inc. (1992-2002), Fidelity Management & Research (Far East) Inc. (1991-2002), and FMR Corp. (1995-2002). | |
Mark Osterheld (48) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Thomas J. Simpson (45) | |
Year of Election or Appointment: 1998 Assistant Treasurer of Advisor Short Fixed-Income. Mr. Simpson is Assistant Treasurer of other Fidelity funds (2000) and an employee of FMR (1996). Prior to joining FMR, Mr. Simpson was Vice President and Fund Controller of Liberty Investment Services (1987-1995). | |
Annual Report
Distributions
A total of 13.40% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2004 of amounts for use in preparing 2003 income tax returns.
Annual Report
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Adviser
Fidelity Management &
Research (U.K.) Inc.
Fidelity Management &
Research (Far East) Inc.
Fidelity Investments Japan Limited
Fidelity Investments Money
Management, Inc.
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Shareholder
Servicing Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
Annual Report
Fidelity Advisor Aggressive Growth Fund |
Fidelity Advisor Asset Allocation Fund |
Fidelity Advisor Balanced Fund |
Fidelity Advisor Biotechnology Fund |
Fidelity Advisor California Municipal Income Fund |
Fidelity Advisor Consumer Industries Fund |
Fidelity Advisor Cyclical Industries Fund |
Fidelity Advisor Developing Communications Fund |
Fidelity Advisor Diversified International Fund |
Fidelity Advisor Dividend Growth Fund |
Fidelity Advisor Dynamic Capital Appreciation Fund |
Fidelity Advisor Electronics Fund |
Fidelity Advisor Emerging Asia Fund |
Fidelity Advisor Emerging Markets Income Fund |
Fidelity Advisor Equity Growth Fund |
Fidelity Advisor Equity Income Fund |
Fidelity Advisor Equity Value Fund |
Fidelity Advisor Europe Capital Appreciation Fund |
Fidelity Advisor Fifty Fund |
Fidelity Advisor Financial Services Fund |
Fidelity Advisor Floating Rate High Income Fund |
Fidelity Advisor Freedom Income FundSM |
Fidelity Advisor Freedom 2010 FundSM |
Fidelity Advisor Freedom 2020 FundSM |
Fidelity Advisor Freedom 2030 FundSM |
Fidelity Advisor Freedom 2040 FundSM |
Fidelity Advisor Global Equity Fund |
Fidelity Advisor Government Investment Fund |
Fidelity Advisor Growth & Income Fund |
Fidelity Advisor Growth Opportunities |
Fidelity Advisor Health Care Fund |
Fidelity Advisor High Income Advantage Fund |
Fidelity Advisor High Income Fund |
Fidelity Advisor Inflation-Protected Bond Fund |
Fidelity Advisor Intermediate Bond Fund |
Fidelity Advisor International Capital Appreciation Fund |
Fidelity Advisor International Small Cap Fund |
Fidelity Advisor Investment Grade Bond Fund |
Fidelity Advisor Japan Fund |
Fidelity Advisor Korea Fund |
Fidelity Advisor Large Cap Fund |
Fidelity Advisor Latin America Fund |
Fidelity Advisor Leveraged Company Stock Fund |
Fidelity Advisor Mid Cap Fund |
Fidelity Advisor Mortgage Securities Fund |
Fidelity Advisor Municipal Income Fund |
Fidelity Advisor Natural Resources Fund |
Fidelity Advisor New Insights Fund |
Fidelity Advisor New York |
Fidelity Advisor Overseas Fund |
Fidelity Advisor Real Estate Fund |
Fidelity Advisor Short Fixed-Income Fund |
Fidelity Advisor Short Intermediate Municipal Income Fund |
Fidelity Advisor Small Cap Fund |
Fidelity Advisor Strategic Growth Fund |
Fidelity Advisor Strategic Income Fund |
Fidelity Advisor Tax Managed |
Fidelity Advisor Technology Fund |
Fidelity Advisor Telecommunications & Utilities Growth Fund |
Fidelity Advisor Value Leaders Fund |
Fidelity Advisor Value Strategies Fund |
Prime Fund |
Tax-Exempt Fund |
Treasury Fund |
SFII-UANN-1203
1.784770.100
(Fidelity Investment logo)(registered trademark)
Item 2. Code of Ethics
As of the end of the period, October 31, 2003, the Fidelity Advisor Series II has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of Fidelity Advisor Series II has determined that Marie L. Knowles and Donald J. Kirk are each audit committee financial experts, as defined in Item 3 of Form N-CSR. Ms. Knowles and Mr. Kirk are each independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Reserved
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Reserved
Item 9. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Fidelity Advisor Series II's (the "Trust") disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the Trust's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
Item 10. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Advisor Series II
By: | /s/Maria Dwyer |
Maria Dwyer | |
President and Treasurer | |
Date: | December 23, 2003 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Maria Dwyer |
Maria Dwyer | |
President and Treasurer | |
Date: | December 23, 2003 |
By: | /s/Timothy F. Hayes |
Timothy F. Hayes | |
Chief Financial Officer | |
Date: | December 23, 2003 |