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: | December 31 |
| |
Date of reporting period: | June 30, 2006 |
Item 1. Reports to Stockholders
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Mid Cap II
Fund - Class A, Class T,
Class B and Class C
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | <Click Here> | Ned Johnson's message to shareholders. |
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Semiannual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Semiannual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semiannual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Class A | | | |
Actual | $ 1,000.00 | $ 1,063.30 | $ 6.29 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | | | |
Actual | $ 1,000.00 | $ 1,062.70 | $ 7.06 |
HypotheticalA | $ 1,000.00 | $ 1,017.95 | $ 6.90 |
Class B | | | |
Actual | $ 1,000.00 | $ 1,059.00 | $ 10.21 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Class C | | | |
Actual | $ 1,000.00 | $ 1,059.70 | $ 10.06 |
HypotheticalA | $ 1,000.00 | $ 1,015.03 | $ 9.84 |
Institutional Class | | | |
Actual | $ 1,000.00 | $ 1,064.50 | $ 4.97 |
HypotheticalA | $ 1,000.00 | $ 1,019.98 | $ 4.86 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below);multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Annualized
Expense Ratio |
Class A | 1.23% |
Class T | 1.38% |
Class B | 2.00% |
Class C | 1.97% |
Institutional Class | .97% |
Semiannual Report
Investment Changes
Top Ten Stocks as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Newmont Mining Corp. | 3.0 | 1.6 |
Noble Corp. | 2.7 | 1.0 |
Rockwell Automation, Inc. | 1.7 | 1.5 |
Hess Corp. | 1.6 | 0.1 |
Thermo Electron Corp. | 1.5 | 1.4 |
Harsco Corp. | 1.5 | 1.1 |
AGCO Corp. | 1.5 | 1.1 |
Kinross Gold Corp. | 1.3 | 1.1 |
Assurant, Inc. | 1.2 | 1.4 |
American International Group, Inc. | 1.1 | 0.3 |
| 17.1 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Energy | 17.4 | 16.0 |
Materials | 13.0 | 8.8 |
Industrials | 12.7 | 13.9 |
Financials | 11.4 | 8.9 |
Information Technology | 10.7 | 10.7 |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006* | As of December 31, 2005** |
 | Stocks 88.8% | | | Stocks 92.6% | |
 | Short-Term
Investments and
Net Other Assets 11.2% | | | Short-Term
Investments and
Net Other Assets 7.4% | |
* Foreign
investments | 26.4% | | ** Foreign investments | 26.7% | |
Semiannual Report
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Common Stocks - 88.8% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 7.7% |
Auto Components - 0.4% |
Autoliv, Inc. | 30 | | $ 1,697 |
IMPCO Technologies, Inc. (a) | 339,805 | | 3,625,719 |
New Focus Auto Tech Holdings Ltd. | 1,016,000 | | 320,515 |
Showa Corp. | 47,700 | | 796,633 |
| | 4,744,564 |
Automobiles - 0.3% |
Bajaj Auto Ltd. | 14 | | 839 |
Geely Automobile Holdings Ltd. | 10,590,000 | | 1,322,685 |
Harley-Davidson, Inc. | 12,600 | | 691,614 |
Hero Honda Motors Ltd. | 6 | | 104 |
Hyundai Motor Co. | 10,097 | | 857,825 |
Mahindra & Mahindra Ltd. | 18,659 | | 252,881 |
Maruti Udyog Ltd. | 55,170 | | 958,020 |
National R.V. Holdings, Inc. (a) | 16,800 | | 90,888 |
| | 4,174,856 |
Diversified Consumer Services - 0.1% |
Bright Horizons Family Solutions, Inc. (a) | 2 | | 75 |
Raffles Education Corp. Ltd. | 274,000 | | 418,915 |
| | 418,990 |
Hotels, Restaurants & Leisure - 0.8% |
Ruth's Chris Steak House, Inc. | 15,700 | | 320,594 |
Sonic Corp. (a) | 239,602 | | 4,981,326 |
St. Marc Holdings Co. Ltd. | 68,300 | | 4,715,491 |
TAJ GVK Hotels & Resorts Ltd. | 111,311 | | 471,640 |
| | 10,489,051 |
Household Durables - 0.8% |
Alba PLC | 19 | | 73 |
Cyrela Brazil Realty SA | 9,000 | | 149,591 |
Daito Trust Construction Co. | 14,600 | | 808,949 |
Goldcrest Co. Ltd. (d) | 25,180 | | 1,234,519 |
Leggett & Platt, Inc. | 95,000 | | 2,373,100 |
LG Electronics, Inc. | 13,560 | | 821,862 |
Nihon Eslead Corp. | 47,000 | | 1,326,721 |
Sekisui House Ltd. | 118,000 | | 1,620,083 |
The Stanley Works | 40,700 | | 1,921,854 |
Woongjin Coway Co. Ltd. | 15,470 | | 339,176 |
| | 10,595,928 |
Internet & Catalog Retail - 0.2% |
Alloy, Inc. (a) | 425 | | 4,458 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - continued |
Internet & Catalog Retail - continued |
ASKUL Corp. | 30,800 | | $ 685,043 |
dELiA*s, Inc. (a) | 850 | | 6,868 |
VistaPrint Ltd. | 50,132 | | 1,340,530 |
| | 2,036,899 |
Leisure Equipment & Products - 0.4% |
Giant Manufacturing Co. Ltd. | 126,000 | | 203,913 |
Jumbo SA | 165,760 | | 2,073,753 |
Oakley, Inc. | 60,800 | | 1,024,480 |
Trigano SA | 39,800 | | 2,112,855 |
| | 5,415,001 |
Media - 1.0% |
Astral Media, Inc. Class A (non-vtg.) | 73,400 | | 2,293,462 |
Clear Media Ltd. (a) | 1,000 | | 1,159 |
Harris Interactive, Inc. (a) | 457,258 | | 2,606,371 |
Interpublic Group of Companies, Inc. (a) | 169,300 | | 1,413,655 |
Omnicom Group, Inc. | 72,226 | | 6,434,614 |
Salem Communications Corp. Class A (a) | 23,300 | | 303,133 |
Trader Classified Media NV Class A (NY Shares) | 8,000 | | 111,146 |
Zee Telefilms Ltd. | 12 | | 63 |
| | 13,163,603 |
Multiline Retail - 0.8% |
Lifestyle International Holdings Ltd. | 440,000 | | 804,507 |
Lojas Renner SA | 27,800 | | 1,476,061 |
Nordstrom, Inc. | 179,300 | | 6,544,450 |
Pantaloon Retail India Ltd. | 9,353 | | 315,572 |
PT Mitra Adiperkasa Tbk | 238,000 | | 21,326 |
Ryohin Keikaku Co. Ltd. | 16,100 | | 1,319,799 |
| | 10,481,715 |
Specialty Retail - 2.1% |
Abercrombie & Fitch Co. Class A | 16,700 | | 925,681 |
Asbury Automotive Group, Inc. (a) | 75,100 | | 1,572,594 |
Best Buy Co., Inc. | 7,650 | | 419,526 |
Build-A-Bear Workshop, Inc. (a)(d) | 87,100 | | 1,873,521 |
Charming Shoppes, Inc. (a) | 63,915 | | 718,405 |
Circuit City Stores, Inc. | 80,100 | | 2,180,322 |
DSG International PLC | 1,104,800 | | 3,902,861 |
DSW, Inc. Class A | 11,100 | | 404,262 |
Ellerine Holdings Ltd. | 38,800 | | 354,449 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - continued |
Specialty Retail - continued |
Gamestop Corp.: | | | |
Class A (a) | 3,200 | | $ 134,400 |
Class B (a) | 107,200 | | 3,671,600 |
Inditex SA | 68,700 | | 2,898,317 |
KOMERI Co. Ltd. | 90,200 | | 2,853,607 |
Lewis Group Ltd. | 82,500 | | 531,590 |
Nitori Co. Ltd. | 35,150 | | 1,711,038 |
Tiffany & Co., Inc. | 44,300 | | 1,462,786 |
United Auto Group, Inc. | 35,400 | | 755,790 |
Yamada Denki Co. Ltd. | 11,800 | | 1,203,461 |
| | 27,574,210 |
Textiles, Apparel & Luxury Goods - 0.8% |
Asics Corp. | 676,300 | | 6,891,552 |
Deckers Outdoor Corp. (a) | 16,700 | | 643,952 |
Ports Design Ltd. | 517,500 | | 832,931 |
Ted Baker PLC | 192,840 | | 1,788,686 |
Welspun India Ltd. (a) | 7,963 | | 13,616 |
Yue Yuen Industrial Holdings Ltd. | 142,500 | | 391,743 |
| | 10,562,480 |
TOTAL CONSUMER DISCRETIONARY | | 99,657,297 |
CONSUMER STAPLES - 3.7% |
Beverages - 0.0% |
Fomento Economico Mexicano SA de CV sponsored ADR | 4,900 | | 410,228 |
Grupo Modelo SA de CV Series C | 25,400 | | 96,276 |
Jones Soda Co. (a)(d) | 8,600 | | 77,400 |
| | 583,904 |
Food & Staples Retailing - 0.4% |
Daikokutenbussan Co. Ltd. | 9,200 | | 228,342 |
Heng Tai Consumables Group Ltd. | 2,458,400 | | 294,391 |
Metro AG | 59,600 | | 3,378,971 |
Plant Co. Ltd. | 9,800 | | 53,015 |
Valor Co. Ltd. | 68,100 | | 1,240,887 |
| | 5,195,606 |
Food Products - 1.6% |
Archer-Daniels-Midland Co. | 47,500 | | 1,960,800 |
Barry Callebaut AG | 5 | | 2,110 |
Britannia Industries Ltd. | 6,665 | | 174,128 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER STAPLES - continued |
Food Products - continued |
Green Mountain Coffee Roasters, Inc. (a) | 135 | | $ 5,423 |
Groupe Danone | 93,720 | | 11,910,736 |
Groupe Danone sponsored ADR | 13,500 | | 360,045 |
IAWS Group PLC (Ireland) | 700 | | 12,357 |
Lindt & Spruengli AG | 135 | | 2,823,681 |
McCormick & Co., Inc. (non-vtg.) | 35,300 | | 1,184,315 |
PT Indofood Sukses Makmur Tbk | 4,473,500 | | 424,988 |
Seaboard Corp. | 862 | | 1,103,360 |
Wimm-Bill-Dann Foods OJSC sponsored ADR (a) | 8,500 | | 332,775 |
| | 20,294,718 |
Personal Products - 1.7% |
Avon Products, Inc. | 50,100 | | 1,553,100 |
Concern Kalina OJSC sponsored ADR | 9,600 | | 387,795 |
Godrej Consumer Products Ltd. (a) | 23,819 | | 335,610 |
Hengan International Group Co. Ltd. | 6,665,000 | | 10,856,237 |
NBTY, Inc. (a) | 319,200 | | 7,632,072 |
Shiseido Co. Ltd. sponsored ADR | 57,600 | | 1,117,440 |
| | 21,882,254 |
TOTAL CONSUMER STAPLES | | 47,956,482 |
ENERGY - 17.4% |
Energy Equipment & Services - 12.5% |
BJ Services Co. | 59,500 | | 2,216,970 |
Cameron International Corp. (a) | 73,600 | | 3,515,872 |
Compagnie Generale de Geophysique SA (a) | 2,400 | | 414,154 |
Core Laboratories NV (a) | 218,700 | | 13,349,448 |
ENSCO International, Inc. | 65,800 | | 3,028,116 |
FMC Technologies, Inc. (a) | 163,100 | | 11,002,726 |
Global Industries Ltd. (a) | 537,716 | | 8,979,857 |
GlobalSantaFe Corp. | 230,500 | | 13,311,375 |
Grant Prideco, Inc. (a) | 263,400 | | 11,787,150 |
Gulf Island Fabrication, Inc. | 7,350 | | 147,294 |
Noble Corp. | 464,600 | | 34,575,532 |
Parker Drilling Co. (a) | 939,670 | | 6,746,831 |
Pason Systems, Inc. | 596,700 | | 8,739,626 |
Pride International, Inc. (a) | 134,800 | | 4,209,804 |
Smith International, Inc. | 92,300 | | 4,104,581 |
Superior Energy Services, Inc. (a) | 301,400 | | 10,217,460 |
TODCO Class A | 38,500 | | 1,572,725 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Energy Equipment & Services - continued |
Transocean, Inc. (a) | 111,100 | | $ 8,923,552 |
Veritas DGC, Inc. (a) | 105,400 | | 5,436,532 |
Weatherford International Ltd. (a) | 186,636 | | 9,260,878 |
| | 161,540,483 |
Oil, Gas & Consumable Fuels - 4.9% |
Arch Coal, Inc. | 227,700 | | 9,647,649 |
Cameco Corp. | 22,100 | | 880,397 |
Canadian Natural Resources Ltd. | 73,000 | | 4,036,155 |
Clayton Williams Energy, Inc. (a) | 19,989 | | 690,420 |
CONSOL Energy, Inc. | 248,796 | | 11,623,749 |
Energy Partners Ltd. (a) | 76,416 | | 1,448,083 |
Forest Oil Corp. (a) | 86,138 | | 2,856,336 |
Golar LNG Ltd. (NASDAQ) (a) | 377 | | 5,025 |
Hess Corp. | 398,400 | | 21,055,440 |
Hugoton Royalty Trust | 1,907 | | 56,638 |
International Coal Group, Inc. (a) | 200,300 | | 1,440,157 |
Ship Finance International Ltd. (NY Shares) | 130,800 | | 2,264,148 |
Southwestern Energy Co. (a) | 24,000 | | 747,840 |
Tesoro Corp. | 77,500 | | 5,762,900 |
TransMontaigne, Inc. (a) | 100 | | 1,121 |
Valero Energy Corp. | 26,102 | | 1,736,305 |
| | 64,252,363 |
TOTAL ENERGY | | 225,792,846 |
FINANCIALS - 11.4% |
Capital Markets - 1.7% |
A.G. Edwards, Inc. | 28,400 | | 1,571,088 |
AllianceBernstein Holding LP | 170,800 | | 10,442,712 |
Ameriprise Financial, Inc. | 101,800 | | 4,547,406 |
Azimut Holdings Spa | 165,600 | | 1,732,179 |
JAFCO Co. Ltd. | 11,300 | | 677,457 |
Korea Investment Holdings Co. Ltd. | 87,990 | | 2,875,187 |
| | 21,846,029 |
Commercial Banks - 1.9% |
Allahabad Bank | 202,408 | | 281,686 |
Banco Itau Holding Financeira SA sponsored ADR (non-vtg.) | 25,900 | | 755,244 |
Banco Pastor SA | 384,000 | | 5,034,931 |
Bank of Baroda | 277,156 | | 1,276,923 |
Bank of Fukuoka Ltd. | 444,400 | | 3,378,877 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
FINANCIALS - continued |
Commercial Banks - continued |
Bank of India | 356,989 | | $ 795,600 |
Boston Private Financial Holdings, Inc. | 114,045 | | 3,181,856 |
Canara Bank | 72,671 | | 322,347 |
Colonial Bancgroup, Inc. | 43,200 | | 1,109,376 |
Corp. Bank | 61,129 | | 295,785 |
HDFC Bank Ltd. sponsored ADR | 9,400 | | 512,770 |
Hiroshima Bank Ltd. | 302,100 | | 1,840,190 |
ICICI Bank Ltd. sponsored ADR | 9,100 | | 215,215 |
Industrial & Commercial Bank of China (Asia) Ltd. | 157,000 | | 231,470 |
Juroku Bank Ltd. | 189,000 | | 1,106,664 |
Oriental Bank of Commerce | 8,668 | | 33,642 |
PrivateBancorp, Inc. | 8,000 | | 331,280 |
Punjab National Bank | 13,630 | | 101,871 |
State Bank of India | 46,867 | | 862,351 |
Sumitomo Trust & Banking Co. Ltd. | 153,000 | | 1,671,401 |
The Keiyo Bank Ltd. | 127,000 | | 719,213 |
UCO Bank | 379,897 | | 139,936 |
Uniao de Bancos Brasileiros SA (Unibanco) GDR | 6,200 | | 411,618 |
Uti Bank Ltd. | 74,100 | | 432,761 |
| | 25,043,007 |
Consumer Finance - 0.2% |
Advanta Corp.: | | | |
Class A | 21,475 | | 704,165 |
Class B | 40,800 | | 1,466,760 |
| | 2,170,925 |
Diversified Financial Services - 0.9% |
Bank of America Corp. | 158,100 | | 7,604,610 |
Financial Technology (India) Ltd. | 12 | | 313 |
IntercontinentalExchange, Inc. | 37,500 | | 2,172,750 |
Kotak Mahindra Bank Ltd. | 162,226 | | 862,751 |
TSX Group, Inc. | 39,200 | | 1,573,197 |
| | 12,213,621 |
Insurance - 4.9% |
Admiral Group PLC | 51,900 | | 596,108 |
AFLAC, Inc. | 261,600 | | 12,125,160 |
American International Group, Inc. | 236,600 | | 13,971,230 |
Assurant, Inc. | 315,800 | | 15,284,720 |
Milano Assicurazioni Spa | 181,000 | | 1,320,908 |
Ohio Casualty Corp. | 58,473 | | 1,738,402 |
Old Republic International Corp. | 166,500 | | 3,558,105 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
FINANCIALS - continued |
Insurance - continued |
Ping An Insurance (Group) Co. of China, Ltd. (H Shares) | 636,500 | | $ 1,930,092 |
Progressive Corp. | 194,000 | | 4,987,740 |
Protective Life Corp. | 68,600 | | 3,198,132 |
Universal American Financial Corp. (a) | 1,699 | | 22,342 |
USI Holdings Corp. (a) | 339,031 | | 4,546,406 |
| | 63,279,345 |
Real Estate Investment Trusts - 0.8% |
Equity Residential (SBI) | 112,100 | | 5,014,233 |
Multiplex Group unit | 1,037,600 | | 2,521,472 |
Unibail (Reg.) | 6,300 | | 1,098,436 |
Weingarten Realty Investors (SBI) | 30,200 | | 1,156,056 |
| | 9,790,197 |
Real Estate Management & Development - 1.0% |
Aeon Mall Co. Ltd. (d) | 72,900 | | 3,064,444 |
British Land Co. PLC | 45,800 | | 1,069,880 |
CapitaLand Ltd. | 379,000 | | 1,077,487 |
Derwent Valley Holdings PLC | 37,700 | | 1,093,336 |
Kerry Properties Ltd. | 1,442,665 | | 4,913,374 |
Mitsubishi Estate Co. Ltd. | 54,000 | | 1,146,777 |
NTT Urban Development Co. | 83 | | 647,026 |
W.P. Carey & Co. LLC | 1,100 | | 27,852 |
| | 13,040,176 |
Thrifts & Mortgage Finance - 0.0% |
Housing Development Finance Corp. Ltd. | 16 | | 397 |
Radian Group, Inc. | 4,500 | | 278,010 |
| | 278,407 |
TOTAL FINANCIALS | | 147,661,707 |
HEALTH CARE - 9.7% |
Biotechnology - 0.2% |
Alnylam Pharmaceuticals, Inc. (a) | 49,668 | | 748,993 |
BioMarin Pharmaceutical, Inc. (a) | 69,582 | | 999,893 |
Sirna Therapeutics, Inc. (a)(d) | 39,855 | | 227,174 |
Theravance, Inc. (a) | 30,300 | | 693,264 |
| | 2,669,324 |
Health Care Equipment & Supplies - 1.0% |
Beckman Coulter, Inc. | 41,300 | | 2,294,215 |
BioLase Technology, Inc. | 35,800 | | 300,720 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Health Care Equipment & Supplies - continued |
C.R. Bard, Inc. | 42,100 | | $ 3,084,246 |
Edwards Lifesciences Corp. (a) | 39,200 | | 1,780,856 |
Endocare, Inc. (a) | 7,500 | | 18,750 |
Haemonetics Corp. (a) | 115,175 | | 5,356,789 |
IDEXX Laboratories, Inc. (a) | 5,600 | | 420,728 |
St. Jude Medical, Inc. (a) | 200 | | 6,484 |
Synthes, Inc. | 10 | | 1,207 |
| | 13,263,995 |
Health Care Providers & Services - 1.6% |
Aetna, Inc. | 65,700 | | 2,623,401 |
Apollo Hospitals Enterprise Ltd. | 31,353 | | 273,963 |
Caremark Rx, Inc. | 34,200 | | 1,705,554 |
Chemed Corp. | 25,800 | | 1,406,874 |
Diagnosticos Da America SA (a) | 16,000 | | 307,974 |
Humana, Inc. (a) | 63,400 | | 3,404,580 |
Omnicare, Inc. | 32,350 | | 1,534,037 |
PSS World Medical, Inc. (a) | 1,000 | | 17,650 |
ResCare, Inc. (a) | 302,600 | | 6,052,000 |
VCA Antech, Inc. (a) | 98,780 | | 3,154,045 |
| | 20,480,078 |
Health Care Technology - 1.2% |
Eclipsys Corp. (a) | 104,242 | | 1,893,035 |
Emdeon Corp. (a) | 102,300 | | 1,269,543 |
IMS Health, Inc. | 383,000 | | 10,283,550 |
TriZetto Group, Inc. (a) | 125,947 | | 1,862,756 |
| | 15,308,884 |
Life Sciences Tools & Services - 4.4% |
Albany Molecular Research, Inc. (a) | 100 | | 1,068 |
Covance, Inc. (a) | 115,300 | | 7,058,666 |
Exelixis, Inc. (a) | 26 | | 261 |
Harvard Bioscience, Inc. (a) | 275,671 | | 1,226,736 |
ICON PLC sponsored ADR (a) | 32,600 | | 1,802,780 |
Invitrogen Corp. (a) | 92,600 | | 6,118,082 |
Luminex Corp. (a) | 4,800 | | 83,472 |
Millipore Corp. (a) | 75,900 | | 4,780,941 |
PAREXEL International Corp. (a) | 103,400 | | 2,983,090 |
QIAGEN NV (a) | 750,600 | | 10,298,232 |
Stratagene Corp. | 121,264 | | 748,199 |
Thermo Electron Corp. (a) | 555,600 | | 20,134,944 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Life Sciences Tools & Services - continued |
Ventana Medical Systems, Inc. (a) | 20 | | $ 944 |
Waters Corp. (a) | 48,000 | | 2,131,200 |
| | 57,368,615 |
Pharmaceuticals - 1.3% |
Allergan, Inc. | 23,663 | | 2,538,093 |
Dr. Reddy's Laboratories Ltd. sponsored ADR | 9,400 | | 260,380 |
Johnson & Johnson | 124,500 | | 7,460,040 |
New River Pharmaceuticals, Inc. (a) | 129,800 | | 3,699,300 |
Ranbaxy Laboratories Ltd. sponsored GDR | 13 | | 103 |
ViroPharma, Inc. (a) | 280,200 | | 2,415,324 |
| | 16,373,240 |
TOTAL HEALTH CARE | | 125,464,136 |
INDUSTRIALS - 12.7% |
Aerospace & Defense - 1.1% |
Alliant Techsystems, Inc. (a) | 29,300 | | 2,237,055 |
CAE, Inc. | 209,700 | | 1,596,748 |
Ceradyne, Inc. (a) | 58,700 | | 2,905,063 |
Esterline Technologies Corp. (a) | 167,209 | | 6,954,222 |
| | 13,693,088 |
Air Freight & Logistics - 0.0% |
Hub Group, Inc. Class A (a) | 72 | | 1,766 |
Airlines - 1.2% |
ACE Aviation Holdings, Inc. Class A (a) | 180,500 | | 5,036,796 |
Alaska Air Group, Inc. (a) | 269,500 | | 10,623,690 |
| | 15,660,486 |
Building Products - 0.2% |
American Woodmark Corp. | 88,351 | | 3,095,819 |
Simpson Manufacturing Co. Ltd. | 48 | | 1,730 |
| | 3,097,549 |
Commercial Services & Supplies - 1.2% |
American Ecology Corp. | 8,328 | | 220,692 |
Bio-Treat Technology Ltd. | 775,000 | | 523,897 |
Cintas Corp. | 105,426 | | 4,191,738 |
Equifax, Inc. | 57,500 | | 1,974,550 |
Fullcast Co. Ltd. (d) | 1,109 | | 3,770,164 |
Intertek Group PLC | 78,000 | | 1,009,854 |
Midas International Holdings Ltd. | 2,051,000 | | 126,764 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INDUSTRIALS - continued |
Commercial Services & Supplies - continued |
Monster Worldwide, Inc. (a) | 25,600 | | $ 1,092,096 |
Randstad Holdings NV | 46,200 | | 2,709,100 |
Societe Generale de Surveillance Holding SA (SGS) (Reg.) | 14 | | 13,284 |
Stericycle, Inc. (a) | 76 | | 4,948 |
Tele Atlas NV (a) | 7,300 | | 155,480 |
| | 15,792,567 |
Construction & Engineering - 0.6% |
Daelim Industrial Co. | 7,750 | | 486,877 |
Fluor Corp. | 24,700 | | 2,295,371 |
Insituform Technologies, Inc. Class A (a) | 17 | | 389 |
Jacobs Engineering Group, Inc. (a) | 26,530 | | 2,112,849 |
LG Engineering & Construction Co. Ltd. | 7,880 | | 509,995 |
Quanta Services, Inc. (a) | 6,800 | | 117,844 |
Shaw Group, Inc. (a) | 60,330 | | 1,677,174 |
Taihei Dengyo Kaisha Ltd. | 59,000 | | 407,341 |
| | 7,607,840 |
Electrical Equipment - 2.0% |
Crompton Greaves Ltd. | 15,896 | | 303,212 |
Rockwell Automation, Inc. | 300,778 | | 21,659,024 |
Roper Industries, Inc. | 11,800 | | 551,650 |
Solar Integrated Technologies, Inc. (a) | 122,700 | | 207,650 |
SolarWorld AG (d) | 43,200 | | 2,711,679 |
| | 25,433,215 |
Industrial Conglomerates - 0.6% |
Fu Sheng Industrial Co. Ltd. | 681,840 | | 658,076 |
General Electric Co. | 179,400 | | 5,913,024 |
Max India Ltd. (a) | 44,379 | | 759,028 |
NWS Holdings Ltd. | 267,000 | | 464,124 |
| | 7,794,252 |
Machinery - 5.2% |
AGCO Corp. (a) | 748,780 | | 19,707,890 |
Badger Meter, Inc. | 118,000 | | 3,186,000 |
Crane Co. | 37,600 | | 1,564,160 |
Deutz AG (a) | 31,300 | | 246,240 |
Dover Corp. | 53,600 | | 2,649,448 |
Eicher Motors Ltd. | 30,058 | | 156,252 |
Flowserve Corp. (a) | 129,300 | | 7,357,170 |
Graco, Inc. | 57,900 | | 2,662,242 |
Harsco Corp. | 257,100 | | 20,043,516 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INDUSTRIALS - continued |
Machinery - continued |
Heidelberger Druckmaschinen AG | 36,000 | | $ 1,637,120 |
Hyflux Ltd. | 102,000 | | 152,080 |
Krones AG | 190 | | 23,814 |
MAN AG | 22,100 | | 1,600,666 |
MMI Holdings Ltd. | 2,694,000 | | 1,216,925 |
Tata Motors Ltd. | 64,939 | | 1,125,038 |
Valmont Industries, Inc. | 59,180 | | 2,751,278 |
Wabtec Corp. | 55,300 | | 2,068,220 |
| | 68,148,059 |
Marine - 0.0% |
Hanjin Shipping Co. Ltd. | 10 | | 239 |
Road & Rail - 0.1% |
J.B. Hunt Transport Services, Inc. | 66,679 | | 1,660,974 |
Trading Companies & Distributors - 0.4% |
GATX Corp. | 110,100 | | 4,679,250 |
Transportation Infrastructure - 0.1% |
Hopewell Holdings Ltd. | 321,000 | | 905,186 |
TOTAL INDUSTRIALS | | 164,474,471 |
INFORMATION TECHNOLOGY - 10.7% |
Communications Equipment - 1.4% |
Adtran, Inc. | 78,100 | | 1,751,783 |
Avaya, Inc. (a) | 261,300 | | 2,984,046 |
Black Box Corp. | 11,900 | | 456,127 |
D-Link Corp. | 313,000 | | 341,242 |
Harris Corp. | 71,100 | | 2,951,361 |
NETGEAR, Inc. (a) | 86 | | 1,862 |
QUALCOMM, Inc. | 154,300 | | 6,182,801 |
Tellabs, Inc. (a) | 229,546 | | 3,055,257 |
Zyxel Communications Corp. | 244,000 | | 399,401 |
| | 18,123,880 |
Computers & Peripherals - 1.1% |
Apple Computer, Inc. (a) | 132,951 | | 7,594,161 |
Hypercom Corp. (a) | 221,500 | | 2,071,025 |
Oberthur Card Systems (d) | 125,200 | | 940,115 |
SanDisk Corp. (a) | 21 | | 1,071 |
Seagate Technology | 111,400 | | 2,522,096 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Computers & Peripherals - continued |
Unisteel Technology Ltd. | 347,500 | | $ 401,759 |
Xyratex Ltd. (a) | 1,800 | | 47,610 |
| | 13,577,837 |
Electronic Equipment & Instruments - 3.7% |
Agilent Technologies, Inc. (a) | 67,600 | | 2,133,456 |
CDW Corp. | 211,120 | | 11,537,708 |
FLIR Systems, Inc. (a) | 51 | | 1,125 |
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 1,163,485 | | 7,186,775 |
Ibiden Co. Ltd. | 22,700 | | 1,091,108 |
Itron, Inc. (a) | 11,700 | | 693,342 |
KEMET Corp. (a) | 338,200 | | 3,118,204 |
Keyence Corp. | 2,200 | | 561,800 |
Mettler-Toledo International, Inc. (a) | 183,900 | | 11,138,823 |
Molex, Inc. | 49,250 | | 1,653,323 |
National Instruments Corp. | 100 | | 2,740 |
Nidec Corp. sponsored ADR | 53,700 | | 968,748 |
Vishay Intertechnology, Inc. (a) | 486,100 | | 7,646,353 |
| | 47,733,505 |
Internet Software & Services - 1.1% |
Art Technology Group, Inc. (a) | 946,338 | | 2,820,087 |
EDGAR Online, Inc. (a) | 13,600 | | 63,920 |
NHN Corp. (a) | 1,366 | | 475,155 |
RealNetworks, Inc. (a) | 251,272 | | 2,688,610 |
Tencent Holdings Ltd. | 315,000 | | 661,130 |
ValueClick, Inc. (a) | 45,821 | | 703,352 |
VeriSign, Inc. (a) | 71,500 | | 1,656,655 |
WebEx Communications, Inc. (a) | 145,828 | | 5,182,727 |
Yahoo! Japan Corp. | 932 | | 493,591 |
| | 14,745,227 |
IT Services - 0.3% |
Cognizant Technology Solutions Corp. Class A (a) | 27,900 | | 1,879,623 |
Infosys Technologies Ltd. | 5,020 | | 336,886 |
Infosys Technologies Ltd. sponsored ADR | 5,200 | | 397,332 |
Northgate Information Solutions PLC (a) | 1,113,700 | | 1,596,379 |
StarTek, Inc. | 4,900 | | 73,255 |
| | 4,283,475 |
Semiconductors & Semiconductor Equipment - 2.3% |
Advanced Micro Devices, Inc. (a) | 54,600 | | 1,333,332 |
Altera Corp. (a) | 100,836 | | 1,769,672 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Semiconductors & Semiconductor Equipment - continued |
Analog Devices, Inc. | 19,500 | | $ 626,730 |
ASML Holding NV (NY Shares) (a) | 339,300 | | 6,860,646 |
Cymer, Inc. (a) | 7,100 | | 329,866 |
MEMC Electronic Materials, Inc. (a) | 132,600 | | 4,972,500 |
Saifun Semiconductors Ltd. | 700 | | 20,055 |
Teradyne, Inc. (a) | 77,600 | | 1,080,968 |
Texas Instruments, Inc. | 72,800 | | 2,205,112 |
Veeco Instruments, Inc. (a) | 235,854 | | 5,622,759 |
Zoran Corp. (a) | 225,229 | | 5,482,074 |
| | 30,303,714 |
Software - 0.8% |
Cognos, Inc. (a) | 133,500 | | 3,792,631 |
Informatica Corp. (a) | 7,100 | | 93,436 |
Manhattan Associates, Inc. (a) | 58,803 | | 1,193,113 |
Open Solutions, Inc. (a) | 95,271 | | 2,535,161 |
Plato Learning, Inc. (a) | 48,734 | | 303,125 |
Quality Systems, Inc. | 27,828 | | 1,024,627 |
Temenos Group AG (a) | 73,939 | | 680,420 |
| | 9,622,513 |
TOTAL INFORMATION TECHNOLOGY | | 138,390,151 |
MATERIALS - 13.0% |
Chemicals - 2.7% |
Airgas, Inc. | 332,957 | | 12,402,648 |
Albemarle Corp. | 48,000 | | 2,298,240 |
Asian Paints India Ltd. | 102,341 | | 1,320,641 |
Ecolab, Inc. | 263,100 | | 10,676,598 |
Kuraray Co. Ltd. | 27,500 | | 307,625 |
Nitto Denko Corp. | 10,800 | | 769,238 |
Praxair, Inc. | 40,100 | | 2,165,400 |
Tokuyama Corp. | 336,000 | | 4,991,916 |
United Phosphorous Ltd. | 45 | | 232 |
Valhi, Inc. | 9,550 | | 234,453 |
| | 35,166,991 |
Containers & Packaging - 0.2% |
Crown Holdings, Inc. (a) | 94,140 | | 1,465,760 |
Essel Propack Ltd. | 201,674 | | 281,983 |
Pactiv Corp. (a) | 61,595 | | 1,524,476 |
| | 3,272,219 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - continued |
Metals & Mining - 9.7% |
Agnico-Eagle Mines Ltd. | 318,200 | | $ 10,549,657 |
AK Steel Holding Corp. (a) | 150,766 | | 2,085,094 |
Amcol International Corp. | 14,200 | | 374,170 |
Barrick Gold Corp. | 18,800 | | 555,259 |
Bema Gold Corp. (a) | 31,400 | | 156,677 |
Boliden AB | 274,600 | | 5,056,493 |
Century Aluminum Co. (a) | 211,860 | | 7,561,283 |
Compania de Minas Buenaventura SA sponsored ADR | 49,800 | | 1,358,544 |
Eldorado Gold Corp. (a) | 27,800 | | 134,978 |
Equinox Minerals Ltd. (a) | 863,500 | | 1,005,599 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 249,100 | | 13,802,631 |
Harmony Gold Mining Co. Ltd. (a) | 120,700 | | 1,966,203 |
High River Gold Mines Ltd. (a) | 407,400 | | 839,398 |
HudBay Minerals, Inc. (a) | 187,900 | | 2,390,200 |
IAMGOLD Corp. | 158,800 | | 1,411,176 |
Kinross Gold Corp. (a) | 1,605,100 | | 17,498,940 |
Newmont Mining Corp. | 738,500 | | 39,088,802 |
Nucor Corp. | 28,800 | | 1,562,400 |
Phelps Dodge Corp. | 30,700 | | 2,522,312 |
Teck Cominco Ltd. Class B (sub. vtg.) | 58,200 | | 3,492,104 |
United States Steel Corp. | 147,900 | | 10,370,748 |
Zinifex Ltd. | 262,900 | | 1,957,649 |
| | 125,740,317 |
Paper & Forest Products - 0.4% |
Lee & Man Paper Manufacturing Ltd. | 1,972,000 | | 2,881,983 |
Sino-Forest Corp. (a) | 398,500 | | 2,052,652 |
| | 4,934,635 |
TOTAL MATERIALS | | 169,114,162 |
TELECOMMUNICATION SERVICES - 1.5% |
Diversified Telecommunication Services - 1.2% |
AT&T, Inc. | 253,300 | | 7,064,537 |
Qwest Communications International, Inc. (a) | 1,060,500 | | 8,579,445 |
| | 15,643,982 |
Wireless Telecommunication Services - 0.3% |
America Movil SA de CV Series L sponsored ADR | 28,300 | | 941,258 |
Bharti Airtel Ltd. (a) | 116,182 | | 1,001,297 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
TELECOMMUNICATION SERVICES - continued |
Wireless Telecommunication Services - continued |
NII Holdings, Inc. (a) | 50 | | $ 2,819 |
USA Mobility, Inc. | 80,460 | | 1,335,636 |
| | 3,281,010 |
TOTAL TELECOMMUNICATION SERVICES | | 18,924,992 |
UTILITIES - 1.0% |
Gas Utilities - 0.3% |
AGL Resources, Inc. | 41,900 | | 1,597,228 |
Xinao Gas Holdings Ltd. | 2,352,000 | | 2,241,082 |
| | 3,838,310 |
Independent Power Producers & Energy Traders - 0.7% |
AES Corp. (a) | 467,900 | | 8,632,755 |
Black Hills Corp. | 29,300 | | 1,005,869 |
Malakoff BHD | 91,700 | | 242,071 |
| | 9,880,695 |
TOTAL UTILITIES | | 13,719,005 |
TOTAL COMMON STOCKS (Cost $1,031,861,937) | 1,151,155,249 |
Money Market Funds - 11.0% |
| | | |
Fidelity Cash Central Fund, 5.11% (b) | 132,856,643 | | 132,856,643 |
Fidelity Securities Lending Cash Central Fund, 5.14% (b)(c) | 10,330,844 | | 10,330,844 |
TOTAL MONEY MARKET FUNDS (Cost $143,187,487) | 143,187,487 |
TOTAL INVESTMENT PORTFOLIO - 99.8% (Cost $1,175,049,424) | 1,294,342,736 |
NET OTHER ASSETS - 0.2% | | 2,785,264 |
NET ASSETS - 100% | $ 1,297,128,000 |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 2,251,748 |
Fidelity Securities Lending Cash Central Fund | 147,080 |
Total | $ 2,398,828 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 73.6% |
Cayman Islands | 5.3% |
Canada | 5.3% |
Japan | 4.3% |
Netherlands | 2.5% |
France | 1.3% |
Others (individually less than 1%) | 7.7% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| June 30, 2006 (Unaudited) |
Assets | | |
Investment in securities, at value (including securities loaned of $9,983,626) - See accompanying schedule: Unaffiliated issuers (cost $1,031,861,937) | $ 1,151,155,249 | |
Affiliated Central Funds (cost $143,187,487) | 143,187,487 | |
Total Investments (cost $1,175,049,424) | | $ 1,294,342,736 |
Cash | | 2,780,480 |
Foreign currency held at value (cost $8,030,376) | | 8,050,826 |
Receivable for investments sold | | 8,761,042 |
Receivable for fund shares sold | | 4,660,469 |
Dividends receivable | | 910,313 |
Interest receivable | | 471,888 |
Prepaid expenses | | 934 |
Receivable from investment adviser for expense reductions | | 367 |
Other receivables | | 71,398 |
Total assets | | 1,320,050,453 |
| | |
Liabilities | | |
Payable for investments purchased | $ 9,074,181 | |
Payable for fund shares redeemed | 2,039,641 | |
Accrued management fee | 578,698 | |
Distribution fees payable | 457,828 | |
Other affiliated payables | 326,922 | |
Other payables and accrued expenses | 114,339 | |
Collateral on securities loaned, at value | 10,330,844 | |
Total liabilities | | 22,922,453 |
| | |
Net Assets | | $ 1,297,128,000 |
Net Assets consist of: | | |
Paid in capital | | $ 1,157,130,224 |
Accumulated net investment loss | | (506,918) |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 21,163,683 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 119,341,011 |
Net Assets | | $ 1,297,128,000 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| June 30, 2006 (Unaudited) |
Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share ($334,850,420 ÷ 21,636,483 shares) | | $ 15.48 |
| | |
Maximum offering price per share (100/94.25 of $15.48) | | $ 16.42 |
Class T:
Net Asset Value and redemption price per share ($481,759,483 ÷ 31,209,888 shares) | | $ 15.44 |
| | |
Maximum offering price per share (100/96.50 of $15.44) | | $ 16.00 |
Class B:
Net Asset Value and offering price per share ($78,988,384 ÷ 5,155,665 shares)A | | $ 15.32 |
| | |
Class C:
Net Asset Value and offering price per share ($171,036,126 ÷ 11,156,634 shares)A | | $ 15.33 |
| | |
Institutional Class:
Net Asset Value, offering price and redemption price per share ($230,493,587 ÷ 14,840,043 shares) | | $ 15.53 |
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.
Semiannual Report
Statement of Operations
| Six months ended June 30, 2006 (Unaudited) |
Investment Income | | |
Dividends | | $ 4,670,413 |
Interest | | 1,011 |
Income from affiliated Central Funds | | 2,398,828 |
Total income | | 7,070,252 |
| | |
Expenses | | |
Management fee | $ 3,111,030 | |
Transfer agent fees | 1,568,669 | |
Distribution fees | 2,505,848 | |
Accounting and security lending fees | 191,969 | |
Independent trustees' compensation | 1,959 | |
Custodian fees and expenses | 110,939 | |
Registration fees | 175,588 | |
Audit | 39,010 | |
Legal | 7,537 | |
Miscellaneous | 3,151 | |
Total expenses before reductions | 7,715,700 | |
Expense reductions | (139,101) | 7,576,599 |
Net investment income (loss) | | (506,347) |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers (net of foreign taxes of $154,061) | 24,205,476 | |
Foreign currency transactions | 5,809 | |
Total net realized gain (loss) | | 24,211,285 |
Change in net unrealized appreciation (depreciation) on: Investment securities (net of decrease in deferred foreign taxes of $308,354) | 22,340,118 | |
Assets and liabilities in foreign currencies | 50,948 | |
Total change in net unrealized appreciation (depreciation) | | 22,391,066 |
Net gain (loss) | | 46,602,351 |
Net increase (decrease) in net assets resulting from operations | | $ 46,096,004 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Six months ended June 30, 2006
(Unaudited) | Year ended
December 31, 2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ (506,347) | $ (707,079) |
Net realized gain (loss) | 24,211,285 | 3,477,904 |
Change in net unrealized appreciation (depreciation) | 22,391,066 | 84,370,006 |
Net increase (decrease) in net assets resulting
from operations | 46,096,004 | 87,140,831 |
Distributions to shareholders from net realized gain | (2,980,256) | (2,541,513) |
Share transactions - net increase (decrease) | 444,957,345 | 589,804,166 |
Total increase (decrease) in net assets | 488,073,093 | 674,403,484 |
| | |
Net Assets | | |
Beginning of period | 809,054,907 | 134,651,423 |
End of period (including accumulated net investment loss of $506,918 and accumulated net investment loss of $571, respectively) | $ 1,297,128,000 | $ 809,054,907 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.61 | $ 12.52 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .01 | .01 F | (.02) |
Net realized and unrealized gain (loss) | .92 | 2.14 | 2.54 |
Total from investment operations | .93 | 2.15 | 2.52 |
Distributions from net realized gain | (.06) | (.06) | - |
Net asset value, end of period | $ 15.48 | $ 14.61 | $ 12.52 |
Total Return B, C, D | 6.33% | 17.21% | 25.20% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.23% A | 1.32% | 1.79% A |
Expenses net of fee waivers, if any | 1.23% A | 1.25% | 1.30% A |
Expenses net of all reductions | 1.21% A | 1.18% | 1.26% A |
Net investment income (loss) | .07% A | .04% F | (.53)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 334,850 | $ 189,864 | $ 34,438 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.14)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class T
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.58 | $ 12.51 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.01) | (.02) F | (.03) |
Net realized and unrealized gain (loss) | .93 | 2.13 | 2.54 |
Total from investment operations | .92 | 2.11 | 2.51 |
Distributions from net realized gain | (.06) | (.04) | - |
Net asset value, end of period | $ 15.44 | $ 14.58 | $ 12.51 |
Total Return B, C, D | 6.27% | 16.87% | 25.10% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.38% A | 1.46% | 1.96% A |
Expenses net of fee waivers, if any | 1.38% A | 1.46% | 1.55% A |
Expenses net of all reductions | 1.36% A | 1.39% | 1.51% A |
Net investment income (loss) | (.08)% A | (.16)% F | (.78)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 481,759 | $ 318,826 | $ 60,107 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.35)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class B
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.49 | $ 12.48 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.05) | (.09) F | (.06) |
Net realized and unrealized gain (loss) | .91 | 2.13 | 2.54 |
Total from investment operations | .86 | 2.04 | 2.48 |
Distributions from net realized gain | (.03) | (.03) | - |
Net asset value, end of period | $ 15.32 | $ 14.49 | $ 12.48 |
Total Return B, C, D | 5.90% | 16.34% | 24.80% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 2.02% A | 2.08% | 2.61% A |
Expenses net of fee waivers, if any | 2.00% A | 2.00% | 2.05% A |
Expenses net of all reductions | 1.97% A | 1.92% | 2.01% A |
Net investment income (loss) | (.69)% A | (.70)% F | (1.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 78,988 | $ 56,201 | $ 15,527 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.02 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.89)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class C
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.49 | $ 12.49 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.05) | (.09) F | (.06) |
Net realized and unrealized gain (loss) | .92 | 2.12 | 2.55 |
Total from investment operations | .87 | 2.03 | 2.49 |
Distributions from net realized gain | (.03) | (.03) | - |
Net asset value, end of period | $ 15.33 | $ 14.49 | $ 12.49 |
Total Return B, C, D | 5.97% | 16.25% | 24.90% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.97% A | 2.05% | 2.53% A |
Expenses net of fee waivers, if any | 1.97% A | 2.00% | 2.05% A |
Expenses net of all reductions | 1.94% A | 1.93% | 2.01% A |
Net investment income (loss) | (.66)% A | (.70)% F | (1.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 171,036 | $ 107,286 | $ 17,822 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.02 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.89)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.64 | $ 12.54 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) D | .03 | .04 E | (.01) |
Net realized and unrealized gain (loss) | .92 | 2.15 | 2.55 |
Total from investment operations | .95 | 2.19 | 2.54 |
Distributions from net realized gain | (.06) | (.09) | - |
Net asset value, end of period | $ 15.53 | $ 14.64 | $ 12.54 |
Total Return B, C | 6.45% | 17.43% | 25.40% |
Ratios to Average Net Assets G | | | |
Expenses before reductions | .97% A | 1.04% | 1.38% A |
Expenses net of fee waivers, if any | .97% A | 1.00% | 1.05% A |
Expenses net of all reductions | .95% A | .93% | 1.01% A |
Net investment income (loss) | .33% A | .29% E | (.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 230,494 | $ 136,879 | $ 6,757 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .10%.
F For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
1. Significant Accounting Policies.
Fidelity Advisor Mid Cap II 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 Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. 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 each Fund in the trust.
Semiannual Report
1. Significant Accounting Policies - continued
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 the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund claimed a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to short-term capital gains, foreign currency transactions, certain foreign taxes, passive foreign investment companies (PFIC), partnerships, net operating losses and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 149,520,704 | |
Unrealized depreciation | (33,572,535) | |
Net unrealized appreciation (depreciation) | $ 115,948,169 | |
Cost for federal income tax purposes | $ 1,178,394,567 | |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. 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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
2. Operating Policies - continued
Repurchase Agreements - continued
repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,060,593,700 and $704,521,550, respectively.
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 ..27% 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 annualized management fee rate was .56% 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
Fee | Service
Fee | Paid to
FDC | Retained
by FDC |
Class A | 0% | .25% | $ 345,143 | $ 15,123 |
Class T | .25% | .25% | 1,060,380 | 83,316 |
Class B | .75% | .25% | 357,398 | 268,613 |
Class C | .75% | .25% | 742,927 | 404,604 |
| | | $ 2,505,848 | $ 771,656 |
Semiannual Report
4. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling 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, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained
by FDC |
Class A | $ 469,859 |
Class T | 98,697 |
Class B * | 57,480 |
Class C * | 15,999 |
| $ 642,035 |
* 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 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 shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
| Amount | % of
Average
Net Assets |
Class A | $ 449,968 | .32* |
Class T | 473,126 | .22* |
Class B | 130,675 | .36* |
Class C | 233,116 | .31* |
Institutional Class | 281,784 | .31* |
| $ 1,568,669 | |
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
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 were $21,095 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 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, which amounts to $1,218 and is reflected in Miscellaneous Expense on the Statement of Operations. 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. On the settlement date of the loan, 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $147,080.
Semiannual Report
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual 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.
The following classes were in reimbursement during the period:
| Expense
Limitations | Reimbursement
from adviser |
Class B | 2.00% | $ 8,563 |
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 $129,438 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 $1,100.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
From net realized gain | | |
Class A | $ 813,191 | $ 722,938 |
Class T | 1,326,857 | 785,508 |
Class B | 104,080 | 115,130 |
Class C | 207,361 | 216,578 |
Institutional Class | 528,767 | 701,359 |
Total | $ 2,980,256 | $ 2,541,513 |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 | Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
Class A | | | | |
Shares sold | 10,152,675 | 11,209,186 | $ 158,261,242 | $ 148,925,410 |
Reinvestment of distributions | 48,847 | 46,121 | 760,551 | 673,648 |
Shares redeemed | (1,564,316) | (1,006,186) | (24,122,349) | (13,491,876) |
Net increase (decrease) | 8,637,206 | 10,249,121 | $ 134,899,444 | $ 136,107,182 |
Class T | | | | |
Shares sold | 12,218,751 | 19,298,393 | $ 189,920,927 | $ 254,508,130 |
Reinvestment of distributions | 82,906 | 52,186 | 1,288,360 | 761,896 |
Shares redeemed | (2,960,418) | (2,287,715) | (45,857,485) | (30,643,453) |
Net increase (decrease) | 9,341,239 | 17,062,864 | $ 145,351,802 | $ 224,626,573 |
Class B | | | | |
Shares sold | 1,785,596 | 3,212,130 | $ 27,643,260 | $ 41,956,200 |
Reinvestment of distributions | 6,259 | 7,317 | 96,770 | 106,897 |
Shares redeemed | (515,768) | (583,722) | (7,890,973) | (7,653,056) |
Net increase (decrease) | 1,276,087 | 2,635,725 | $ 19,849,057 | $ 34,410,041 |
Class C | | | | |
Shares sold | 4,642,876 | 6,491,544 | $ 71,964,409 | $ 85,275,825 |
Reinvestment of distributions | 11,690 | 12,876 | 180,845 | 188,163 |
Shares redeemed | (899,806) | (529,610) | (13,512,813) | (7,087,172) |
Net increase (decrease) | 3,754,760 | 5,974,810 | $ 58,632,441 | $ 78,376,816 |
Institutional Class | | | | |
Shares sold | 6,857,447 | 9,859,285 | $ 107,692,560 | $ 130,431,806 |
Reinvestment of distributions | 31,432 | 44,117 | 490,661 | 650,145 |
Shares redeemed | (1,399,099) | (1,092,116) | (21,958,620) | (14,798,397) |
Net increase (decrease) | 5,489,780 | 8,811,286 | $ 86,224,601 | $ 116,283,554 |
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Mid Cap II Fund
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Semiannual Report
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Research & Analysis Company
(formerly 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 Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
AMP-USAN-0806
1.801445.101
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Mid Cap II
Fund - Institutional Class
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | <Click Here> | Ned Johnson's message to shareholders. |
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Semiannual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Semiannual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semiannual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Class A | | | |
Actual | $ 1,000.00 | $ 1,063.30 | $ 6.29 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | | | |
Actual | $ 1,000.00 | $ 1,062.70 | $ 7.06 |
HypotheticalA | $ 1,000.00 | $ 1,017.95 | $ 6.90 |
Class B | | | |
Actual | $ 1,000.00 | $ 1,059.00 | $ 10.21 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Class C | | | |
Actual | $ 1,000.00 | $ 1,059.70 | $ 10.06 |
HypotheticalA | $ 1,000.00 | $ 1,015.03 | $ 9.84 |
Institutional Class | | | |
Actual | $ 1,000.00 | $ 1,064.50 | $ 4.97 |
HypotheticalA | $ 1,000.00 | $ 1,019.98 | $ 4.86 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below);multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
| Annualized
Expense Ratio |
Class A | 1.23% |
Class T | 1.38% |
Class B | 2.00% |
Class C | 1.97% |
Institutional Class | .97% |
Semiannual Report
Investment Changes
Top Ten Stocks as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Newmont Mining Corp. | 3.0 | 1.6 |
Noble Corp. | 2.7 | 1.0 |
Rockwell Automation, Inc. | 1.7 | 1.5 |
Hess Corp. | 1.6 | 0.1 |
Thermo Electron Corp. | 1.5 | 1.4 |
Harsco Corp. | 1.5 | 1.1 |
AGCO Corp. | 1.5 | 1.1 |
Kinross Gold Corp. | 1.3 | 1.1 |
Assurant, Inc. | 1.2 | 1.4 |
American International Group, Inc. | 1.1 | 0.3 |
| 17.1 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Energy | 17.4 | 16.0 |
Materials | 13.0 | 8.8 |
Industrials | 12.7 | 13.9 |
Financials | 11.4 | 8.9 |
Information Technology | 10.7 | 10.7 |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006* | As of December 31, 2005** |
| Stocks 88.8% | | | Stocks 92.6% | |
| Short-Term
Investments and
Net Other Assets 11.2% | | | Short-Term
Investments and
Net Other Assets 7.4% | |
* Foreign
investments | 26.4% | | ** Foreign investments | 26.7% | |
Semiannual Report
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Common Stocks - 88.8% |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - 7.7% |
Auto Components - 0.4% |
Autoliv, Inc. | 30 | | $ 1,697 |
IMPCO Technologies, Inc. (a) | 339,805 | | 3,625,719 |
New Focus Auto Tech Holdings Ltd. | 1,016,000 | | 320,515 |
Showa Corp. | 47,700 | | 796,633 |
| | 4,744,564 |
Automobiles - 0.3% |
Bajaj Auto Ltd. | 14 | | 839 |
Geely Automobile Holdings Ltd. | 10,590,000 | | 1,322,685 |
Harley-Davidson, Inc. | 12,600 | | 691,614 |
Hero Honda Motors Ltd. | 6 | | 104 |
Hyundai Motor Co. | 10,097 | | 857,825 |
Mahindra & Mahindra Ltd. | 18,659 | | 252,881 |
Maruti Udyog Ltd. | 55,170 | | 958,020 |
National R.V. Holdings, Inc. (a) | 16,800 | | 90,888 |
| | 4,174,856 |
Diversified Consumer Services - 0.1% |
Bright Horizons Family Solutions, Inc. (a) | 2 | | 75 |
Raffles Education Corp. Ltd. | 274,000 | | 418,915 |
| | 418,990 |
Hotels, Restaurants & Leisure - 0.8% |
Ruth's Chris Steak House, Inc. | 15,700 | | 320,594 |
Sonic Corp. (a) | 239,602 | | 4,981,326 |
St. Marc Holdings Co. Ltd. | 68,300 | | 4,715,491 |
TAJ GVK Hotels & Resorts Ltd. | 111,311 | | 471,640 |
| | 10,489,051 |
Household Durables - 0.8% |
Alba PLC | 19 | | 73 |
Cyrela Brazil Realty SA | 9,000 | | 149,591 |
Daito Trust Construction Co. | 14,600 | | 808,949 |
Goldcrest Co. Ltd. (d) | 25,180 | | 1,234,519 |
Leggett & Platt, Inc. | 95,000 | | 2,373,100 |
LG Electronics, Inc. | 13,560 | | 821,862 |
Nihon Eslead Corp. | 47,000 | | 1,326,721 |
Sekisui House Ltd. | 118,000 | | 1,620,083 |
The Stanley Works | 40,700 | | 1,921,854 |
Woongjin Coway Co. Ltd. | 15,470 | | 339,176 |
| | 10,595,928 |
Internet & Catalog Retail - 0.2% |
Alloy, Inc. (a) | 425 | | 4,458 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - continued |
Internet & Catalog Retail - continued |
ASKUL Corp. | 30,800 | | $ 685,043 |
dELiA*s, Inc. (a) | 850 | | 6,868 |
VistaPrint Ltd. | 50,132 | | 1,340,530 |
| | 2,036,899 |
Leisure Equipment & Products - 0.4% |
Giant Manufacturing Co. Ltd. | 126,000 | | 203,913 |
Jumbo SA | 165,760 | | 2,073,753 |
Oakley, Inc. | 60,800 | | 1,024,480 |
Trigano SA | 39,800 | | 2,112,855 |
| | 5,415,001 |
Media - 1.0% |
Astral Media, Inc. Class A (non-vtg.) | 73,400 | | 2,293,462 |
Clear Media Ltd. (a) | 1,000 | | 1,159 |
Harris Interactive, Inc. (a) | 457,258 | | 2,606,371 |
Interpublic Group of Companies, Inc. (a) | 169,300 | | 1,413,655 |
Omnicom Group, Inc. | 72,226 | | 6,434,614 |
Salem Communications Corp. Class A (a) | 23,300 | | 303,133 |
Trader Classified Media NV Class A (NY Shares) | 8,000 | | 111,146 |
Zee Telefilms Ltd. | 12 | | 63 |
| | 13,163,603 |
Multiline Retail - 0.8% |
Lifestyle International Holdings Ltd. | 440,000 | | 804,507 |
Lojas Renner SA | 27,800 | | 1,476,061 |
Nordstrom, Inc. | 179,300 | | 6,544,450 |
Pantaloon Retail India Ltd. | 9,353 | | 315,572 |
PT Mitra Adiperkasa Tbk | 238,000 | | 21,326 |
Ryohin Keikaku Co. Ltd. | 16,100 | | 1,319,799 |
| | 10,481,715 |
Specialty Retail - 2.1% |
Abercrombie & Fitch Co. Class A | 16,700 | | 925,681 |
Asbury Automotive Group, Inc. (a) | 75,100 | | 1,572,594 |
Best Buy Co., Inc. | 7,650 | | 419,526 |
Build-A-Bear Workshop, Inc. (a)(d) | 87,100 | | 1,873,521 |
Charming Shoppes, Inc. (a) | 63,915 | | 718,405 |
Circuit City Stores, Inc. | 80,100 | | 2,180,322 |
DSG International PLC | 1,104,800 | | 3,902,861 |
DSW, Inc. Class A | 11,100 | | 404,262 |
Ellerine Holdings Ltd. | 38,800 | | 354,449 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER DISCRETIONARY - continued |
Specialty Retail - continued |
Gamestop Corp.: | | | |
Class A (a) | 3,200 | | $ 134,400 |
Class B (a) | 107,200 | | 3,671,600 |
Inditex SA | 68,700 | | 2,898,317 |
KOMERI Co. Ltd. | 90,200 | | 2,853,607 |
Lewis Group Ltd. | 82,500 | | 531,590 |
Nitori Co. Ltd. | 35,150 | | 1,711,038 |
Tiffany & Co., Inc. | 44,300 | | 1,462,786 |
United Auto Group, Inc. | 35,400 | | 755,790 |
Yamada Denki Co. Ltd. | 11,800 | | 1,203,461 |
| | 27,574,210 |
Textiles, Apparel & Luxury Goods - 0.8% |
Asics Corp. | 676,300 | | 6,891,552 |
Deckers Outdoor Corp. (a) | 16,700 | | 643,952 |
Ports Design Ltd. | 517,500 | | 832,931 |
Ted Baker PLC | 192,840 | | 1,788,686 |
Welspun India Ltd. (a) | 7,963 | | 13,616 |
Yue Yuen Industrial Holdings Ltd. | 142,500 | | 391,743 |
| | 10,562,480 |
TOTAL CONSUMER DISCRETIONARY | | 99,657,297 |
CONSUMER STAPLES - 3.7% |
Beverages - 0.0% |
Fomento Economico Mexicano SA de CV sponsored ADR | 4,900 | | 410,228 |
Grupo Modelo SA de CV Series C | 25,400 | | 96,276 |
Jones Soda Co. (a)(d) | 8,600 | | 77,400 |
| | 583,904 |
Food & Staples Retailing - 0.4% |
Daikokutenbussan Co. Ltd. | 9,200 | | 228,342 |
Heng Tai Consumables Group Ltd. | 2,458,400 | | 294,391 |
Metro AG | 59,600 | | 3,378,971 |
Plant Co. Ltd. | 9,800 | | 53,015 |
Valor Co. Ltd. | 68,100 | | 1,240,887 |
| | 5,195,606 |
Food Products - 1.6% |
Archer-Daniels-Midland Co. | 47,500 | | 1,960,800 |
Barry Callebaut AG | 5 | | 2,110 |
Britannia Industries Ltd. | 6,665 | | 174,128 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
CONSUMER STAPLES - continued |
Food Products - continued |
Green Mountain Coffee Roasters, Inc. (a) | 135 | | $ 5,423 |
Groupe Danone | 93,720 | | 11,910,736 |
Groupe Danone sponsored ADR | 13,500 | | 360,045 |
IAWS Group PLC (Ireland) | 700 | | 12,357 |
Lindt & Spruengli AG | 135 | | 2,823,681 |
McCormick & Co., Inc. (non-vtg.) | 35,300 | | 1,184,315 |
PT Indofood Sukses Makmur Tbk | 4,473,500 | | 424,988 |
Seaboard Corp. | 862 | | 1,103,360 |
Wimm-Bill-Dann Foods OJSC sponsored ADR (a) | 8,500 | | 332,775 |
| | 20,294,718 |
Personal Products - 1.7% |
Avon Products, Inc. | 50,100 | | 1,553,100 |
Concern Kalina OJSC sponsored ADR | 9,600 | | 387,795 |
Godrej Consumer Products Ltd. (a) | 23,819 | | 335,610 |
Hengan International Group Co. Ltd. | 6,665,000 | | 10,856,237 |
NBTY, Inc. (a) | 319,200 | | 7,632,072 |
Shiseido Co. Ltd. sponsored ADR | 57,600 | | 1,117,440 |
| | 21,882,254 |
TOTAL CONSUMER STAPLES | | 47,956,482 |
ENERGY - 17.4% |
Energy Equipment & Services - 12.5% |
BJ Services Co. | 59,500 | | 2,216,970 |
Cameron International Corp. (a) | 73,600 | | 3,515,872 |
Compagnie Generale de Geophysique SA (a) | 2,400 | | 414,154 |
Core Laboratories NV (a) | 218,700 | | 13,349,448 |
ENSCO International, Inc. | 65,800 | | 3,028,116 |
FMC Technologies, Inc. (a) | 163,100 | | 11,002,726 |
Global Industries Ltd. (a) | 537,716 | | 8,979,857 |
GlobalSantaFe Corp. | 230,500 | | 13,311,375 |
Grant Prideco, Inc. (a) | 263,400 | | 11,787,150 |
Gulf Island Fabrication, Inc. | 7,350 | | 147,294 |
Noble Corp. | 464,600 | | 34,575,532 |
Parker Drilling Co. (a) | 939,670 | | 6,746,831 |
Pason Systems, Inc. | 596,700 | | 8,739,626 |
Pride International, Inc. (a) | 134,800 | | 4,209,804 |
Smith International, Inc. | 92,300 | | 4,104,581 |
Superior Energy Services, Inc. (a) | 301,400 | | 10,217,460 |
TODCO Class A | 38,500 | | 1,572,725 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
ENERGY - continued |
Energy Equipment & Services - continued |
Transocean, Inc. (a) | 111,100 | | $ 8,923,552 |
Veritas DGC, Inc. (a) | 105,400 | | 5,436,532 |
Weatherford International Ltd. (a) | 186,636 | | 9,260,878 |
| | 161,540,483 |
Oil, Gas & Consumable Fuels - 4.9% |
Arch Coal, Inc. | 227,700 | | 9,647,649 |
Cameco Corp. | 22,100 | | 880,397 |
Canadian Natural Resources Ltd. | 73,000 | | 4,036,155 |
Clayton Williams Energy, Inc. (a) | 19,989 | | 690,420 |
CONSOL Energy, Inc. | 248,796 | | 11,623,749 |
Energy Partners Ltd. (a) | 76,416 | | 1,448,083 |
Forest Oil Corp. (a) | 86,138 | | 2,856,336 |
Golar LNG Ltd. (NASDAQ) (a) | 377 | | 5,025 |
Hess Corp. | 398,400 | | 21,055,440 |
Hugoton Royalty Trust | 1,907 | | 56,638 |
International Coal Group, Inc. (a) | 200,300 | | 1,440,157 |
Ship Finance International Ltd. (NY Shares) | 130,800 | | 2,264,148 |
Southwestern Energy Co. (a) | 24,000 | | 747,840 |
Tesoro Corp. | 77,500 | | 5,762,900 |
TransMontaigne, Inc. (a) | 100 | | 1,121 |
Valero Energy Corp. | 26,102 | | 1,736,305 |
| | 64,252,363 |
TOTAL ENERGY | | 225,792,846 |
FINANCIALS - 11.4% |
Capital Markets - 1.7% |
A.G. Edwards, Inc. | 28,400 | | 1,571,088 |
AllianceBernstein Holding LP | 170,800 | | 10,442,712 |
Ameriprise Financial, Inc. | 101,800 | | 4,547,406 |
Azimut Holdings Spa | 165,600 | | 1,732,179 |
JAFCO Co. Ltd. | 11,300 | | 677,457 |
Korea Investment Holdings Co. Ltd. | 87,990 | | 2,875,187 |
| | 21,846,029 |
Commercial Banks - 1.9% |
Allahabad Bank | 202,408 | | 281,686 |
Banco Itau Holding Financeira SA sponsored ADR (non-vtg.) | 25,900 | | 755,244 |
Banco Pastor SA | 384,000 | | 5,034,931 |
Bank of Baroda | 277,156 | | 1,276,923 |
Bank of Fukuoka Ltd. | 444,400 | | 3,378,877 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
FINANCIALS - continued |
Commercial Banks - continued |
Bank of India | 356,989 | | $ 795,600 |
Boston Private Financial Holdings, Inc. | 114,045 | | 3,181,856 |
Canara Bank | 72,671 | | 322,347 |
Colonial Bancgroup, Inc. | 43,200 | | 1,109,376 |
Corp. Bank | 61,129 | | 295,785 |
HDFC Bank Ltd. sponsored ADR | 9,400 | | 512,770 |
Hiroshima Bank Ltd. | 302,100 | | 1,840,190 |
ICICI Bank Ltd. sponsored ADR | 9,100 | | 215,215 |
Industrial & Commercial Bank of China (Asia) Ltd. | 157,000 | | 231,470 |
Juroku Bank Ltd. | 189,000 | | 1,106,664 |
Oriental Bank of Commerce | 8,668 | | 33,642 |
PrivateBancorp, Inc. | 8,000 | | 331,280 |
Punjab National Bank | 13,630 | | 101,871 |
State Bank of India | 46,867 | | 862,351 |
Sumitomo Trust & Banking Co. Ltd. | 153,000 | | 1,671,401 |
The Keiyo Bank Ltd. | 127,000 | | 719,213 |
UCO Bank | 379,897 | | 139,936 |
Uniao de Bancos Brasileiros SA (Unibanco) GDR | 6,200 | | 411,618 |
Uti Bank Ltd. | 74,100 | | 432,761 |
| | 25,043,007 |
Consumer Finance - 0.2% |
Advanta Corp.: | | | |
Class A | 21,475 | | 704,165 |
Class B | 40,800 | | 1,466,760 |
| | 2,170,925 |
Diversified Financial Services - 0.9% |
Bank of America Corp. | 158,100 | | 7,604,610 |
Financial Technology (India) Ltd. | 12 | | 313 |
IntercontinentalExchange, Inc. | 37,500 | | 2,172,750 |
Kotak Mahindra Bank Ltd. | 162,226 | | 862,751 |
TSX Group, Inc. | 39,200 | | 1,573,197 |
| | 12,213,621 |
Insurance - 4.9% |
Admiral Group PLC | 51,900 | | 596,108 |
AFLAC, Inc. | 261,600 | | 12,125,160 |
American International Group, Inc. | 236,600 | | 13,971,230 |
Assurant, Inc. | 315,800 | | 15,284,720 |
Milano Assicurazioni Spa | 181,000 | | 1,320,908 |
Ohio Casualty Corp. | 58,473 | | 1,738,402 |
Old Republic International Corp. | 166,500 | | 3,558,105 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
FINANCIALS - continued |
Insurance - continued |
Ping An Insurance (Group) Co. of China, Ltd. (H Shares) | 636,500 | | $ 1,930,092 |
Progressive Corp. | 194,000 | | 4,987,740 |
Protective Life Corp. | 68,600 | | 3,198,132 |
Universal American Financial Corp. (a) | 1,699 | | 22,342 |
USI Holdings Corp. (a) | 339,031 | | 4,546,406 |
| | 63,279,345 |
Real Estate Investment Trusts - 0.8% |
Equity Residential (SBI) | 112,100 | | 5,014,233 |
Multiplex Group unit | 1,037,600 | | 2,521,472 |
Unibail (Reg.) | 6,300 | | 1,098,436 |
Weingarten Realty Investors (SBI) | 30,200 | | 1,156,056 |
| | 9,790,197 |
Real Estate Management & Development - 1.0% |
Aeon Mall Co. Ltd. (d) | 72,900 | | 3,064,444 |
British Land Co. PLC | 45,800 | | 1,069,880 |
CapitaLand Ltd. | 379,000 | | 1,077,487 |
Derwent Valley Holdings PLC | 37,700 | | 1,093,336 |
Kerry Properties Ltd. | 1,442,665 | | 4,913,374 |
Mitsubishi Estate Co. Ltd. | 54,000 | | 1,146,777 |
NTT Urban Development Co. | 83 | | 647,026 |
W.P. Carey & Co. LLC | 1,100 | | 27,852 |
| | 13,040,176 |
Thrifts & Mortgage Finance - 0.0% |
Housing Development Finance Corp. Ltd. | 16 | | 397 |
Radian Group, Inc. | 4,500 | | 278,010 |
| | 278,407 |
TOTAL FINANCIALS | | 147,661,707 |
HEALTH CARE - 9.7% |
Biotechnology - 0.2% |
Alnylam Pharmaceuticals, Inc. (a) | 49,668 | | 748,993 |
BioMarin Pharmaceutical, Inc. (a) | 69,582 | | 999,893 |
Sirna Therapeutics, Inc. (a)(d) | 39,855 | | 227,174 |
Theravance, Inc. (a) | 30,300 | | 693,264 |
| | 2,669,324 |
Health Care Equipment & Supplies - 1.0% |
Beckman Coulter, Inc. | 41,300 | | 2,294,215 |
BioLase Technology, Inc. | 35,800 | | 300,720 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Health Care Equipment & Supplies - continued |
C.R. Bard, Inc. | 42,100 | | $ 3,084,246 |
Edwards Lifesciences Corp. (a) | 39,200 | | 1,780,856 |
Endocare, Inc. (a) | 7,500 | | 18,750 |
Haemonetics Corp. (a) | 115,175 | | 5,356,789 |
IDEXX Laboratories, Inc. (a) | 5,600 | | 420,728 |
St. Jude Medical, Inc. (a) | 200 | | 6,484 |
Synthes, Inc. | 10 | | 1,207 |
| | 13,263,995 |
Health Care Providers & Services - 1.6% |
Aetna, Inc. | 65,700 | | 2,623,401 |
Apollo Hospitals Enterprise Ltd. | 31,353 | | 273,963 |
Caremark Rx, Inc. | 34,200 | | 1,705,554 |
Chemed Corp. | 25,800 | | 1,406,874 |
Diagnosticos Da America SA (a) | 16,000 | | 307,974 |
Humana, Inc. (a) | 63,400 | | 3,404,580 |
Omnicare, Inc. | 32,350 | | 1,534,037 |
PSS World Medical, Inc. (a) | 1,000 | | 17,650 |
ResCare, Inc. (a) | 302,600 | | 6,052,000 |
VCA Antech, Inc. (a) | 98,780 | | 3,154,045 |
| | 20,480,078 |
Health Care Technology - 1.2% |
Eclipsys Corp. (a) | 104,242 | | 1,893,035 |
Emdeon Corp. (a) | 102,300 | | 1,269,543 |
IMS Health, Inc. | 383,000 | | 10,283,550 |
TriZetto Group, Inc. (a) | 125,947 | | 1,862,756 |
| | 15,308,884 |
Life Sciences Tools & Services - 4.4% |
Albany Molecular Research, Inc. (a) | 100 | | 1,068 |
Covance, Inc. (a) | 115,300 | | 7,058,666 |
Exelixis, Inc. (a) | 26 | | 261 |
Harvard Bioscience, Inc. (a) | 275,671 | | 1,226,736 |
ICON PLC sponsored ADR (a) | 32,600 | | 1,802,780 |
Invitrogen Corp. (a) | 92,600 | | 6,118,082 |
Luminex Corp. (a) | 4,800 | | 83,472 |
Millipore Corp. (a) | 75,900 | | 4,780,941 |
PAREXEL International Corp. (a) | 103,400 | | 2,983,090 |
QIAGEN NV (a) | 750,600 | | 10,298,232 |
Stratagene Corp. | 121,264 | | 748,199 |
Thermo Electron Corp. (a) | 555,600 | | 20,134,944 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
HEALTH CARE - continued |
Life Sciences Tools & Services - continued |
Ventana Medical Systems, Inc. (a) | 20 | | $ 944 |
Waters Corp. (a) | 48,000 | | 2,131,200 |
| | 57,368,615 |
Pharmaceuticals - 1.3% |
Allergan, Inc. | 23,663 | | 2,538,093 |
Dr. Reddy's Laboratories Ltd. sponsored ADR | 9,400 | | 260,380 |
Johnson & Johnson | 124,500 | | 7,460,040 |
New River Pharmaceuticals, Inc. (a) | 129,800 | | 3,699,300 |
Ranbaxy Laboratories Ltd. sponsored GDR | 13 | | 103 |
ViroPharma, Inc. (a) | 280,200 | | 2,415,324 |
| | 16,373,240 |
TOTAL HEALTH CARE | | 125,464,136 |
INDUSTRIALS - 12.7% |
Aerospace & Defense - 1.1% |
Alliant Techsystems, Inc. (a) | 29,300 | | 2,237,055 |
CAE, Inc. | 209,700 | | 1,596,748 |
Ceradyne, Inc. (a) | 58,700 | | 2,905,063 |
Esterline Technologies Corp. (a) | 167,209 | | 6,954,222 |
| | 13,693,088 |
Air Freight & Logistics - 0.0% |
Hub Group, Inc. Class A (a) | 72 | | 1,766 |
Airlines - 1.2% |
ACE Aviation Holdings, Inc. Class A (a) | 180,500 | | 5,036,796 |
Alaska Air Group, Inc. (a) | 269,500 | | 10,623,690 |
| | 15,660,486 |
Building Products - 0.2% |
American Woodmark Corp. | 88,351 | | 3,095,819 |
Simpson Manufacturing Co. Ltd. | 48 | | 1,730 |
| | 3,097,549 |
Commercial Services & Supplies - 1.2% |
American Ecology Corp. | 8,328 | | 220,692 |
Bio-Treat Technology Ltd. | 775,000 | | 523,897 |
Cintas Corp. | 105,426 | | 4,191,738 |
Equifax, Inc. | 57,500 | | 1,974,550 |
Fullcast Co. Ltd. (d) | 1,109 | | 3,770,164 |
Intertek Group PLC | 78,000 | | 1,009,854 |
Midas International Holdings Ltd. | 2,051,000 | | 126,764 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INDUSTRIALS - continued |
Commercial Services & Supplies - continued |
Monster Worldwide, Inc. (a) | 25,600 | | $ 1,092,096 |
Randstad Holdings NV | 46,200 | | 2,709,100 |
Societe Generale de Surveillance Holding SA (SGS) (Reg.) | 14 | | 13,284 |
Stericycle, Inc. (a) | 76 | | 4,948 |
Tele Atlas NV (a) | 7,300 | | 155,480 |
| | 15,792,567 |
Construction & Engineering - 0.6% |
Daelim Industrial Co. | 7,750 | | 486,877 |
Fluor Corp. | 24,700 | | 2,295,371 |
Insituform Technologies, Inc. Class A (a) | 17 | | 389 |
Jacobs Engineering Group, Inc. (a) | 26,530 | | 2,112,849 |
LG Engineering & Construction Co. Ltd. | 7,880 | | 509,995 |
Quanta Services, Inc. (a) | 6,800 | | 117,844 |
Shaw Group, Inc. (a) | 60,330 | | 1,677,174 |
Taihei Dengyo Kaisha Ltd. | 59,000 | | 407,341 |
| | 7,607,840 |
Electrical Equipment - 2.0% |
Crompton Greaves Ltd. | 15,896 | | 303,212 |
Rockwell Automation, Inc. | 300,778 | | 21,659,024 |
Roper Industries, Inc. | 11,800 | | 551,650 |
Solar Integrated Technologies, Inc. (a) | 122,700 | | 207,650 |
SolarWorld AG (d) | 43,200 | | 2,711,679 |
| | 25,433,215 |
Industrial Conglomerates - 0.6% |
Fu Sheng Industrial Co. Ltd. | 681,840 | | 658,076 |
General Electric Co. | 179,400 | | 5,913,024 |
Max India Ltd. (a) | 44,379 | | 759,028 |
NWS Holdings Ltd. | 267,000 | | 464,124 |
| | 7,794,252 |
Machinery - 5.2% |
AGCO Corp. (a) | 748,780 | | 19,707,890 |
Badger Meter, Inc. | 118,000 | | 3,186,000 |
Crane Co. | 37,600 | | 1,564,160 |
Deutz AG (a) | 31,300 | | 246,240 |
Dover Corp. | 53,600 | | 2,649,448 |
Eicher Motors Ltd. | 30,058 | | 156,252 |
Flowserve Corp. (a) | 129,300 | | 7,357,170 |
Graco, Inc. | 57,900 | | 2,662,242 |
Harsco Corp. | 257,100 | | 20,043,516 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INDUSTRIALS - continued |
Machinery - continued |
Heidelberger Druckmaschinen AG | 36,000 | | $ 1,637,120 |
Hyflux Ltd. | 102,000 | | 152,080 |
Krones AG | 190 | | 23,814 |
MAN AG | 22,100 | | 1,600,666 |
MMI Holdings Ltd. | 2,694,000 | | 1,216,925 |
Tata Motors Ltd. | 64,939 | | 1,125,038 |
Valmont Industries, Inc. | 59,180 | | 2,751,278 |
Wabtec Corp. | 55,300 | | 2,068,220 |
| | 68,148,059 |
Marine - 0.0% |
Hanjin Shipping Co. Ltd. | 10 | | 239 |
Road & Rail - 0.1% |
J.B. Hunt Transport Services, Inc. | 66,679 | | 1,660,974 |
Trading Companies & Distributors - 0.4% |
GATX Corp. | 110,100 | | 4,679,250 |
Transportation Infrastructure - 0.1% |
Hopewell Holdings Ltd. | 321,000 | | 905,186 |
TOTAL INDUSTRIALS | | 164,474,471 |
INFORMATION TECHNOLOGY - 10.7% |
Communications Equipment - 1.4% |
Adtran, Inc. | 78,100 | | 1,751,783 |
Avaya, Inc. (a) | 261,300 | | 2,984,046 |
Black Box Corp. | 11,900 | | 456,127 |
D-Link Corp. | 313,000 | | 341,242 |
Harris Corp. | 71,100 | | 2,951,361 |
NETGEAR, Inc. (a) | 86 | | 1,862 |
QUALCOMM, Inc. | 154,300 | | 6,182,801 |
Tellabs, Inc. (a) | 229,546 | | 3,055,257 |
Zyxel Communications Corp. | 244,000 | | 399,401 |
| | 18,123,880 |
Computers & Peripherals - 1.1% |
Apple Computer, Inc. (a) | 132,951 | | 7,594,161 |
Hypercom Corp. (a) | 221,500 | | 2,071,025 |
Oberthur Card Systems (d) | 125,200 | | 940,115 |
SanDisk Corp. (a) | 21 | | 1,071 |
Seagate Technology | 111,400 | | 2,522,096 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Computers & Peripherals - continued |
Unisteel Technology Ltd. | 347,500 | | $ 401,759 |
Xyratex Ltd. (a) | 1,800 | | 47,610 |
| | 13,577,837 |
Electronic Equipment & Instruments - 3.7% |
Agilent Technologies, Inc. (a) | 67,600 | | 2,133,456 |
CDW Corp. | 211,120 | | 11,537,708 |
FLIR Systems, Inc. (a) | 51 | | 1,125 |
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 1,163,485 | | 7,186,775 |
Ibiden Co. Ltd. | 22,700 | | 1,091,108 |
Itron, Inc. (a) | 11,700 | | 693,342 |
KEMET Corp. (a) | 338,200 | | 3,118,204 |
Keyence Corp. | 2,200 | | 561,800 |
Mettler-Toledo International, Inc. (a) | 183,900 | | 11,138,823 |
Molex, Inc. | 49,250 | | 1,653,323 |
National Instruments Corp. | 100 | | 2,740 |
Nidec Corp. sponsored ADR | 53,700 | | 968,748 |
Vishay Intertechnology, Inc. (a) | 486,100 | | 7,646,353 |
| | 47,733,505 |
Internet Software & Services - 1.1% |
Art Technology Group, Inc. (a) | 946,338 | | 2,820,087 |
EDGAR Online, Inc. (a) | 13,600 | | 63,920 |
NHN Corp. (a) | 1,366 | | 475,155 |
RealNetworks, Inc. (a) | 251,272 | | 2,688,610 |
Tencent Holdings Ltd. | 315,000 | | 661,130 |
ValueClick, Inc. (a) | 45,821 | | 703,352 |
VeriSign, Inc. (a) | 71,500 | | 1,656,655 |
WebEx Communications, Inc. (a) | 145,828 | | 5,182,727 |
Yahoo! Japan Corp. | 932 | | 493,591 |
| | 14,745,227 |
IT Services - 0.3% |
Cognizant Technology Solutions Corp. Class A (a) | 27,900 | | 1,879,623 |
Infosys Technologies Ltd. | 5,020 | | 336,886 |
Infosys Technologies Ltd. sponsored ADR | 5,200 | | 397,332 |
Northgate Information Solutions PLC (a) | 1,113,700 | | 1,596,379 |
StarTek, Inc. | 4,900 | | 73,255 |
| | 4,283,475 |
Semiconductors & Semiconductor Equipment - 2.3% |
Advanced Micro Devices, Inc. (a) | 54,600 | | 1,333,332 |
Altera Corp. (a) | 100,836 | | 1,769,672 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
INFORMATION TECHNOLOGY - continued |
Semiconductors & Semiconductor Equipment - continued |
Analog Devices, Inc. | 19,500 | | $ 626,730 |
ASML Holding NV (NY Shares) (a) | 339,300 | | 6,860,646 |
Cymer, Inc. (a) | 7,100 | | 329,866 |
MEMC Electronic Materials, Inc. (a) | 132,600 | | 4,972,500 |
Saifun Semiconductors Ltd. | 700 | | 20,055 |
Teradyne, Inc. (a) | 77,600 | | 1,080,968 |
Texas Instruments, Inc. | 72,800 | | 2,205,112 |
Veeco Instruments, Inc. (a) | 235,854 | | 5,622,759 |
Zoran Corp. (a) | 225,229 | | 5,482,074 |
| | 30,303,714 |
Software - 0.8% |
Cognos, Inc. (a) | 133,500 | | 3,792,631 |
Informatica Corp. (a) | 7,100 | | 93,436 |
Manhattan Associates, Inc. (a) | 58,803 | | 1,193,113 |
Open Solutions, Inc. (a) | 95,271 | | 2,535,161 |
Plato Learning, Inc. (a) | 48,734 | | 303,125 |
Quality Systems, Inc. | 27,828 | | 1,024,627 |
Temenos Group AG (a) | 73,939 | | 680,420 |
| | 9,622,513 |
TOTAL INFORMATION TECHNOLOGY | | 138,390,151 |
MATERIALS - 13.0% |
Chemicals - 2.7% |
Airgas, Inc. | 332,957 | | 12,402,648 |
Albemarle Corp. | 48,000 | | 2,298,240 |
Asian Paints India Ltd. | 102,341 | | 1,320,641 |
Ecolab, Inc. | 263,100 | | 10,676,598 |
Kuraray Co. Ltd. | 27,500 | | 307,625 |
Nitto Denko Corp. | 10,800 | | 769,238 |
Praxair, Inc. | 40,100 | | 2,165,400 |
Tokuyama Corp. | 336,000 | | 4,991,916 |
United Phosphorous Ltd. | 45 | | 232 |
Valhi, Inc. | 9,550 | | 234,453 |
| | 35,166,991 |
Containers & Packaging - 0.2% |
Crown Holdings, Inc. (a) | 94,140 | | 1,465,760 |
Essel Propack Ltd. | 201,674 | | 281,983 |
Pactiv Corp. (a) | 61,595 | | 1,524,476 |
| | 3,272,219 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
MATERIALS - continued |
Metals & Mining - 9.7% |
Agnico-Eagle Mines Ltd. | 318,200 | | $ 10,549,657 |
AK Steel Holding Corp. (a) | 150,766 | | 2,085,094 |
Amcol International Corp. | 14,200 | | 374,170 |
Barrick Gold Corp. | 18,800 | | 555,259 |
Bema Gold Corp. (a) | 31,400 | | 156,677 |
Boliden AB | 274,600 | | 5,056,493 |
Century Aluminum Co. (a) | 211,860 | | 7,561,283 |
Compania de Minas Buenaventura SA sponsored ADR | 49,800 | | 1,358,544 |
Eldorado Gold Corp. (a) | 27,800 | | 134,978 |
Equinox Minerals Ltd. (a) | 863,500 | | 1,005,599 |
Freeport-McMoRan Copper & Gold, Inc. Class B | 249,100 | | 13,802,631 |
Harmony Gold Mining Co. Ltd. (a) | 120,700 | | 1,966,203 |
High River Gold Mines Ltd. (a) | 407,400 | | 839,398 |
HudBay Minerals, Inc. (a) | 187,900 | | 2,390,200 |
IAMGOLD Corp. | 158,800 | | 1,411,176 |
Kinross Gold Corp. (a) | 1,605,100 | | 17,498,940 |
Newmont Mining Corp. | 738,500 | | 39,088,802 |
Nucor Corp. | 28,800 | | 1,562,400 |
Phelps Dodge Corp. | 30,700 | | 2,522,312 |
Teck Cominco Ltd. Class B (sub. vtg.) | 58,200 | | 3,492,104 |
United States Steel Corp. | 147,900 | | 10,370,748 |
Zinifex Ltd. | 262,900 | | 1,957,649 |
| | 125,740,317 |
Paper & Forest Products - 0.4% |
Lee & Man Paper Manufacturing Ltd. | 1,972,000 | | 2,881,983 |
Sino-Forest Corp. (a) | 398,500 | | 2,052,652 |
| | 4,934,635 |
TOTAL MATERIALS | | 169,114,162 |
TELECOMMUNICATION SERVICES - 1.5% |
Diversified Telecommunication Services - 1.2% |
AT&T, Inc. | 253,300 | | 7,064,537 |
Qwest Communications International, Inc. (a) | 1,060,500 | | 8,579,445 |
| | 15,643,982 |
Wireless Telecommunication Services - 0.3% |
America Movil SA de CV Series L sponsored ADR | 28,300 | | 941,258 |
Bharti Airtel Ltd. (a) | 116,182 | | 1,001,297 |
Common Stocks - continued |
| Shares | | Value (Note 1) |
TELECOMMUNICATION SERVICES - continued |
Wireless Telecommunication Services - continued |
NII Holdings, Inc. (a) | 50 | | $ 2,819 |
USA Mobility, Inc. | 80,460 | | 1,335,636 |
| | 3,281,010 |
TOTAL TELECOMMUNICATION SERVICES | | 18,924,992 |
UTILITIES - 1.0% |
Gas Utilities - 0.3% |
AGL Resources, Inc. | 41,900 | | 1,597,228 |
Xinao Gas Holdings Ltd. | 2,352,000 | | 2,241,082 |
| | 3,838,310 |
Independent Power Producers & Energy Traders - 0.7% |
AES Corp. (a) | 467,900 | | 8,632,755 |
Black Hills Corp. | 29,300 | | 1,005,869 |
Malakoff BHD | 91,700 | | 242,071 |
| | 9,880,695 |
TOTAL UTILITIES | | 13,719,005 |
TOTAL COMMON STOCKS (Cost $1,031,861,937) | 1,151,155,249 |
Money Market Funds - 11.0% |
| | | |
Fidelity Cash Central Fund, 5.11% (b) | 132,856,643 | | 132,856,643 |
Fidelity Securities Lending Cash Central Fund, 5.14% (b)(c) | 10,330,844 | | 10,330,844 |
TOTAL MONEY MARKET FUNDS (Cost $143,187,487) | 143,187,487 |
TOTAL INVESTMENT PORTFOLIO - 99.8% (Cost $1,175,049,424) | 1,294,342,736 |
NET OTHER ASSETS - 0.2% | | 2,785,264 |
NET ASSETS - 100% | $ 1,297,128,000 |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 2,251,748 |
Fidelity Securities Lending Cash Central Fund | 147,080 |
Total | $ 2,398,828 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 73.6% |
Cayman Islands | 5.3% |
Canada | 5.3% |
Japan | 4.3% |
Netherlands | 2.5% |
France | 1.3% |
Others (individually less than 1%) | 7.7% |
| 100.0% |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
| June 30, 2006 (Unaudited) |
Assets | | |
Investment in securities, at value (including securities loaned of $9,983,626) - See accompanying schedule: Unaffiliated issuers (cost $1,031,861,937) | $ 1,151,155,249 | |
Affiliated Central Funds (cost $143,187,487) | 143,187,487 | |
Total Investments (cost $1,175,049,424) | | $ 1,294,342,736 |
Cash | | 2,780,480 |
Foreign currency held at value (cost $8,030,376) | | 8,050,826 |
Receivable for investments sold | | 8,761,042 |
Receivable for fund shares sold | | 4,660,469 |
Dividends receivable | | 910,313 |
Interest receivable | | 471,888 |
Prepaid expenses | | 934 |
Receivable from investment adviser for expense reductions | | 367 |
Other receivables | | 71,398 |
Total assets | | 1,320,050,453 |
| | |
Liabilities | | |
Payable for investments purchased | $ 9,074,181 | |
Payable for fund shares redeemed | 2,039,641 | |
Accrued management fee | 578,698 | |
Distribution fees payable | 457,828 | |
Other affiliated payables | 326,922 | |
Other payables and accrued expenses | 114,339 | |
Collateral on securities loaned, at value | 10,330,844 | |
Total liabilities | | 22,922,453 |
| | |
Net Assets | | $ 1,297,128,000 |
Net Assets consist of: | | |
Paid in capital | | $ 1,157,130,224 |
Accumulated net investment loss | | (506,918) |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 21,163,683 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | 119,341,011 |
Net Assets | | $ 1,297,128,000 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
| June 30, 2006 (Unaudited) |
Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share ($334,850,420 ÷ 21,636,483 shares) | | $ 15.48 |
| | |
Maximum offering price per share (100/94.25 of $15.48) | | $ 16.42 |
Class T:
Net Asset Value and redemption price per share ($481,759,483 ÷ 31,209,888 shares) | | $ 15.44 |
| | |
Maximum offering price per share (100/96.50 of $15.44) | | $ 16.00 |
Class B:
Net Asset Value and offering price per share ($78,988,384 ÷ 5,155,665 shares)A | | $ 15.32 |
| | |
Class C:
Net Asset Value and offering price per share ($171,036,126 ÷ 11,156,634 shares)A | | $ 15.33 |
| | |
Institutional Class:
Net Asset Value, offering price and redemption price per share ($230,493,587 ÷ 14,840,043 shares) | | $ 15.53 |
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.
Semiannual Report
Statement of Operations
| Six months ended June 30, 2006 (Unaudited) |
Investment Income | | |
Dividends | | $ 4,670,413 |
Interest | | 1,011 |
Income from affiliated Central Funds | | 2,398,828 |
Total income | | 7,070,252 |
| | |
Expenses | | |
Management fee | $ 3,111,030 | |
Transfer agent fees | 1,568,669 | |
Distribution fees | 2,505,848 | |
Accounting and security lending fees | 191,969 | |
Independent trustees' compensation | 1,959 | |
Custodian fees and expenses | 110,939 | |
Registration fees | 175,588 | |
Audit | 39,010 | |
Legal | 7,537 | |
Miscellaneous | 3,151 | |
Total expenses before reductions | 7,715,700 | |
Expense reductions | (139,101) | 7,576,599 |
Net investment income (loss) | | (506,347) |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers (net of foreign taxes of $154,061) | 24,205,476 | |
Foreign currency transactions | 5,809 | |
Total net realized gain (loss) | | 24,211,285 |
Change in net unrealized appreciation (depreciation) on: Investment securities (net of decrease in deferred foreign taxes of $308,354) | 22,340,118 | |
Assets and liabilities in foreign currencies | 50,948 | |
Total change in net unrealized appreciation (depreciation) | | 22,391,066 |
Net gain (loss) | | 46,602,351 |
Net increase (decrease) in net assets resulting from operations | | $ 46,096,004 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
| Six months ended June 30, 2006
(Unaudited) | Year ended
December 31, 2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income (loss) | $ (506,347) | $ (707,079) |
Net realized gain (loss) | 24,211,285 | 3,477,904 |
Change in net unrealized appreciation (depreciation) | 22,391,066 | 84,370,006 |
Net increase (decrease) in net assets resulting
from operations | 46,096,004 | 87,140,831 |
Distributions to shareholders from net realized gain | (2,980,256) | (2,541,513) |
Share transactions - net increase (decrease) | 444,957,345 | 589,804,166 |
Total increase (decrease) in net assets | 488,073,093 | 674,403,484 |
| | |
Net Assets | | |
Beginning of period | 809,054,907 | 134,651,423 |
End of period (including accumulated net investment loss of $506,918 and accumulated net investment loss of $571, respectively) | $ 1,297,128,000 | $ 809,054,907 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.61 | $ 12.52 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | .01 | .01 F | (.02) |
Net realized and unrealized gain (loss) | .92 | 2.14 | 2.54 |
Total from investment operations | .93 | 2.15 | 2.52 |
Distributions from net realized gain | (.06) | (.06) | - |
Net asset value, end of period | $ 15.48 | $ 14.61 | $ 12.52 |
Total Return B, C, D | 6.33% | 17.21% | 25.20% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.23% A | 1.32% | 1.79% A |
Expenses net of fee waivers, if any | 1.23% A | 1.25% | 1.30% A |
Expenses net of all reductions | 1.21% A | 1.18% | 1.26% A |
Net investment income (loss) | .07% A | .04% F | (.53)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 334,850 | $ 189,864 | $ 34,438 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.14)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class T
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.58 | $ 12.51 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.01) | (.02) F | (.03) |
Net realized and unrealized gain (loss) | .93 | 2.13 | 2.54 |
Total from investment operations | .92 | 2.11 | 2.51 |
Distributions from net realized gain | (.06) | (.04) | - |
Net asset value, end of period | $ 15.44 | $ 14.58 | $ 12.51 |
Total Return B, C, D | 6.27% | 16.87% | 25.10% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.38% A | 1.46% | 1.96% A |
Expenses net of fee waivers, if any | 1.38% A | 1.46% | 1.55% A |
Expenses net of all reductions | 1.36% A | 1.39% | 1.51% A |
Net investment income (loss) | (.08)% A | (.16)% F | (.78)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 481,759 | $ 318,826 | $ 60,107 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.35)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class B
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.49 | $ 12.48 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.05) | (.09) F | (.06) |
Net realized and unrealized gain (loss) | .91 | 2.13 | 2.54 |
Total from investment operations | .86 | 2.04 | 2.48 |
Distributions from net realized gain | (.03) | (.03) | - |
Net asset value, end of period | $ 15.32 | $ 14.49 | $ 12.48 |
Total Return B, C, D | 5.90% | 16.34% | 24.80% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 2.02% A | 2.08% | 2.61% A |
Expenses net of fee waivers, if any | 2.00% A | 2.00% | 2.05% A |
Expenses net of all reductions | 1.97% A | 1.92% | 2.01% A |
Net investment income (loss) | (.69)% A | (.70)% F | (1.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 78,988 | $ 56,201 | $ 15,527 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.02 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.89)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Class C
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 G |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.49 | $ 12.49 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) E | (.05) | (.09) F | (.06) |
Net realized and unrealized gain (loss) | .92 | 2.12 | 2.55 |
Total from investment operations | .87 | 2.03 | 2.49 |
Distributions from net realized gain | (.03) | (.03) | - |
Net asset value, end of period | $ 15.33 | $ 14.49 | $ 12.49 |
Total Return B, C, D | 5.97% | 16.25% | 24.90% |
Ratios to Average Net Assets H | | | |
Expenses before reductions | 1.97% A | 2.05% | 2.53% A |
Expenses net of fee waivers, if any | 1.97% A | 2.00% | 2.05% A |
Expenses net of all reductions | 1.94% A | 1.93% | 2.01% A |
Net investment income (loss) | (.66)% A | (.70)% F | (1.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 171,036 | $ 107,286 | $ 17,822 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.02 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.89)%.
G For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 F |
Selected Per-Share Data | | | |
Net asset value, beginning of period | $ 14.64 | $ 12.54 | $ 10.00 |
Income from Investment Operations | | | |
Net investment income (loss) D | .03 | .04 E | (.01) |
Net realized and unrealized gain (loss) | .92 | 2.15 | 2.55 |
Total from investment operations | .95 | 2.19 | 2.54 |
Distributions from net realized gain | (.06) | (.09) | - |
Net asset value, end of period | $ 15.53 | $ 14.64 | $ 12.54 |
Total Return B, C | 6.45% | 17.43% | 25.40% |
Ratios to Average Net Assets G | | | |
Expenses before reductions | .97% A | 1.04% | 1.38% A |
Expenses net of fee waivers, if any | .97% A | 1.00% | 1.05% A |
Expenses net of all reductions | .95% A | .93% | 1.01% A |
Net investment income (loss) | .33% A | .29% E | (.28)% A |
Supplemental Data | | | |
Net assets, end of period (000 omitted) | $ 230,494 | $ 136,879 | $ 6,757 |
Portfolio turnover rate | 140% A | 111% | 40% 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 Investment income per share reflects a special dividend which amounted to $.03 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .10%.
F For the period August 12, 2004 (commencement of operations) to December 31, 2004.
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 fee 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.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
1. Significant Accounting Policies.
Fidelity Advisor Mid Cap II 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 Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. 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 each Fund in the trust.
Semiannual Report
1. Significant Accounting Policies - continued
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 the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund claimed a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to short-term capital gains, foreign currency transactions, certain foreign taxes, passive foreign investment companies (PFIC), partnerships, net operating losses and losses deferred due to wash sales.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 149,520,704 | |
Unrealized depreciation | (33,572,535) | |
Net unrealized appreciation (depreciation) | $ 115,948,169 | |
Cost for federal income tax purposes | $ 1,178,394,567 | |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. 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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
2. Operating Policies - continued
Repurchase Agreements - continued
repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,060,593,700 and $704,521,550, respectively.
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 ..27% 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 annualized management fee rate was .56% 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
Fee | Service
Fee | Paid to
FDC | Retained
by FDC |
Class A | 0% | .25% | $ 345,143 | $ 15,123 |
Class T | .25% | .25% | 1,060,380 | 83,316 |
Class B | .75% | .25% | 357,398 | 268,613 |
Class C | .75% | .25% | 742,927 | 404,604 |
| | | $ 2,505,848 | $ 771,656 |
Semiannual Report
4. Fees and Other Transactions with Affiliates - continued
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling 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, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained
by FDC |
Class A | $ 469,859 |
Class T | 98,697 |
Class B * | 57,480 |
Class C * | 15,999 |
| $ 642,035 |
* 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 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 shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
| Amount | % of
Average
Net Assets |
Class A | $ 449,968 | .32* |
Class T | 473,126 | .22* |
Class B | 130,675 | .36* |
Class C | 233,116 | .31* |
Institutional Class | 281,784 | .31* |
| $ 1,568,669 | |
* Annualized
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
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 were $21,095 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 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, which amounts to $1,218 and is reflected in Miscellaneous Expense on the Statement of Operations. 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. On the settlement date of the loan, 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $147,080.
Semiannual Report
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual 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.
The following classes were in reimbursement during the period:
| Expense
Limitations | Reimbursement
from adviser |
Class B | 2.00% | $ 8,563 |
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 $129,438 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 $1,100.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
From net realized gain | | |
Class A | $ 813,191 | $ 722,938 |
Class T | 1,326,857 | 785,508 |
Class B | 104,080 | 115,130 |
Class C | 207,361 | 216,578 |
Institutional Class | 528,767 | 701,359 |
Total | $ 2,980,256 | $ 2,541,513 |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 | Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
Class A | | | | |
Shares sold | 10,152,675 | 11,209,186 | $ 158,261,242 | $ 148,925,410 |
Reinvestment of distributions | 48,847 | 46,121 | 760,551 | 673,648 |
Shares redeemed | (1,564,316) | (1,006,186) | (24,122,349) | (13,491,876) |
Net increase (decrease) | 8,637,206 | 10,249,121 | $ 134,899,444 | $ 136,107,182 |
Class T | | | | |
Shares sold | 12,218,751 | 19,298,393 | $ 189,920,927 | $ 254,508,130 |
Reinvestment of distributions | 82,906 | 52,186 | 1,288,360 | 761,896 |
Shares redeemed | (2,960,418) | (2,287,715) | (45,857,485) | (30,643,453) |
Net increase (decrease) | 9,341,239 | 17,062,864 | $ 145,351,802 | $ 224,626,573 |
Class B | | | | |
Shares sold | 1,785,596 | 3,212,130 | $ 27,643,260 | $ 41,956,200 |
Reinvestment of distributions | 6,259 | 7,317 | 96,770 | 106,897 |
Shares redeemed | (515,768) | (583,722) | (7,890,973) | (7,653,056) |
Net increase (decrease) | 1,276,087 | 2,635,725 | $ 19,849,057 | $ 34,410,041 |
Class C | | | | |
Shares sold | 4,642,876 | 6,491,544 | $ 71,964,409 | $ 85,275,825 |
Reinvestment of distributions | 11,690 | 12,876 | 180,845 | 188,163 |
Shares redeemed | (899,806) | (529,610) | (13,512,813) | (7,087,172) |
Net increase (decrease) | 3,754,760 | 5,974,810 | $ 58,632,441 | $ 78,376,816 |
Institutional Class | | | | |
Shares sold | 6,857,447 | 9,859,285 | $ 107,692,560 | $ 130,431,806 |
Reinvestment of distributions | 31,432 | 44,117 | 490,661 | 650,145 |
Shares redeemed | (1,399,099) | (1,092,116) | (21,958,620) | (14,798,397) |
Net increase (decrease) | 5,489,780 | 8,811,286 | $ 86,224,601 | $ 116,283,554 |
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Mid Cap II Fund
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Semiannual Report
Semiannual Report
Semiannual Report
Semiannual Report
Semiannual Report
Semiannual Report
Semiannual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly 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 Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Citibank, N.A.
New York, NY
AMPI-USAN-0806
1.801447.101
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Strategic Income
Fund - Class A, Class T, Class B
and Class C
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | <Click Here> | Ned Johnson's message to shareholders. |
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Semiannual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Semiannual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Class A | | | |
Actual | $ 1,000.00 | $ 1,013.40 | $ 4.89 |
HypotheticalA | $ 1,000.00 | $ 1,019.93 | $ 4.91 |
Class T | | | |
Actual | $ 1,000.00 | $ 1,013.20 | $ 5.14 |
HypotheticalA | $ 1,000.00 | $ 1,019.69 | $ 5.16 |
Class B | | | |
Actual | $ 1,000.00 | $ 1,008.70 | $ 8.72 |
HypotheticalA | $ 1,000.00 | $ 1,016.12 | $ 8.75 |
Class C | | | |
Actual | $ 1,000.00 | $ 1,008.30 | $ 9.06 |
HypotheticalA | $ 1,000.00 | $ 1,015.77 | $ 9.10 |
Institutional Class | | | |
Actual | $ 1,000.00 | $ 1,014.20 | $ 4.00 |
HypotheticalA | $ 1,000.00 | $ 1,020.83 | $ 4.01 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund's annualized expense ratio.
| Annualized
Expense Ratio |
Class A | .98% |
Class T | 1.03% |
Class B | 1.75% |
Class C | 1.82% |
Institutional Class | .80% |
Semiannual Report
Investment Changes
Top Five Holdings as of June 30, 2006 |
(by issuer, excluding cash equivalents) | % of fund's
net assets | % of fund's net assets
6 months ago |
U.S. Treasury Obligations | 14.6 | 16.3 |
Fannie Mae | 8.2 | 6.6 |
Freddie Mac | 3.7 | 3.5 |
French Government | 2.7 | 0.2 |
Japan Government | 2.1 | 1.7 |
| 31.3 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Consumer Discretionary | 10.2 | 10.9 |
Telecommunication Services | 6.8 | 7.2 |
Financials | 5.1 | 5.2 |
Energy | 5.1 | 4.7 |
Information Technology | 4.4 | 3.7 |
Quality Diversification (% of fund's net assets) |
As of June 30, 2006 | As of December 31, 2005 |
 | U.S.Government and U.S.Government
Agency
Obligations 27.0% | | | U.S.Government and U.S.Government
Agency
Obligations 27.1% | |
 | AAA, AA, A 12.5% | | | AAA, AA, A 11.9% | |
 | BBB 4.5% | | | BBB 5.5% | |
 | BB 17.5% | | | BB 14.6% | |
 | B 19.9% | | | B 21.5% | |
 | CCC, CC, C 5.9% | | | CCC, CC, C 5.9% | |
 | Not Rated 2.3% | | | Not Rated 3.2% | |
 | Equities 0.8% | | | Equities 1.1% | |
 | Short-Term
Investments and
Net Other Assets 9.6% | | | Short-Term
Investments and
Net Other Assets 9.2% | |
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
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 funds. |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006 * | As of December 31, 2005 ** |
| Corporate Bonds 35.3% | | | Corporate Bonds 36.6% | |
| U.S. Government and U.S. Government
Agency
Obligations 26.9% | | | U.S. Government and
U.S. Government
Agency
Obligations 27.1% | |
| Foreign Government
& Government
Agency
Obligations 21.6% | | | Foreign Government
& Government
Agency
Obligations 20.8% | |
| Floating Rate Loans 5.1% | | | Floating Rate Loans 4.5% | |
| Stocks 0.8% | | | Stocks 1.1% | |
 | Other Investments 0.7% | | | Other Investments 0.7% | |
| Short-Term
Investments and
Net Other
Assets *** 9.6% | | | Short-Term
Investments and
Net Other
Assets **** 9.2% | |
* Foreign investments | 31.4% | | ** Foreign investments | 32.0% | |
*** Includes short-term
foreign government
obligations of .2% | | **** Includes short-term
foreign government
obligations of .3% | |
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 funds. |
For an unaudited list of holdings for each fixed-income central fund, visit advisor.fidelity.com. |
Semiannual Report
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Corporate Bonds - 35.0% |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Convertible Bonds - 0.1% |
CONSUMER DISCRETIONARY - 0.1% |
Media - 0.1% |
Liberty Media Corp. (Sprint Corp. PCS Series 1) 3.75% 2/15/30 | | $ 6,685 | | $ 3,780 |
INFORMATION TECHNOLOGY - 0.0% |
Semiconductors & Semiconductor Equipment - 0.0% |
ON Semiconductor Corp. 0% 4/15/24 | | 450 | | 381 |
TOTAL CONVERTIBLE BONDS | | 4,161 |
Nonconvertible Bonds - 34.9% |
CONSUMER DISCRETIONARY - 7.8% |
Auto Components - 0.5% |
Affinia Group, Inc. 9% 11/30/14 | | 3,475 | | 3,162 |
Delco Remy International, Inc.: | | | | |
9.375% 4/15/12 | | 590 | | 327 |
11% 5/1/09 | | 695 | | 407 |
Stoneridge, Inc. 11.5% 5/1/12 | | 35 | | 33 |
Tenneco, Inc. 8.625% 11/15/14 | | 5,980 | | 5,965 |
TRW Automotive Acquisition Corp.: | | | | |
9.375% 2/15/13 | | 3,753 | | 4,025 |
11% 2/15/13 | | 2,988 | | 3,272 |
United Components, Inc. 9.375% 6/15/13 | | 360 | | 356 |
Visteon Corp. 7% 3/10/14 | | 2,390 | | 1,960 |
| | 19,507 |
Automobiles - 0.0% |
Fiat Finance & Trade Ltd. 5.625% 11/15/11 | EUR | 1,300 | | 1,605 |
Diversified Consumer Services - 0.1% |
Affinion Group, Inc. 11.5% 10/15/15 (f) | | 840 | | 838 |
Service Corp. International (SCI): | | | | |
6.75% 4/1/16 | | 2,800 | | 2,590 |
8% 6/15/17 (f)(h) | | 2,420 | | 2,275 |
| | 5,703 |
Hotels, Restaurants & Leisure - 2.2% |
Carrols Corp. 9% 1/15/13 | | 4,095 | | 4,075 |
Festival Fun Parks LLC 10.875% 4/15/14 (f) | | 2,725 | | 2,698 |
Galaxy Entertainment Finance Co. Ltd.: | | | | |
9.875% 12/15/12 (f) | | 1,110 | | 1,157 |
10.42% 12/15/10 (f)(h) | | 1,470 | | 1,538 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Hotels, Restaurants & Leisure - continued |
Gaylord Entertainment Co.: | | | | |
6.75% 11/15/14 | | $ 9,210 | | $ 8,588 |
8% 11/15/13 | | 920 | | 929 |
Herbst Gaming, Inc.: | | | | |
7% 11/15/14 | | 2,500 | | 2,400 |
8.125% 6/1/12 | | 835 | | 843 |
ITT Corp. 7.375% 11/15/15 | | 2,560 | | 2,598 |
Kerzner International Ltd. 6.75% 10/1/15 | | 7,250 | | 7,567 |
Landry's Seafood Restaurants, Inc. 7.5% 12/15/14 | | 2,935 | | 2,730 |
Mandalay Resort Group: | | | | |
6.375% 12/15/11 | | 4,220 | | 4,035 |
6.5% 7/31/09 | | 1,995 | | 1,968 |
MGM MIRAGE: | | | | |
6% 10/1/09 | | 1,050 | | 1,021 |
6.625% 7/15/15 | | 3,140 | | 2,936 |
6.75% 9/1/12 | | 1,310 | | 1,267 |
6.75% 4/1/13 (f) | | 2,230 | | 2,144 |
6.875% 4/1/16 (f) | | 8,230 | | 7,746 |
8.5% 9/15/10 | | 435 | | 453 |
Mohegan Tribal Gaming Authority 6.875% 2/15/15 | | 2,140 | | 2,017 |
MTR Gaming Group, Inc. 9% 6/1/12 (f) | | 980 | | 1,000 |
Penn National Gaming, Inc. 6.75% 3/1/15 | | 1,375 | | 1,286 |
Scientific Games Corp. 6.25% 12/15/12 | | 660 | | 617 |
Speedway Motorsports, Inc. 6.75% 6/1/13 | | 3,495 | | 3,408 |
Starwood Hotels & Resorts Worldwide, Inc.: | | | | |
7.375% 5/1/07 | | 1,480 | | 1,487 |
7.875% 5/1/12 | | 985 | | 1,018 |
Station Casinos, Inc.: | | | | |
6% 4/1/12 | | 1,790 | | 1,669 |
6.5% 2/1/14 | | 5,000 | | 4,669 |
Town Sports International Holdings, Inc. 0% 2/1/14 (d) | | 5,035 | | 3,990 |
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 | | 2,555 | | 2,782 |
Vail Resorts, Inc. 6.75% 2/15/14 | | 5,060 | | 4,858 |
Virgin River Casino Corp./RBG LLC/B&BB, Inc.: | | | | |
0% 1/15/13 (d) | | 1,070 | | 728 |
9% 1/15/12 | | 575 | | 587 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Hotels, Restaurants & Leisure - continued |
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f) | | $ 472 | | $ 500 |
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | | 735 | | 760 |
| | 88,069 |
Household Durables - 0.5% |
D.R. Horton, Inc. 7.875% 8/15/11 | | 170 | | 178 |
Fortune Brands, Inc. 4% 1/30/13 | EUR | 1,100 | | 1,330 |
Goodman Global Holdings, Inc. 8.3294% 6/15/12 (h) | | 3,082 | | 3,101 |
K. Hovnanian Enterprises, Inc.: | | | | |
6% 1/15/10 | | 730 | | 683 |
6.25% 1/15/15 | | 1,120 | | 983 |
7.75% 5/15/13 | | 5,070 | | 4,639 |
Kimball Hill, Inc. 10.5% 12/15/12 | | 2,210 | | 2,055 |
Meritage Homes Corp. 6.25% 3/15/15 | | 1,790 | | 1,504 |
Technical Olympic USA, Inc.: | | | | |
7.5% 1/15/15 | | 2,535 | | 2,117 |
10.375% 7/1/12 | | 760 | | 730 |
Urbi, Desarrollos Urbanos, SA de CV 8.5% 4/19/16 (f) | | 4,285 | | 4,306 |
| | 21,626 |
Leisure Equipment & Products - 0.0% |
Riddell Bell Holdings, Inc. 8.375% 10/1/12 | | 720 | | 706 |
Media - 3.6% |
AMC Entertainment, Inc. 11% 2/1/16 | | 2,610 | | 2,812 |
CanWest Media, Inc. 8% 9/15/12 | | 860 | | 866 |
CCH I Holdings LLC/CCH I Capital Corp. 11.75% 5/15/14 | | 830 | | 527 |
CCH I LLC/CCH I Capital Corp. 11% 10/1/15 | | 8,148 | | 6,967 |
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp.: | | | | |
10.25% 9/15/10 | | 6,750 | | 6,558 |
CSC Holdings, Inc.: | | | | |
7.25% 4/15/12 (f)(h) | | 7,060 | | 6,831 |
7.625% 4/1/11 | | 2,580 | | 2,574 |
7.625% 7/15/18 | | 22,500 | | 22,275 |
7.875% 2/15/18 | | 15,015 | | 15,015 |
EchoStar DBS Corp.: | | | | |
6.375% 10/1/11 | | 3,705 | | 3,543 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Media - continued |
EchoStar DBS Corp.: - continued | | | | |
6.625% 10/1/14 | | $ 9,095 | | $ 8,527 |
Globo Comunicacoes e Participacoes SA: | | | | |
(Reg. S) 7.375% 10/20/11 (e) | | 8,630 | | 8,619 |
7.375% 10/20/11 (e)(f) | | 68 | | 67 |
Haights Cross Communications, Inc. 12.5% 8/15/11 (d) | | 1,550 | | 837 |
Houghton Mifflin Co.: | | | | |
0% 10/15/13 (d) | | 5,985 | | 4,938 |
8.25% 2/1/11 | | 1,905 | | 1,917 |
9.875% 2/1/13 | | 6,890 | | 7,097 |
iesy Repository GmbH 10.375% 2/15/15 (f) | | 2,970 | | 2,822 |
Liberty Media Corp.: | | | | |
5.7% 5/15/13 | | 8,315 | | 7,556 |
8.5% 7/15/29 | | 5,320 | | 5,174 |
Livent, Inc. yankee 9.375% 10/15/04 (c) | | 300 | | 9 |
PanAmSat Corp.: | | | | |
6.375% 1/15/08 | | 490 | | 486 |
9% 8/15/14 | | 2,860 | | 2,917 |
9% 6/15/16 (f)(g) | | 2,240 | | 2,262 |
Rainbow National LLC & RNS Co. Corp.: | | | | |
8.75% 9/1/12 (f) | | 3,280 | | 3,428 |
10.375% 9/1/14 (f) | | 11,090 | | 12,227 |
Sun Media Corp. Canada 7.625% 2/15/13 | | 635 | | 648 |
Vertis, Inc.: | | | | |
10.875% 6/15/09 | | 3,775 | | 3,709 |
13.5% 12/7/09 (f) | | 500 | | 415 |
Videotron Ltee 6.875% 1/15/14 | | 550 | | 523 |
| | 142,146 |
Multiline Retail - 0.3% |
Marks & Spencer Group PLC 5.125% 11/7/06 | EUR | 2,000 | | 2,574 |
Neiman Marcus Group, Inc.: | | | | |
9% 10/15/15 (f) | | 4,940 | | 5,144 |
10.375% 10/15/15 (f) | | 2,015 | | 2,126 |
| | 9,844 |
Specialty Retail - 0.3% |
AutoNation, Inc.: | | | | |
7% 4/15/14 (f) | | 4,715 | | 4,597 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Specialty Retail - continued |
AutoNation, Inc.: - continued | | | | |
7.0447% 4/15/13 (f)(h) | | $ 1,000 | | $ 998 |
Burlington Coat Factory Warehouse Corp. 11.125% 4/15/14 (f) | | 4,430 | | 4,297 |
| | 9,892 |
Textiles, Apparel & Luxury Goods - 0.3% |
AAC Group Holding Corp. 0% 10/1/12 (d) | | 3,925 | | 3,062 |
Levi Strauss & Co.: | | | | |
8.875% 4/1/16 (f) | | 4,460 | | 4,237 |
9.75% 1/15/15 | | 3,880 | | 3,899 |
| | 11,198 |
TOTAL CONSUMER DISCRETIONARY | | 310,296 |
CONSUMER STAPLES - 0.5% |
Food & Staples Retailing - 0.2% |
Rite Aid Corp.: | | | | |
6.875% 8/15/13 | | 300 | | 259 |
6.875% 12/15/28 (f) | | 2,090 | | 1,536 |
7.7% 2/15/27 | | 6,510 | | 5,403 |
| | 7,198 |
Food Products - 0.3% |
Dean Foods Co.: | | | | |
6.625% 5/15/09 | | 90 | | 90 |
6.9% 10/15/17 | | 979 | | 918 |
Hines Nurseries, Inc. 10.25% 10/1/11 | | 370 | | 352 |
Michael Foods, Inc. 8% 11/15/13 | | 420 | | 413 |
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | | 900 | | 909 |
NPI Merger Corp.: | | | | |
9.23% 10/15/13 (f)(h) | | 710 | | 723 |
10.75% 4/15/14 (f) | | 820 | | 844 |
Philipp Brothers Chemicals, Inc. 9.875% 6/1/08 | | 1,909 | | 1,909 |
Reddy Ice Holdings, Inc. 0% 11/1/12 (d) | | 3,250 | | 2,633 |
Swift & Co.: | | | | |
10.125% 10/1/09 | | 915 | | 929 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER STAPLES - continued |
Food Products - continued |
Swift & Co.: - continued | | | | |
12.5% 1/1/10 | | $ 1,400 | | $ 1,414 |
Tate & Lyle International Finance PLC 5.75% 10/6/06 | EUR | 800 | | 1,030 |
| | 12,164 |
Household Products - 0.0% |
Central Garden & Pet Co. 9.125% 2/1/13 | | 260 | | 265 |
Personal Products - 0.0% |
Elizabeth Arden, Inc. 7.75% 1/15/14 | | 470 | | 461 |
Tobacco - 0.0% |
BAT Holdings BV 4.375% 9/15/14 | EUR | 1,500 | | 1,837 |
TOTAL CONSUMER STAPLES | | 21,925 |
ENERGY - 4.7% |
Energy Equipment & Services - 0.7% |
CHC Helicopter Corp. 7.375% 5/1/14 | | 6,185 | | 5,845 |
Hanover Compressor Co.: | | | | |
7.5% 4/15/13 | | 530 | | 513 |
8.625% 12/15/10 | | 490 | | 502 |
9% 6/1/14 | | 4,260 | | 4,398 |
Ocean Rig Norway AS 8.375% 7/1/13 (f) | | 1,020 | | 1,046 |
Petroliam Nasional BHD (Petronas) 7.625% 10/15/26 (Reg. S) | | 10,005 | | 11,327 |
Seabulk International, Inc. 9.5% 8/15/13 | | 3,290 | | 3,635 |
| | 27,266 |
Oil, Gas & Consumable Fuels - 4.0% |
ANR Pipeline, Inc.: | | | | |
7.375% 2/15/24 | | 2,165 | | 2,062 |
8.875% 3/15/10 | | 2,520 | | 2,621 |
Atlas Pipeline Partners LP/Atlas Pipeline Partners Finance Corp. 8.125% 12/15/15 (f) | | 4,710 | | 4,710 |
Chaparral Energy, Inc. 8.5% 12/1/15 (f) | | 2,530 | | 2,524 |
Chesapeake Energy Corp.: | | | | |
6.5% 8/15/17 | | 8,855 | | 8,124 |
6.875% 11/15/20 | | 4,255 | | 3,936 |
7% 8/15/14 | | 865 | | 841 |
7.5% 6/15/14 | | 850 | | 848 |
7.625% 7/15/13 | | 4,500 | | 4,517 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Colorado Interstate Gas Co. 6.8% 11/15/15 | | $ 5,320 | | $ 5,140 |
El Paso Production Holding Co. 7.75% 6/1/13 | | 4,000 | | 4,040 |
Encore Acquisition Co. 6.25% 4/15/14 | | 1,500 | | 1,386 |
Energy Partners Ltd. 8.75% 8/1/10 | | 3,530 | | 3,451 |
EXCO Resources, Inc. 7.25% 1/15/11 | | 570 | | 537 |
Forest Oil Corp. 8% 12/15/11 | | 480 | | 491 |
Gaz Capital SA Luxembourg 7.8% 9/27/10 | EUR | 1,400 | | 1,965 |
Grupo TMM SA de CV 10.5% 8/1/07 (f) | | 1,617 | | 1,625 |
Harvest Operations Corp. 7.875% 10/15/11 | | 1,170 | | 1,112 |
Houston Exploration Co. 7% 6/15/13 | | 410 | | 402 |
InterNorth, Inc. 9.625% 3/15/06 (c) | | 935 | | 318 |
Massey Energy Co. 6.875% 12/15/13 | | 2,350 | | 2,186 |
MOL Hungarian Oil & Gas 3.875% 10/5/15 | EUR | 700 | | 775 |
Northwest Pipeline Corp.: | | | | |
6.625% 12/1/07 | | 285 | | 285 |
8.125% 3/1/10 | | 400 | | 420 |
Pan American Energy LLC 7.125% 10/27/09 (f) | | 2,475 | | 2,438 |
Pemex Project Funding Master Trust: | | | | |
5.5% 2/24/25 (f) | EUR | 750 | | 875 |
7.75% 9/28/49 | | 14,614 | | 14,304 |
8.625% 2/1/22 | | 5,490 | | 6,176 |
Petrobras Energia SA 9.375% 10/30/13 | | 2,495 | | 2,607 |
Petrohawk Energy Corp. 9.125% 7/15/13 (f)(g) | | 6,000 | | 5,970 |
Petrozuata Finance, Inc.: | | | | |
7.63% 4/1/09 (f) | | 3,732 | | 3,704 |
8.22% 4/1/17 (f) | | 4,515 | | 4,289 |
Plains Exploration & Production Co. 8.75% 7/1/12 | | 1,610 | | 1,674 |
Pogo Producing Co.: | | | | |
6.875% 10/1/17 | | 4,290 | | 3,947 |
7.875% 5/1/13 (f) | | 2,605 | | 2,612 |
Range Resources Corp. 7.375% 7/15/13 | | 2,190 | | 2,157 |
Ship Finance International Ltd. 8.5% 12/15/13 | | 7,015 | | 6,734 |
Southern Star Central Corp. 6.75% 3/1/16 (f) | | 1,560 | | 1,486 |
Targa Resources, Inc./Targa Resources Finance Corp. 8.5% 11/1/13 (f) | | 1,220 | | 1,177 |
Teekay Shipping Corp. 8.875% 7/15/11 | | 3,330 | | 3,480 |
Tennessee Gas Pipeline Co.: | | | | |
7% 10/15/28 | | 550 | | 508 |
7.5% 4/1/17 | | 7,600 | | 7,676 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Tennessee Gas Pipeline Co.: - continued | | | | |
7.625% 4/1/37 | | $ 1,035 | | $ 996 |
8.375% 6/15/32 | | 1,155 | | 1,224 |
Transcontinental Gas Pipe Line Corp.: | | | | |
7% 8/15/11 | | 330 | | 336 |
8.875% 7/15/12 | | 1,455 | | 1,608 |
Venoco, Inc. 8.75% 12/15/11 | | 1,470 | | 1,419 |
Vintage Petroleum, Inc. 8.25% 5/1/12 | | 1,000 | | 1,058 |
Williams Co., Inc. Credit Linked Certificate Trust III 6.75% 4/15/09 (f) | | 1,820 | | 1,804 |
Williams Companies, Inc.: | | | | |
6.375% 10/1/10 (f) | | 7,650 | | 7,440 |
7.625% 7/15/19 | | 7,152 | | 7,250 |
7.75% 6/15/31 | | 230 | | 227 |
7.875% 9/1/21 | | 1,880 | | 1,908 |
8.75% 3/15/32 | | 1,245 | | 1,355 |
YPF SA: | | | | |
10% 11/2/28 | | 4,210 | | 4,805 |
yankee 9.125% 2/24/09 | | 2,755 | | 2,851 |
| | 160,411 |
TOTAL ENERGY | | 187,677 |
FINANCIALS - 4.4% |
Capital Markets - 0.2% |
Bank of Scotland International Australia Ltd. 4.4614% 9/7/06 (h) | CAD | 1,500 | | 1,344 |
E*TRADE Financial Corp. 7.375% 9/15/13 | | 4,570 | | 4,547 |
Mizuho Capital Investment Europe 1 Ltd. 5.02% (h) | EUR | 800 | | 1,004 |
| | 6,895 |
Commercial Banks - 1.1% |
Australia & New Zealand Banking Group Ltd. 4.6186% 12/29/06 (h) | CAD | 1,500 | | 1,344 |
Banco Nacional de Desenvolvimento Economico e Social 5.727% 6/16/08 (h) | | 2,915 | | 2,864 |
Bank of Tokyo-Mitsubishi Ltd. 3.5% 12/16/15 (h) | EUR | 1,150 | | 1,419 |
BIE Bank & Trust Ltd. 16.8% 3/13/07 | BRL | 5,690 | | 2,644 |
Commonwealth Bank of Australia 4.4229% 11/28/06 (h) | CAD | 1,750 | | 1,568 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
FINANCIALS - continued |
Commercial Banks - continued |
Dresdner Bank AG 10.375% 8/17/09 (f) | | $ 6,340 | | $ 6,760 |
European Investment Bank 4% 10/15/37 | EUR | 2,600 | | 3,050 |
Kazkommerts International BV 5.125% 3/23/11 | EUR | 1,750 | | 2,166 |
Korea Development Bank (Reg.) 0.87% 6/28/10 | JPY | 600,000 | | 5,065 |
Kyivstar GSM 7.75% 4/27/12 (Issued by Dresdner Bank AG for Kyivstar GSM) (f) | | 3,585 | | 3,477 |
Rabobank Nederland 4.3286% 2/23/07 (h) | CAD | 250 | | 224 |
Shinsei Bank Ltd. 3.75% 2/23/16 (h) | EUR | 1,250 | | 1,537 |
Standard Chartered Bank PLC 3.625% 2/3/17 (e) | EUR | 385 | | 471 |
Sumitomo Mitsui Banking Corp. (Reg. S) 4.375% 10/15/49 (h) | EUR | 2,000 | | 2,406 |
UBS Luxembourg SA 8% 2/11/10 | | 3,200 | | 3,188 |
Vimpel Communications 10% 6/16/09 (Issued by UBS Luxembourg SA for Vimpel Communications) | | 6,185 | | 6,525 |
| | 44,708 |
Consumer Finance - 1.3% |
Ford Credit Europe PLC 4.061% 9/30/09 (h) | EUR | 1,500 | | 1,741 |
Ford Motor Credit Co. 6.625% 6/16/08 | | 7,650 | | 7,281 |
General Motors Acceptance Corp.: | | | | |
6% 10/16/06 | EUR | 2,000 | | 2,558 |
6.75% 12/1/14 | | 9,520 | | 8,758 |
6.875% 9/15/11 | | 5,190 | | 4,943 |
6.875% 8/28/12 | | 6,460 | | 6,086 |
8% 11/1/31 | | 19,175 | | 18,264 |
| | 49,631 |
Diversified Financial Services - 0.6% |
Canada Housing Trust No. 1 4.65% 9/15/09 | CAD | 16,600 | | 14,904 |
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 | | 955 | | 925 |
Citigroup, Inc. 4.25% 2/25/30 (h) | EUR | 1,500 | | 1,715 |
Global Cash Access LLC/Global Cash Access Finance Corp. 8.75% 3/15/12 | | 2,056 | | 2,167 |
MUFG Capital Finance 2 Ltd. 4.85% (h) | EUR | 1,300 | | 1,580 |
MUFG Capital Finance 3 Ltd. 2.68% (h) | JPY | 150,000 | | 1,269 |
Red Arrow International Leasing 8.375% 6/30/12 | RUB | 33,077 | | 1,254 |
| | 23,814 |
Insurance - 0.2% |
Amlin PLC 6.5% 12/19/26 (h) | GBP | 1,000 | | 1,768 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
FINANCIALS - continued |
Insurance - continued |
Brit Insurance Holdings PLC 6.625% 12/9/30 (h) | GBP | 500 | | $ 885 |
Eureko BV 5.125% (h) | EUR | 1,500 | | 1,891 |
Fukoku Mutual Life Insurance Co. 4.5% 9/28/25 (h) | EUR | 1,200 | | 1,432 |
Wuerttembergische Lebens AG 5.375% 6/1/26 (h) | EUR | 800 | | 986 |
| | 6,962 |
Real Estate Investment Trusts - 0.4% |
BF Saul REIT 7.5% 3/1/14 | | $ 3,400 | | 3,451 |
Rouse Co. LP/TRC, Inc. 6.75% 5/1/13 (f) | | 6,640 | | 6,492 |
Senior Housing Properties Trust: | | | | |
7.875% 4/15/15 | | 2,641 | | 2,681 |
8.625% 1/15/12 | | 4,370 | | 4,632 |
| | 17,256 |
Real Estate Management & Development - 0.2% |
American Real Estate Partners/American Real Estate Finance Corp.: | | | | |
7.125% 2/15/13 | | 3,630 | | 3,489 |
8.125% 6/1/12 | | 4,955 | | 4,992 |
| | 8,481 |
Thrifts & Mortgage Finance - 0.4% |
Residential Capital Corp.: | | | | |
6.375% 6/30/10 | | 6,985 | | 6,890 |
6.875% 6/30/15 | | 3,885 | | 3,881 |
6.8983% 4/17/09 (f)(h) | | 6,640 | | 6,615 |
| | 17,386 |
TOTAL FINANCIALS | | 175,133 |
HEALTH CARE - 0.9% |
Health Care Providers & Services - 0.6% |
AmeriPath, Inc. 10.5% 4/1/13 | | 2,805 | | 2,938 |
CRC Health Group, Inc. 10.75% 2/1/16 (f) | | 1,880 | | 1,913 |
Fresenius Medical Care Capital Trust IV 7.875% 6/15/11 | | 1,000 | | 1,010 |
HCA, Inc.: | | | | |
5.75% 3/15/14 | | 745 | | 665 |
6.75% 7/15/13 | | 5,015 | | 4,795 |
LifeCare Holdings, Inc. 9.25% 8/15/13 | | 2,215 | | 1,551 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
HEALTH CARE - continued |
Health Care Providers & Services - continued |
Psychiatric Solutions, Inc. 10.625% 6/15/13 | | $ 197 | | $ 218 |
Rural/Metro Corp. 9.875% 3/15/15 | | 1,355 | | 1,396 |
Skilled Healthcare Group, Inc. 11% 1/15/14 (f) | | 5,480 | | 5,809 |
Team Finance LLC/Health Finance Corp. 11.25% 12/1/13 | | 3,040 | | 3,101 |
U.S. Oncology, Inc. 9% 8/15/12 | | 1,300 | | 1,349 |
| | 24,745 |
Life Sciences Tools & Services - 0.1% |
Bio-Rad Laboratories, Inc. 7.5% 8/15/13 | | 1,770 | | 1,788 |
Polypore, Inc. 8.75% 5/15/12 | | 1,675 | | 1,587 |
| | 3,375 |
Pharmaceuticals - 0.2% |
Elan Finance PLC/Elan Finance Corp. 7.75% 11/15/11 | | 1,585 | | 1,518 |
Leiner Health Products, Inc. 11% 6/1/12 | | 1,885 | | 1,781 |
VWR International, Inc.: | | | | |
6.875% 4/15/12 | | 115 | | 109 |
8% 4/15/14 | | 3,647 | | 3,556 |
| | 6,964 |
TOTAL HEALTH CARE | | 35,084 |
INDUSTRIALS - 2.2% |
Aerospace & Defense - 0.1% |
Hexcel Corp. 6.75% 2/1/15 | | 2,350 | | 2,280 |
Orbimage Holdings, Inc. 14.2% 7/1/12 (f)(h) | | 1,720 | | 1,862 |
| | 4,142 |
Airlines - 0.4% |
Continental Airlines, Inc. pass thru trust certificates: | | | | |
6.748% 9/15/18 | | 88 | | 83 |
6.9% 7/2/18 | | 661 | | 625 |
8.312% 10/2/12 | | 470 | | 454 |
8.388% 5/1/22 | | 784 | | 760 |
9.798% 4/1/21 | | 2,765 | | 2,882 |
Delta Air Lines, Inc.: | | | | |
7.9% 12/15/09 (c) | | 12,630 | | 3,648 |
8.3% 12/15/29 (c) | | 1,900 | | 551 |
10% 8/15/08 (c) | | 750 | | 203 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INDUSTRIALS - continued |
Airlines - continued |
Delta Air Lines, Inc. pass thru trust certificates 7.57% 11/18/10 | | $ 1,280 | | $ 1,285 |
Northwest Airlines Corp. 10% 2/1/09 (c) | | 1,465 | | 703 |
Northwest Airlines, Inc.: | | | | |
7.875% 3/15/08 (c) | | 1,065 | | 535 |
8.875% 6/1/06 (c) | | 1,355 | | 650 |
10.5% 4/1/09 (c) | | 173 | | 69 |
Northwest Airlines, Inc. pass thru trust certificates: | | | | |
7.248% 7/2/14 | | 487 | | 149 |
7.95% 9/1/16 | | 23 | | 23 |
8.07% 1/2/15 | | 1,320 | | 1,281 |
NWA Trust 10.23% 6/21/14 | | 239 | | 229 |
| | 14,130 |
Building Products - 0.0% |
ACIH, Inc. 0% 12/15/12 (d)(f) | | 300 | | 238 |
NTK Holdings, Inc. 0% 3/1/14 (d) | | 410 | | 296 |
| | 534 |
Commercial Services & Supplies - 0.3% |
ALH Finance LLC/ALH Finance Corp. 8.5% 1/15/13 | | 160 | | 154 |
Allied Security Escrow Corp. 11.375% 7/15/11 | | 2,255 | | 2,190 |
Allied Waste North America, Inc.: | | | | |
6.5% 11/15/10 | | 830 | | 799 |
7.125% 5/15/16 (f) | | 3,240 | | 3,062 |
Browning-Ferris Industries, Inc.: | | | | |
7.4% 9/15/35 | | 1,640 | | 1,443 |
9.25% 5/1/21 | | 680 | | 694 |
FTI Consulting, Inc. 7.625% 6/15/13 | | 720 | | 727 |
Mac-Gray Corp. 7.625% 8/15/15 | | 680 | | 683 |
R.H. Donnelley Finance Corp. I 10.875% 12/15/12 (f) | | 550 | | 603 |
Williams Scotsman, Inc. 8.5% 10/1/15 | | 2,850 | | 2,814 |
| | 13,169 |
Construction & Engineering - 0.0% |
Blount, Inc. 8.875% 8/1/12 | | 1,250 | | 1,256 |
Electrical Equipment - 0.2% |
General Cable Corp. 9.5% 11/15/10 | | 3,055 | | 3,192 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INDUSTRIALS - continued |
Electrical Equipment - continued |
Polypore, Inc. 0% 10/1/12 (d) | | $ 5,840 | | $ 3,884 |
Sensus Metering Systems, Inc. 8.625% 12/15/13 | | 900 | | 878 |
| | 7,954 |
Machinery - 0.1% |
Chart Industries, Inc. 9.125% 10/15/15 (f) | | 1,160 | | 1,189 |
Cummins, Inc. 7.125% 3/1/28 | | 2,250 | | 2,133 |
Invensys PLC 9.875% 3/15/11 (f) | | 295 | | 320 |
| | 3,642 |
Marine - 0.3% |
American Commercial Lines LLC/ACL Finance Corp. 9.5% 2/15/15 | | 539 | | 590 |
H-Lines Finance Holding Corp. 0% 4/1/13 (d) | | 1,424 | | 1,225 |
OMI Corp. 7.625% 12/1/13 | | 6,125 | | 6,110 |
Ultrapetrol Bahamas Ltd. 9% 11/24/14 | | 1,795 | | 1,616 |
| | 9,541 |
Road & Rail - 0.5% |
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | | | | |
7.576% 5/15/14 (f)(h) | | 510 | | 511 |
7.625% 5/15/14 (f) | | 1,340 | | 1,307 |
7.75% 5/15/16 (f) | | 1,280 | | 1,245 |
Hertz Corp. 8.875% 1/1/14 (f) | | 3,820 | | 3,916 |
Kansas City Southern Railway Co.: | | | | |
7.5% 6/15/09 | | 3,165 | | 3,181 |
9.5% 10/1/08 | | 1,350 | | 1,411 |
TFM SA de CV: | | | | |
9.375% 5/1/12 | | 6,450 | | 6,837 |
yankee 10.25% 6/15/07 | | 865 | | 891 |
| | 19,299 |
Trading Companies & Distributors - 0.3% |
Ahern Rentals, Inc. 9.25% 8/15/13 | | 550 | | 556 |
Ashtead Holdings PLC 8.625% 8/1/15 (f) | | 1,190 | | 1,211 |
Neff Rent LLC/Neff Finance Corp. 11.25% 6/15/12 (f) | | 9,840 | | 10,578 |
| | 12,345 |
TOTAL INDUSTRIALS | | 86,012 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INFORMATION TECHNOLOGY - 3.8% |
Communications Equipment - 0.9% |
Hughes Network Systems LLC / HNS Finance Corp. 9.5% 4/15/14 (f) | | $ 6,290 | | $ 6,227 |
L-3 Communications Corp. 6.375% 10/15/15 | | 3,840 | | 3,667 |
Lucent Technologies, Inc.: | | | | |
6.45% 3/15/29 | | 12,535 | | 10,592 |
6.5% 1/15/28 | | 3,740 | | 3,160 |
Nortel Networks Corp.: | | | | |
9.7581% 7/15/11 (f)(h) | | 3,760 | | 3,826 |
10.125% 7/15/13 (f) | | 3,730 | | 3,795 |
10.75% 7/15/16 (f) | | 3,760 | | 3,863 |
| | 35,130 |
Electronic Equipment & Instruments - 0.3% |
Altra Industrial Motion, Inc. 9% 12/1/11 | | 970 | | 970 |
Celestica, Inc. 7.875% 7/1/11 | | 12,340 | | 12,001 |
| | 12,971 |
IT Services - 0.8% |
Iron Mountain, Inc.: | | | | |
6.625% 1/1/16 | | 10,955 | | 9,777 |
7.75% 1/15/15 | | 4,830 | | 4,637 |
8.25% 7/1/11 | | 535 | | 532 |
8.625% 4/1/13 | | 2,900 | | 2,915 |
SunGard Data Systems, Inc.: | | | | |
9.125% 8/15/13 (f) | | 5,280 | | 5,498 |
9.4306% 8/15/13 (f)(h) | | 2,830 | | 2,972 |
10.25% 8/15/15 (f) | | 6,955 | | 7,233 |
| | 33,564 |
Office Electronics - 0.9% |
Xerox Capital Trust I 8% 2/1/27 | | 4,585 | | 4,631 |
Xerox Corp.: | | | | |
6.4% 3/15/16 | | 8,000 | | 7,560 |
6.875% 8/15/11 | | 3,240 | | 3,208 |
7.125% 6/15/10 | | 3,720 | | 3,753 |
7.2% 4/1/16 | | 3,345 | | 3,320 |
7.625% 6/15/13 | | 12,425 | | 12,518 |
| | 34,990 |
Semiconductors & Semiconductor Equipment - 0.8% |
Amkor Technology, Inc. 9.25% 6/1/16 | | 2,955 | | 2,792 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INFORMATION TECHNOLOGY - continued |
Semiconductors & Semiconductor Equipment - continued |
Avago Technologies Finance Ltd.: | | | | |
10.7306% 6/1/13 (f)(h) | | $ 4,560 | | $ 4,777 |
11.875% 12/1/15 (f) | | 5,150 | | 5,588 |
Freescale Semiconductor, Inc. 7.125% 7/15/14 | | 11,740 | | 11,857 |
New ASAT Finance Ltd. 9.25% 2/1/11 | | 2,100 | | 1,743 |
Viasystems, Inc. 10.5% 1/15/11 | | 4,065 | | 4,024 |
| | 30,781 |
Software - 0.1% |
SERENA Software, Inc. 10.375% 3/15/16 (f) | | 4,105 | | 4,146 |
TOTAL INFORMATION TECHNOLOGY | | 151,582 |
MATERIALS - 3.0% |
Chemicals - 0.8% |
America Rock Salt Co. LLC 9.5% 3/15/14 | | 3,940 | | 3,979 |
BCP Crystal U.S. Holdings Corp. 9.625% 6/15/14 | | 8,045 | | 8,729 |
Braskem SA: | | | | |
(Reg. S) 11.75% 1/22/14 | | 1,185 | | 1,333 |
11.75% 1/22/14 (f) | | 325 | | 366 |
Crystal US Holding 3 LLC/Crystal US Sub 3 Corp.: | | | | |
Series A, 0% 10/1/14 (d) | | 1,380 | | 1,083 |
Series B, 0% 10/1/14 (d) | | 12,655 | | 9,808 |
Huntsman LLC 11.625% 10/15/10 | | 466 | | 516 |
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (d) | | 6,095 | | 5,257 |
Lyondell Chemical Co. 11.125% 7/15/12 | | 930 | | 1,011 |
Phibro Animal Health Corp. 13% 12/1/07 unit | | 1,575 | | 1,638 |
| | 33,720 |
Construction Materials - 0.0% |
Texas Industries, Inc. 7.25% 7/15/13 | | 630 | | 628 |
Containers & Packaging - 0.5% |
AEP Industries, Inc. 7.875% 3/15/13 | | 640 | | 627 |
BWAY Corp. 10% 10/15/10 | | 1,175 | | 1,237 |
Constar International, Inc. 11% 12/1/12 | | 2,085 | | 1,564 |
Crown Cork & Seal Finance PLC yankee 7% 12/15/06 | | 830 | | 832 |
Crown Cork & Seal, Inc.: | | | | |
7.375% 12/15/26 | | 355 | | 310 |
7.5% 12/15/96 | | 3,685 | | 2,893 |
8% 4/15/23 | | 2,980 | | 2,757 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
MATERIALS - continued |
Containers & Packaging - continued |
Owens-Brockway Glass Container, Inc.: | | | | |
6.75% 12/1/14 | | $ 895 | | $ 828 |
7.75% 5/15/11 | | 320 | | 322 |
8.25% 5/15/13 | | 3,390 | | 3,407 |
8.75% 11/15/12 | | 2,325 | | 2,418 |
8.875% 2/15/09 | | 1,170 | | 1,199 |
Sealed Air Finance 5.625% 7/19/06 | EUR | 250 | | 320 |
Tekni-Plex, Inc. 10.875% 8/15/12 (f) | | 980 | | 1,068 |
| | 19,782 |
Metals & Mining - 1.5% |
AK Steel Corp. 7.75% 6/15/12 | | 3,055 | | 2,994 |
Compass Minerals International, Inc.: | | | | |
0% 12/15/12 (d) | | 1,330 | | 1,267 |
0% 6/1/13 (d) | | 2,260 | | 2,062 |
CSN Islands VIII Corp. 9.75% 12/16/13 (f) | | 5,830 | | 6,209 |
CSN Islands X Corp. (Reg. S) 9.5% 7/14/49 | | 5,795 | | 5,752 |
Edgen Acquisition Corp. 9.875% 2/1/11 | | 1,340 | | 1,327 |
Evraz Securities SA 10.875% 8/3/09 | | 6,600 | | 7,128 |
Freeport-McMoRan Copper & Gold, Inc.: | | | | |
6.875% 2/1/14 | | 4,200 | | 4,043 |
10.125% 2/1/10 | | 740 | | 781 |
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 | | 1,335 | | 1,442 |
Gerdau SA 8.875% (f) | | 2,590 | | 2,525 |
International Steel Group, Inc. 6.5% 4/15/14 | | 10,550 | | 9,996 |
Ispat Inland ULC 9.75% 4/1/14 | | 932 | | 1,025 |
Norilsk Nickel Finance Luxembourg SA 7.125% 9/30/09 | | 4,570 | | 4,547 |
RathGibson, Inc. 11.25% 2/15/14 (f) | | 5,905 | | 6,023 |
Steel Dynamics, Inc.: | | | | |
9.5% 3/15/09 | | 2,155 | | 2,242 |
| | 59,363 |
Paper & Forest Products - 0.2% |
Georgia-Pacific Corp. 8% 1/15/24 | | 1,125 | | 1,080 |
Millar Western Forest Products Ltd. 7.75% 11/15/13 | | 1,835 | | 1,404 |
NewPage Corp.: | | | | |
10.93% 5/1/12 (h) | | 1,770 | | 1,929 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
MATERIALS - continued |
Paper & Forest Products - continued |
NewPage Corp.: - continued | | | | |
12% 5/1/13 | | $ 1,930 | | $ 1,998 |
P.H. Glatfelter Co. 7.125% 5/1/16 (f) | | 550 | | 542 |
| | 6,953 |
TOTAL MATERIALS | | 120,446 |
TELECOMMUNICATION SERVICES - 6.3% |
Diversified Telecommunication Services - 3.9% |
AT&T Corp. 7.75% 11/21/06 (h) | EUR | 1,250 | | 1,613 |
Citizens Communications Co. 9% 8/15/31 | | 6,725 | | 6,826 |
Embarq Corp.: | | | | |
6.738% 6/1/13 | | 2,509 | | 2,501 |
7.082% 6/1/16 | | 1,116 | | 1,110 |
7.995% 6/1/36 | | 8,700 | | 8,744 |
Empresa Brasileira de Telecomm SA 11% 12/15/08 | | 4,046 | | 4,390 |
Eschelon Operating Co. 8.375% 3/15/10 | | 2,196 | | 2,092 |
Level 3 Financing, Inc.: | | | | |
11.4238% 3/15/11 (f)(h) | | 3,050 | | 3,119 |
12.25% 3/15/13 (f) | | 9,580 | | 10,179 |
Mobifon Holdings BV 12.5% 7/31/10 | | 7,225 | | 8,092 |
New Skies Satellites BV: | | | | |
9.125% 11/1/12 | | 3,145 | | 3,326 |
10.4144% 11/1/11 (h) | | 750 | | 774 |
Nordic Telephone Co. Holdings Aps 8.875% 5/1/16 (f) | | 1,830 | | 1,857 |
NTL Cable PLC 8.75% 4/15/14 | | 6,865 | | 6,796 |
PanAmSat Holding Corp. 0% 11/1/14 (d) | | 5,375 | | 3,924 |
Qwest Capital Funding, Inc.: | | | | |
7.625% 8/3/21 | | 370 | | 346 |
7.75% 2/15/31 | | 370 | | 346 |
Qwest Corp.: | | | | |
7.875% 9/1/11 | | 2,980 | | 2,995 |
8.5794% 6/15/13 (h) | | 9,470 | | 10,015 |
8.875% 3/15/12 | | 25,740 | | 27,156 |
Telecom Egypt SAE: | | | | |
10.7% 2/4/10 (h) | EGP | 3,565 | | 612 |
10.95% 2/4/10 | EGP | 3,565 | | 635 |
Telefonica de Argentina SA 9.125% 11/7/10 | | 5,952 | | 6,041 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
TELECOMMUNICATION SERVICES - continued |
Diversified Telecommunication Services - continued |
Telenet Group Holding NV 0% 6/15/14 (d)(f) | | $ 10,537 | | $ 8,930 |
U.S. West Capital Funding, Inc.: | | | | |
6.5% 11/15/18 | | 285 | | 251 |
6.875% 7/15/28 | | 1,855 | | 1,595 |
U.S. West Communications: | | | | |
6.875% 9/15/33 | | 13,988 | | 12,100 |
7.125% 11/15/43 | | 220 | | 196 |
7.2% 11/10/26 | | 3,115 | | 2,905 |
7.25% 9/15/25 | | 1,780 | | 1,655 |
7.25% 10/15/35 | | 3,210 | | 2,921 |
7.5% 6/15/23 | | 1,880 | | 1,777 |
8.875% 6/1/31 | | 340 | | 347 |
Wind Acquisition Finance SA 10.75% 12/1/15 (f) | | 3,720 | | 3,943 |
Windstream Corp. 8.625% 8/1/16 (f)(g) | | 4,120 | | 4,202 |
| | 154,311 |
Wireless Telecommunication Services - 2.4% |
American Tower Corp. 7.125% 10/15/12 | | 10,745 | | 10,987 |
Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 | | 7,015 | | 7,366 |
Centennial Communications Corp./Centennial Cellular Operating Co. LLC/Centennial Puerto Rico Operations Corp. 8.125% 2/1/14 | | 2,460 | | 2,386 |
Digicel Ltd. 9.25% 9/1/12 (f) | | 1,880 | | 1,936 |
Inmarsat Finance PLC 7.625% 6/30/12 | | 414 | | 424 |
Intelsat Ltd.: | | | | |
6.5% 11/1/13 | | 4,545 | | 3,483 |
7.625% 4/15/12 | | 8,785 | | 7,434 |
9.25% 6/15/16 (f)(g) | | 2,240 | | 2,310 |
11.25% 6/15/16 (f)(g) | | 5,990 | | 6,125 |
Intelsat Subsidiary Holding Co. Ltd. 9.6138% 1/15/12 (h) | | 4,860 | | 4,921 |
Millicom International Cellular SA 10% 12/1/13 | | 5,695 | | 6,321 |
Mobile Telesystems Finance SA 8.375% 10/14/10 (f) | | 10,795 | | 10,782 |
Nextel Communications, Inc.: | | | | |
5.95% 3/15/14 | | 1,150 | | 1,121 |
6.875% 10/31/13 | | 6,365 | | 6,556 |
7.375% 8/1/15 | | 15,530 | | 15,978 |
Rogers Communications, Inc. 8.4544% 12/15/10 (h) | | 1,740 | | 1,788 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
TELECOMMUNICATION SERVICES - continued |
Wireless Telecommunication Services - continued |
Telecom Personal SA 9.25% 12/22/10 (f) | | $ 5,590 | | $ 5,534 |
UbiquiTel Operating Co. 9.875% 3/1/11 | | 1,705 | | 1,854 |
| | 97,306 |
TOTAL TELECOMMUNICATION SERVICES | | 251,617 |
UTILITIES - 1.3% |
Electric Utilities - 0.4% |
AES Gener SA 7.5% 3/25/14 | | 3,410 | | 3,419 |
Chivor SA E.S.P. 9.75% 12/30/14 (f) | | 3,255 | | 3,499 |
Edison Mission Energy: | | | | |
7.5% 6/15/13 (f) | | 3,710 | | 3,617 |
7.75% 6/15/16 (f) | | 3,710 | | 3,613 |
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 | | 1,170 | | 1,170 |
| | 15,318 |
Gas Utilities - 0.7% |
AmeriGas Partners LP/AmeriGas Eagle Finance Corp. 7.125% 5/20/16 | | 6,000 | | 5,768 |
Dynegy Holdings, Inc. 8.375% 5/1/16 (f) | | 2,090 | | 2,059 |
Southern Natural Gas Co.: | | | | |
7.35% 2/15/31 | | 7,350 | | 6,983 |
8% 3/1/32 | | 4,170 | | 4,358 |
8.875% 3/15/10 | | 2,600 | | 2,704 |
Transportadora de Gas del Sur SA (Reg. S) 6.5% 12/15/10 (e) | | 6,022 | | 5,812 |
| | 27,684 |
Independent Power Producers & Energy Traders - 0.1% |
Enron Corp.: | | | | |
6.4% 7/15/06 (c) | | 545 | | 185 |
6.625% 11/15/05 (c) | | 2,200 | | 748 |
6.725% 11/17/08 (c)(h) | | 684 | | 227 |
6.75% 8/1/09 (c) | | 550 | | 187 |
6.875% 10/15/07 (c) | | 1,330 | | 452 |
6.95% 7/15/28 (c) | | 1,204 | | 400 |
7.125% 5/15/07 (c) | | 235 | | 80 |
7.375% 5/15/19 (c) | | 1,400 | | 476 |
7.875% 6/15/03 (c) | | 235 | | 80 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
UTILITIES - continued |
Independent Power Producers & Energy Traders - continued |
Enron Corp.: - continued | | | | |
8.375% 5/23/05 (c) | | $ 2,500 | | $ 838 |
9.125% 4/1/03 (c) | | 50 | | 17 |
9.875% 6/15/03 (c) | | 220 | | 75 |
Tenaska Alabama Partners LP 7% 6/30/21 (f) | | 1,148 | | 1,114 |
| | 4,879 |
Multi-Utilities - 0.1% |
Aquila, Inc. 14.875% 7/1/12 | | 1,615 | | 2,136 |
TECO Energy, Inc. 6.75% 5/1/15 | | 1,020 | | 1,020 |
Utilicorp United, Inc. 9.95% 2/1/11 (h) | | 39 | | 43 |
| | 3,199 |
TOTAL UTILITIES | | 51,080 |
TOTAL NONCONVERTIBLE BONDS | | 1,390,852 |
TOTAL CORPORATE BONDS (Cost $1,399,117) | 1,395,013 |
U.S. Government and Government Agency Obligations - 24.4% |
|
U.S. Government Agency Obligations - 9.8% |
Fannie Mae: | | | | |
3.25% 1/15/08 | | 58,580 | | 56,677 |
3.25% 2/15/09 | | 6,040 | | 5,720 |
4.25% 5/15/09 | | 9,450 | | 9,157 |
4.5% 10/15/08 | | 16,934 | | 16,599 |
4.625% 1/15/08 | | 13,254 | | 13,086 |
4.625% 10/15/13 | | 248 | | 235 |
4.75% 12/15/10 | | 83,058 | | 80,692 |
4.875% 4/15/09 | | 43,850 | | 43,203 |
5.125% 1/2/14 | | 1,380 | | 1,324 |
6.125% 3/15/12 | | 900 | | 927 |
6.25% 2/1/11 | | 380 | | 389 |
6.375% 6/15/09 | | 16,590 | | 17,002 |
Federal Home Loan Bank: | | | | |
4.5% 10/14/08 | | 5,975 | | 5,854 |
5.8% 9/2/08 | | 1,680 | | 1,687 |
U.S. Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
U.S. Government Agency Obligations - continued |
Freddie Mac: | | | | |
4% 8/17/07 | | $ 521 | | $ 512 |
4.125% 4/2/07 | | 3,824 | | 3,785 |
4.125% 10/18/10 | | 65,000 | | 61,637 |
4.25% 7/15/09 | | 22,489 | | 21,754 |
4.875% 2/17/09 | | 9,051 | | 8,932 |
4.875% 11/15/13 | | 4,100 | | 3,945 |
5.125% 4/18/08 | | 14,000 | | 13,914 |
5.25% 7/18/11 | | 18,440 | | 18,237 |
Private Export Funding Corp.: | | | | |
secured 5.685% 5/15/12 | | 1,285 | | 1,295 |
4.974% 8/15/13 | | 1,515 | | 1,462 |
Small Business Administration guaranteed development participation certificates Series 2003 P10B, 5.136% 8/10/13 | | 1,518 | | 1,468 |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | | 389,493 |
U.S. Treasury Inflation Protected Obligations - 3.6% |
U.S. Treasury Inflation-Indexed Notes: | | | | |
0.875% 4/15/10 | | 22,862 | | 21,567 |
1.875% 7/15/13 | | 50,661 | | 48,666 |
2% 1/15/14 | | 22,567 | | 21,781 |
2.375% 4/15/11 | | 51,760 | | 51,553 |
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | | 143,567 |
U.S. Treasury Obligations - 11.0% |
U.S. Treasury Bonds 6.125% 8/15/29 | | 82,650 | | 91,896 |
U.S. Treasury Notes: | | | | |
3.75% 5/15/08 | | 97,629 | | 95,149 |
4% 3/15/10 | | 4,715 | | 4,540 |
4.25% 11/15/13 | | 7,930 | | 7,504 |
4.25% 8/15/14 | | 67,500 | | 63,569 |
4.25% 11/15/14 | | 40,920 | | 38,484 |
4.25% 8/15/15 | | 10,000 | | 9,357 |
4.5% 2/15/09 | | 50,000 | | 49,209 |
U.S. Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
U.S. Treasury Obligations - continued |
U.S. Treasury Notes: - continued | | | | |
4.5% 11/15/15 | | $ 30,500 | | $ 29,051 |
4.75% 5/15/14 | | 50,662 | | 49,421 |
TOTAL U.S. TREASURY OBLIGATIONS | | 438,180 |
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $999,922) | 971,240 |
U.S. Government Agency - Mortgage Securities - 1.5% |
|
Fannie Mae - 1.4% |
4% 5/1/19 | | 35 | | 32 |
4.5% 12/1/18 | | 6,781 | | 6,437 |
4.614% 7/1/34 (h) | | 5,279 | | 5,228 |
4.761% 11/1/33 (h) | | 4,021 | | 3,968 |
4.782% 6/1/35 (h) | | 1,907 | | 1,864 |
4.882% 7/1/34 (h) | | 1,906 | | 1,877 |
4.895% 11/1/35 (h) | | 2,708 | | 2,679 |
5% 3/1/18 to 7/1/35 | | 5,080 | | 4,880 |
5.035% 5/1/35 (h) | | 3,589 | | 3,531 |
5.5% 5/1/11 to 11/1/35 | | 21,431 | | 21,055 |
5.916% 1/1/36 (h) | | 548 | | 546 |
6% 8/1/13 to 1/1/26 | | 99 | | 99 |
6.5% 6/1/24 to 3/1/35 | | 1,778 | | 1,793 |
7% 9/1/25 | | 5 | | 5 |
7.5% 1/1/28 | | 86 | | 90 |
TOTAL FANNIE MAE | | 54,084 |
Freddie Mac - 0.1% |
4.704% 9/1/35 (h) | | 5,600 | | 5,501 |
8.5% 3/1/20 | | 23 | | 25 |
TOTAL FREDDIE MAC | | 5,526 |
Government National Mortgage Association - 0.0% |
6% 1/15/09 to 5/15/09 | | 49 | | 50 |
6.5% 4/15/26 to 5/15/26 | | 50 | | 51 |
7% 9/15/25 to 8/15/31 | | 118 | | 122 |
U.S. Government Agency - Mortgage Securities - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Government National Mortgage Association - continued |
7.5% 2/15/22 to 8/15/28 | | $ 221 | | $ 230 |
8% 9/15/26 to 12/15/26 | | 34 | | 35 |
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | | 488 |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $61,629) | 60,098 |
Asset-Backed Securities - 0.2% |
|
Affinity PLC Series 2002-A CLass C, 6.57% 5/15/09 (h) | GBP | 790 | | 1,468 |
Driver One GmbH Series 1 Class B, 3.106% 5/21/10 (h) | EUR | 360 | | 461 |
Greene King Finance PLC Series A1, 5.1141% 6/15/31 (h) | GBP | 1,000 | | 1,850 |
Lambda Finance BV Series 2005-1X Class C1, 5.79% 11/15/29 (h) | GBP | 500 | | 928 |
Punch Taverns Finance PLC 4.9469% 4/15/09 (h) | GBP | 618 | | 1,144 |
Sedna Finance Corp.: | | | | |
3.605% 12/23/14 (h) | EUR | 500 | | 640 |
3.709% 3/15/16 (h) | EUR | 1,150 | | 1,476 |
Unique Public Finance Co. PLC Series A4, 5.659% 6/30/27 | GBP | 60 | | 114 |
TOTAL ASSET-BACKED SECURITIES (Cost $7,847) | 8,081 |
Collateralized Mortgage Obligations - 1.2% |
|
Private Sponsor - 0.2% |
EPIC PLC Series BROD Class D, 0% 1/22/16 (h) | EUR | 400 | | 512 |
Granite Mortgages PLC 3.139% 1/20/43 (h) | EUR | 400 | | 513 |
Holmes Financing No. 8 PLC floater Series 3 Class C, 3.357% 7/15/40 (h) | EUR | 500 | | 644 |
Lansdowne Mortgage Securities No. 1 PLC: | | | | |
Series M1, 3.189% 6/15/45 (h) | EUR | 850 | | 1,087 |
Series M2 Class 3M, 3.379% 6/15/45 (h) | EUR | 450 | | 576 |
Collateralized Mortgage Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Private Sponsor - continued |
Permanent Financing No. 1 PLC 5.1% 6/10/09 (h) | EUR | 400 | | $ 519 |
RMAC PLC Series 2005-NS4X Class M2A, 5.25% 12/12/43 (h) | GBP | 1,700 | | 3,144 |
TOTAL PRIVATE SPONSOR | | 6,995 |
U.S. Government Agency - 1.0% |
Fannie Mae planned amortization class: | | | | |
Series 2003-24 CLass PB, 4.5% 12/25/12 | | $ 2,351 | | 2,326 |
Series 2006-64 Class PA, 5.5% 2/25/30 | | 7,625 | | 7,587 |
Fannie Mae guaranteed REMIC pass thru certificates: | | | | |
floater Series 2005-45 Class XA, 5.6625% 6/25/35 (h) | | 8,493 | | 8,477 |
planned amortization class: | | | | |
Series 2006-4 Class PB, 6% 9/25/35 | | 6,570 | | 6,575 |
Series 2006-49 Class CA, 6% 2/25/31 | | 5,329 | | 5,347 |
Freddie Mac Multi-class participation certificates guaranteed planned amortization class Series 3013 Class AF, 5.4488% 5/15/35 (h) | | 9,968 | | 9,933 |
TOTAL U.S. GOVERNMENT AGENCY | | 40,245 |
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $47,185) | 47,240 |
Commercial Mortgage Securities - 0.2% |
|
Immeo Residential Finance PLC Series 1 Class D, 3.709% 3/15/13 (h) | EUR | 415 | | 531 |
Opera Finance PLC 4.8481% 7/31/13 (h) | GBP | 1,000 | | 1,853 |
Real Estate Capital Foundation Ltd. Series 3 Class A, 4.8006% 7/15/16 (h) | GBP | 2,000 | | 3,683 |
Trafford Centre Finance Ltd. 5.465% 4/28/35 (h) | GBP | 556 | | 1,025 |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $6,939) | 7,092 |
Foreign Government and Government Agency Obligations - 21.8% |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Arab Republic 8.0203% to 9.7504% 8/22/06 to 2/27/07 | EGP | 13,955 | | $ 2,330 |
Argentine Republic: | | | | |
discount (with partial capitalization through 12/31/13) 8.28% 12/31/33 | | $ 3,054 | | 2,718 |
par 1.33% 12/31/38 (h) | | 22,180 | | 7,985 |
4.889% 8/3/12 (h) | | 16,647 | | 15,418 |
7% 3/28/11 | | 7,295 | | 6,753 |
Austrian Republic 5% 12/20/24 (f) | CAD | 2,000 | | 1,765 |
Banco Central del Uruguay: | | | | |
Brady par A 6.75% 2/19/21 | | 1,000 | | 995 |
value recovery A rights 1/2/21 (j) | | 1,000,000 | | 0 |
value recovery B rights 1/2/21 (j) | | 750,000 | | 0 |
Brazilian Federative Republic: | | | | |
6% 9/15/13 | | 2,125 | | 2,057 |
7.375% 2/3/15 | EUR | 500 | | 681 |
8% 1/15/18 | | 9,241 | | 9,768 |
8.75% 2/4/25 | | 5,290 | | 5,793 |
10.5% 7/14/14 | | 3,800 | | 4,573 |
11% 8/17/40 | | 24,870 | | 30,864 |
12.25% 3/6/30 | | 10,050 | | 14,673 |
12.75% 1/15/20 | | 4,685 | | 6,676 |
Canadian Government: | | | | |
4.5% 9/1/07 | CAD | 5,000 | | 4,480 |
5.25% 6/1/12 | CAD | 42,950 | | 39,891 |
5.5% 6/1/09 | CAD | 5,500 | | 5,067 |
5.75% 6/1/29 | CAD | 6,750 | | 6,977 |
Central Bank of Nigeria: | | | | |
Brady 6.25% 11/15/20 | | 4,750 | | 4,714 |
promissory note 5.092% 1/5/10 | | 2,417 | | 2,272 |
warrants 11/15/20 (j) | | 2,750 | | 179 |
City of Kiev 8.75% 8/8/08 | | 2,800 | | 2,849 |
Colombian Republic: | | | | |
11.75% 3/1/10 | COP | 6,147,000 | | 2,553 |
12% 10/22/15 | COP | 6,051,000 | | 2,610 |
Danish Kingdom 3.125% 10/15/10 | EUR | 3,000 | | 3,732 |
Dominican Republic: | | | | |
Brady 5.7925% 8/30/09 (h) | | 2,607 | | 2,596 |
6.1875% 8/30/24 (h) | | 12,223 | | 11,581 |
9.5% 9/27/11 | | 5,448 | | 5,775 |
Ecuador Republic: | | | | |
9% 8/15/30 (Reg. S) (e) | | 7,595 | | 7,310 |
9.375% 12/15/15 (f) | | 5,950 | | 5,891 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Ecuador Republic: - continued | | | | |
euro par 5% 2/28/25 | | $ 1,545 | | $ 1,149 |
Finnish Government 3.875% 9/15/17 | EUR | 49,700 | | 62,155 |
French Government: | | | | |
3% 1/12/11 | EUR | 42,000 | | 51,884 |
3.25% 4/25/16 | EUR | 47,640 | | 56,949 |
4% 4/25/55 | EUR | 750 | | 897 |
German Federal Republic: | | | | |
3% 4/11/08 | EUR | 15,400 | | 19,513 |
5% 7/4/12 | EUR | 12,670 | | 17,131 |
Indonesian Republic: | | | | |
6.75% 3/10/14 | | 5,875 | | 5,787 |
7.25% 4/20/15 (f) | | 2,200 | | 2,211 |
7.25% 4/20/15 | | 650 | | 653 |
Islamic Republic of Pakistan 7.125% 3/31/16 (f) | | 1,165 | | 1,078 |
Israeli State (guaranteed by U.S. Government through Agency for International Development) 5.5% 9/18/23 | | 4,750 | | 4,714 |
Italian Republic 4% 2/1/37 | EUR | 5,500 | | 6,258 |
Japan Government: | | | | |
Real Return Bond: | | | | |
0.49% 7/20/20 (h) | JPY | 1,125,000 | | 9,214 |
1.22% 11/20/20 (h) | JPY | 1,300,000 | | 10,924 |
0.9% 12/22/08 | JPY | 200,000 | | 1,747 |
1.4% 3/21/11 | JPY | 425,000 | | 3,722 |
1.5% 3/20/14 | JPY | 4,615,000 | | 39,540 |
1.8% 3/20/16 | JPY | 1,267,000 | | 10,974 |
2.4% 12/20/34 | JPY | 750,000 | | 6,403 |
Lebanon, Republic of: | | | | |
8.5669% 11/30/09 (f)(h) | | 1,840 | | 1,925 |
8.5669% 11/30/09 (h) | | 5,085 | | 5,320 |
Pakistan International Sukuk Co. Ltd. 6.95% 1/27/10 (h) | | 4,355 | | 4,420 |
Panamanian Republic Brady discount 5.5625% 7/17/26 (h) | | 1,425 | | 1,425 |
Peruvian Republic: | | | | |
3% 3/7/27 (e) | | 900 | | 596 |
5.875% 3/7/27 (h) | | 1,470 | | 1,433 |
7.35% 7/21/25 | | 3,730 | | 3,562 |
euro Brady past due interest 5% 3/7/17 (h) | | 9,895 | | 9,548 |
Philippine Republic: | | | | |
5.3203% 12/1/09 (h) | | 745 | | 730 |
8.25% 1/15/14 | | 5,445 | | 5,649 |
8.375% 2/15/11 | | 5,530 | | 5,758 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Philippine Republic: - continued | | | | |
8.875% 3/17/15 | | $ 4,860 | | $ 5,261 |
9% 2/15/13 | | 7,480 | | 8,050 |
9.875% 1/15/19 | | 7,375 | | 8,500 |
10.625% 3/16/25 | | 3,995 | | 4,954 |
Republic of Iraq 5.8% 1/15/28 (f) | | 3,780 | | 2,533 |
Republic of Serbia 3.75% 11/1/24 (e)(f) | | 565 | | 470 |
Russian Federation: | | | | |
5% 3/31/30 (e)(f) | | 3,900 | | 4,154 |
5% 3/31/30 (Reg. S) (e) | | 35,730 | | 38,052 |
12.75% 6/24/28 (Reg. S) | | 5,820 | | 9,821 |
euro 10% 6/26/07 | | 3,175 | | 3,290 |
State of Qatar 9.75% 6/15/30 (Reg. S) | | 6,005 | | 8,392 |
Turkish Republic: | | | | |
0% 4/9/08 | TRY | 4,245 | | 1,903 |
11.75% 6/15/10 | | 13,695 | | 15,407 |
11.875% 1/15/30 | | 13,030 | | 17,786 |
13.1525% to 16.4124% 6/27/07 | TRY | 10,485 | | 5,431 |
Ukraine Government: | | | | |
(Reg. S) 6.875% 3/4/11 | | 5,925 | | 5,792 |
8.235% 8/5/09 (h) | | 11,025 | | 11,549 |
United Kingdom, Great Britain & Northern Ireland: | | | | |
4.25% 3/7/11 | GBP | 13,000 | | 23,509 |
4.25% 6/7/32 | GBP | 850 | | 1,536 |
4.25% 3/7/36 | GBP | 8,150 | | 14,840 |
4.75% 6/7/10 | GBP | 250 | | 461 |
4.75% 9/7/15 | GBP | 4,300 | | 7,966 |
5% 3/7/25 | GBP | 670 | | 1,309 |
8% 6/7/21 | GBP | 7,800 | | 19,555 |
8.75% 8/25/17 | GBP | 515 | | 1,284 |
United Mexican States: | | | | |
7.5% 4/8/33 | | 8,085 | | 8,590 |
8.3% 8/15/31 | | 12,535 | | 14,478 |
11.5% 5/15/26 | | 4,630 | | 6,790 |
Uruguay Republic 7.5% 3/15/15 | | 1,820 | | 1,756 |
Venezuelan Republic: | | | | |
oil recovery rights 4/15/20 (j) | | 3,260 | | 111 |
5.375% 8/7/10 | | 3,415 | | 3,239 |
6% 12/9/20 | | 2,165 | | 1,873 |
6.09% 4/20/11 (h) | | 7,350 | | 7,332 |
7% 12/1/18 (Reg. S) | | 2,290 | | 2,198 |
7.65% 4/21/25 | | 3,300 | | 3,284 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Venezuelan Republic: - continued | | | | |
9.25% 9/15/27 | | $ 5,125 | | $ 6,035 |
10.75% 9/19/13 | | 5,560 | | 6,605 |
13.625% 8/15/18 | | 5,355 | | 7,631 |
Vietnamese Socialist Republic Brady par 3.75% 3/12/28 (e) | | 2,110 | | 1,646 |
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $844,300) | 868,168 |
Common Stocks - 0.7% |
| | Shares | | |
CONSUMER DISCRETIONARY - 0.7% |
Auto Components - 0.0% |
Intermet Corp. (a)(k) | | 113,725 | | 1,304 |
Diversified Consumer Services - 0.1% |
Coinmach Service Corp. unit | | 330,000 | | 5,425 |
Hotels, Restaurants & Leisure - 0.1% |
Centerplate, Inc. unit | | 165,925 | | 2,223 |
Media - 0.5% |
NTL, Inc. | | 750,369 | | 18,684 |
NTL, Inc. warrants 1/13/11 | | 6 | | 0 |
| | | 18,684 |
TOTAL CONSUMER DISCRETIONARY | | | 27,636 |
TELECOMMUNICATION SERVICES - 0.0% |
Wireless Telecommunication Services - 0.0% |
DigitalGlobe, Inc. (a)(f) | | 895 | | 2 |
UTILITIES - 0.0% |
Electric Utilities - 0.0% |
Portland General Electric Co. | | 10,867 | | 271 |
TOTAL COMMON STOCKS (Cost $24,042) | | 27,909 |
Preferred Stocks - 0.1% |
| | Shares | | Value (Note 1) (000s) |
Convertible Preferred Stocks - 0.0% |
MATERIALS - 0.0% |
Chemicals - 0.0% |
Celanese Corp. 4.25% | | 6,600 | | $ 201 |
Nonconvertible Preferred Stocks - 0.1% |
CONSUMER DISCRETIONARY - 0.1% |
Media - 0.1% |
Spanish Broadcasting System, Inc. Class B, 10.75% | | 1,690 | | 1,821 |
Specialty Retail - 0.0% |
GNC Corp. Series A, 12.00% | | 1,170 | | 1,404 |
TOTAL CONSUMER DISCRETIONARY | | | 3,225 |
HEALTH CARE - 0.0% |
Health Care Providers & Services - 0.0% |
Fresenius Medical Care Capital Trust II 7.875% | | 1,260 | | 1,282 |
TELECOMMUNICATION SERVICES - 0.0% |
Diversified Telecommunication Services - 0.0% |
PTV, Inc. Series A, 10.00% (a) | | 119 | | 0 |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | | | 4,507 |
TOTAL PREFERRED STOCKS (Cost $4,312) | | 4,708 |
Floating Rate Loans - 3.5% |
| Principal Amount (000s)(l) | | |
CONSUMER DISCRETIONARY - 0.9% |
Auto Components - 0.2% |
Dana Corp. term loan 7.65% 4/13/08 (h) | | $ 340 | | 340 |
Goodyear Tire & Rubber Co.: | | | | |
Tranche 2, term loan 7.9544% 4/30/10 (h) | | 2,235 | | 2,241 |
Tranche 3, term loan 8.7044% 3/1/11 (h) | | 3,550 | | 3,577 |
Lear Corp. term loan 7.9781% 4/25/12 (h) | | 2,470 | | 2,451 |
| | 8,609 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
CONSUMER DISCRETIONARY - continued |
Automobiles - 0.1% |
AM General LLC: | | | | |
Tranche B1, term loan 9.6758% 11/1/11 (h) | | $ 2,210 | | $ 2,243 |
Tranche C2, term loan 14.2088% 5/2/12 (h) | | 1,300 | | 1,339 |
| | 3,582 |
Diversified Consumer Services - 0.0% |
Coinmach Corp. Tranche B1, term loan 7.719% 12/19/12 (h) | | 200 | | 200 |
Hotels, Restaurants & Leisure - 0.0% |
Hilton Head Communications LP Tranche B, term loan 9.5% 3/31/08 (h) | | 1,800 | | 1,710 |
Media - 0.3% |
Charter Communications Operating LLC Tranche B, term loan 7.755% 4/28/13 (h) | | 6,242 | | 6,250 |
CSC Holdings, Inc. Tranche B, term loan 7.0345% 3/29/13 (h) | | 6,364 | | 6,324 |
UPC Broadband Holding BV: | | | | |
Tranche J2, term loan 7.1077% 3/31/13 (h) | | 525 | | 523 |
Tranche K2, term loan 7.1077% 12/31/13 (h) | | 525 | | 523 |
| | 13,620 |
Multiline Retail - 0.1% |
Neiman Marcus Group, Inc. term loan 7.77% 4/6/13 (h) | | 2,316 | | 2,334 |
Specialty Retail - 0.2% |
Toys 'R' US, Inc. term loan 8.1091% 12/9/08 (h) | | 6,110 | | 6,049 |
TOTAL CONSUMER DISCRETIONARY | | 36,104 |
CONSUMER STAPLES - 0.0% |
Beverages - 0.0% |
Constellation Brands, Inc. Tranche B, term loan 6.7865% 6/5/13 (h) | | 1,370 | | 1,373 |
ENERGY - 0.2% |
Oil, Gas & Consumable Fuels - 0.2% |
Coffeyville Resources LLC: | | | | |
Credit-Linked Deposit 7.9% 7/8/11 (h) | | 180 | | 180 |
Tranche 2, term loan 12.1875% 7/8/13 (h) | | 2,020 | | 2,060 |
Tranche B1, term loan 7.9456% 7/8/12 (h) | | 268 | | 268 |
Helix Energy Solutions Group, Inc. term loan 7.4973% 5/9/13 (h) | | 1,370 | | 1,367 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Targa Resources, Inc./Targa Resources Finance Corp.: | | | | |
Credit-Linked Deposit 7.6238% 10/31/12 (h) | | $ 540 | | $ 545 |
term loan: | | | | |
7.3266% 10/31/12 (h) | | 2,233 | | 2,255 |
7.4769% 10/31/07 (h) | | 1,650 | | 1,650 |
| | 8,325 |
FINANCIALS - 0.5% |
Diversified Financial Services - 0.4% |
MGM Holdings II, Inc. Tranche B, term loan 7.7488% 4/8/12 (h) | | 2,304 | | 2,313 |
Olympus Cable Holdings LLC Tranche B, term loan 10.25% 9/30/10 (h) | | 5,220 | | 5,011 |
The NASDAQ Stock Market, Inc.: | | | | |
Tranche B, term loan 6.975% 4/18/12 (h) | | 4,578 | | 4,578 |
Tranche C, term loan 6.9833% 4/18/12 (h) | | 2,654 | | 2,654 |
| | 14,556 |
Real Estate Investment Trusts - 0.1% |
Capital Automotive (REIT) Tranche B, term loan 6.86% 12/16/10 (h) | | 3,820 | | 3,810 |
Newkirk Master LP Tranche B, term loan 6.8338% 8/11/08 (h) | | 139 | | 139 |
| | 3,949 |
TOTAL FINANCIALS | | 18,505 |
HEALTH CARE - 0.1% |
Health Care Providers & Services - 0.1% |
DaVita, Inc. Tranche B, term loan 7.1305% 10/5/12 (h) | | 4,823 | | 4,829 |
INDUSTRIALS - 0.3% |
Airlines - 0.2% |
Delta Air Lines, Inc.: | | | | |
Tranche B, term loan 10.0225% 3/16/08 (h) | | 250 | | 254 |
Tranche C, term loan 12.7725% 3/16/08 (h) | | 4,010 | | 4,130 |
UAL Corp.: | | | | |
Tranche B, term loan 8.625% 2/1/12 (h) | | 3,246 | | 3,283 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
INDUSTRIALS - continued |
Airlines - continued |
UAL Corp.: - continued | | | | |
Tranche DD, term loan 9.125% 2/1/12 (h) | | $ 464 | | $ 469 |
US Airways Group, Inc. term loan 8.9988% 3/31/11 (h) | | 560 | | 562 |
| | 8,698 |
Building Products - 0.0% |
Mueller Group, Inc. term loan 7.4655% 10/3/12 (h) | | 144 | | 144 |
Commercial Services & Supplies - 0.0% |
Allied Waste Industries, Inc.: | | | | |
term loan 6.7593% 1/15/12 (h) | | 551 | | 549 |
Tranche A, Credit-Linked Deposit 6.8464% 1/15/12 (h) | | 214 | | 213 |
| | 762 |
Industrial Conglomerates - 0.0% |
Walter Industries, Inc. term loan 7.0638% 10/3/12 (h) | | 144 | | 144 |
Machinery - 0.0% |
Chart Industries, Inc. Tranche B, term loan 7.1875% 10/17/12 (h) | | 97 | | 97 |
Road & Rail - 0.1% |
Hertz Corp.: | | | | |
Credit-Linked Deposit 7.6744% 12/21/12 (h) | | 143 | | 144 |
Tranche B, term loan 7.4142% 12/21/12 (h) | | 1,022 | | 1,025 |
Tranche DD, term loan 12/21/12 (m) | | 119 | | 119 |
| | 1,288 |
TOTAL INDUSTRIALS | | 11,133 |
INFORMATION TECHNOLOGY - 0.5% |
Communications Equipment - 0.1% |
Nortel Networks Corp. Tranche A, term loan: | | | | |
7.375% 2/15/07 (h) | | 4,450 | | 4,444 |
IT Services - 0.3% |
SunGard Data Systems, Inc. Tranche B, term loan 7.66% 2/10/13 (h) | | 10,801 | | 10,841 |
Software - 0.1% |
Infor Global Solutions AG: | | | | |
Tranche 1, term loan 7.8% 4/18/11 (h) | | 2,330 | | 2,327 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
INFORMATION TECHNOLOGY - continued |
Software - continued |
Infor Global Solutions AG: - continued | | | | |
Tranche 2, term loan 12.05% 4/18/12 (h) | | $ 1,310 | | $ 1,336 |
Tranche 2, term loan 12.3% 4/18/12 (h) | | 2,160 | | 2,198 |
| | 5,861 |
TOTAL INFORMATION TECHNOLOGY | | 21,146 |
MATERIALS - 0.5% |
Chemicals - 0.0% |
Solutia, Inc. Tranche B, term loan 8.72% 3/31/07 (h) | | 210 | | 211 |
Paper & Forest Products - 0.5% |
Georgia-Pacific Corp.: | | | | |
Tranche 2, term loan 8.3% 12/23/13 (h) | | 6,390 | | 6,446 |
Tranche B1, term loan 7.3394% 12/23/12 (h) | | 11,821 | | 11,806 |
| | 18,252 |
TOTAL MATERIALS | | 18,463 |
TELECOMMUNICATION SERVICES - 0.4% |
Diversified Telecommunication Services - 0.3% |
NTL Cable PLC term loan 10.3% 3/3/07 (h) | | 1,600 | | 1,598 |
Wind Telecomunicazioni Spa: | | | | |
Tranche 2, term loan 11.2819% 3/21/15 (h) | | 2,840 | | 2,954 |
Tranche B, term loan 7.7819% 9/21/13 (h) | | 1,420 | | 1,432 |
Tranche C, term loan 8.2819% 9/21/14 (h) | | 1,420 | | 1,432 |
Windstream Corp. term loan 7.26% 7/17/11 (h) | | 4,510 | | 4,524 |
| | 11,940 |
Wireless Telecommunication Services - 0.1% |
Crown Castle Operating Co. Tranche B, term loan 7.65% 6/1/14 (h) | | 2,240 | | 2,251 |
Leap Wireless International, Inc. Tranche B, term loan 8.2488% 6/16/13 (h) | | 630 | | 633 |
| | 2,884 |
TOTAL TELECOMMUNICATION SERVICES | | 14,824 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
UTILITIES - 0.1% |
Independent Power Producers & Energy Traders - 0.1% |
NRG Energy, Inc.: | | | | |
Credit-Linked Deposit 7.4988% 2/1/13 (h) | | $ 748 | | $ 747 |
term loan 7.2306% 2/1/13 (h) | | 3,274 | | 3,280 |
| | 4,027 |
TOTAL FLOATING RATE LOANS (Cost $137,845) | 138,729 |
Sovereign Loan Participations - 0.1% |
|
Indonesian Republic loan participation: | | | | |
- Barclays Bank 6.375% 3/28/13 (h) | | 194 | | 188 |
- Citibank 6.375% 3/28/13 (h) | | 678 | | 658 |
- Credit Suisse First Boston 6.375% 3/28/13 (h) | | 3,045 | | 2,954 |
- Deutsche Bank: | | | | |
1.204% 3/28/13 (h) | JPY | 83,518 | | 690 |
6.375% 3/28/13 (h) | | 871 | | 845 |
TOTAL SOVEREIGN LOAN PARTICIPATIONS (Cost $4,965) | 5,335 |
Commercial Paper - 0.2% |
|
Ebury Finance Ltd. 2.88% 7/10/06 | EUR | 500 | | 639 |
Lake Constance Funding Ltd. 2.88% 7/12/06 | EUR | 5,000 | | 6,390 |
TOTAL COMMERCIAL PAPER (Cost $6,875) | | 7,029 |
Fixed-Income Funds - 2.1% |
| | Shares | | |
Fidelity Floating Rate Central Investment Portfolio (i)
(Cost $82,239) | | 820,098 | | 82,149 |
Money Market Funds - 8.2% |
| Shares | Value (Note 1) (000s) |
Fidelity Cash Central Fund, 5.11% (b)
(Cost $325,023) | | | 325,022,717 | | $ 325,023 |
TOTAL INVESTMENT PORTFOLIO - 99.2% (Cost $3,952,240) | | | 3,947,814 |
NET OTHER ASSETS - 0.8% | | | 30,950 |
NET ASSETS - 100% | | $ 3,978,764 |
Currency Abbreviations |
BRL | - | Brazilian real |
CAD | - | Canadian dollar |
COP | - | Colombian peso |
EGP | - | Egyptian pound |
EUR | - | European Monetary Unit |
GBP | - | British pound |
JPY | - | Japanese yen |
RUB | - | Russian ruble |
TRY | - | New Turkish Lira |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Non-income producing - Issuer is in default. |
(d) Security initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(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 $333,070,000 or 8.4% 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) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund's report date, is available upon request or at advisor.fidelity.com. The reports are located just after the fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund's financial statements are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request. |
(j) Quantity represents share amount. |
(k) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $1,304,000 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost (000s) |
Intermet Corp. | 11/9/05 | $ 2,153 |
(l) Principal amount is stated in United States dollars unless otherwise noted. |
(m) Position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $119,000 and $119,000, respectively. The interest rate will be determined at time of settlement. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned
(Amounts in thousands) |
Fidelity Cash Central Fund | $ 5,794 |
Fidelity Floating Rate Central Investment Portfolio | 2,746 |
Total | $ 8,540 |
|
Additional information regarding the fund's fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows: |
Fund
(Amounts in thousands) | Value, beginning of period | Purchases | Sales Proceeds | Value,
end of
period | % ownership,
end of
period |
Fidelity Floating Rate Central Investment Portfolio | $ 82,231 | $ - | $ - | $ 82,149 | 6.5% |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 68.6% |
United Kingdom | 2.8% |
Canada | 2.7% |
France | 2.7% |
Brazil | 2.4% |
Japan | 2.2% |
Argentina | 1.7% |
Finland | 1.6% |
Russia | 1.4% |
Venezuela | 1.4% |
Germany | 1.3% |
Luxembourg | 1.3% |
Mexico | 1.1% |
Turkey | 1.0% |
Others (individually less than 1%) | 7.8% |
| 100.0% |
The information in the above table is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | June 30, 2006 (Unaudited) |
| | |
Assets | | |
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $3,544,978) | $ 3,540,642 | |
Affiliated Central Funds (cost $407,262) | 407,172 | |
Total Investments (cost $3,952,240) | | $ 3,947,814 |
Cash | | 926 |
Foreign currency held at value (cost $5) | | 5 |
Receivable for investments sold | | 13,532 |
Receivable for fund shares sold | | 26,748 |
Dividends receivable | | 112 |
Interest receivable | | 53,251 |
Prepaid expenses | | 6 |
Receivable from investment adviser for expense reductions | | 10 |
Other receivables | | 69 |
Total assets | | 4,042,473 |
| | |
Liabilities | | |
Payable for investments purchased
Regular delivery | $ 26,168 | |
Delayed delivery | 20,413 | |
Payable for fund shares redeemed | 11,117 | |
Distributions payable | 2,187 | |
Accrued management fee | 1,862 | |
Distribution fees payable | 1,169 | |
Other affiliated payables | 648 | |
Other payables and accrued expenses | 145 | |
Total liabilities | | 63,709 |
| | |
Net Assets | | $ 3,978,764 |
Net Assets consist of: | | |
Paid in capital | | $ 3,957,643 |
Undistributed net investment income | | 7,097 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 18,344 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | (4,320) |
Net Assets | | $ 3,978,764 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | June 30, 2006 (Unaudited) |
| | |
Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share
($758,050 ÷ 66,366 shares) | | $ 11.42 |
| | |
Maximum offering price per share (100/95.25 of $11.42) | | $ 11.99 |
Class T:
Net Asset Value and redemption price per share
($1,690,455 ÷ 148,046 shares) | | $ 11.42 |
| | |
Maximum offering price per share (100/96.50 of $11.42) | | $ 11.83 |
Class B:
Net Asset Value and offering price per share
($330,260 ÷ 28,857 shares)A | | $ 11.44 |
| | |
Class C:
Net Asset Value and offering price per share
($584,522 ÷ 51,254 shares)A | | $ 11.40 |
| | |
Institutional Class:
Net Asset Value, offering price and redemption price per share ($615,477 ÷ 53,458 shares) | | $ 11.51 |
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.
Semiannual Report
Statement of Operations
Amounts in thousands | Six months ended June 30, 2006 (Unaudited) |
| | |
Investment Income | | |
Dividends | | $ 474 |
Interest | | 103,827 |
Income from affiliated Central Funds | | 8,540 |
Total income | | 112,841 |
| | |
Expenses | | |
Management fee | $ 10,668 | |
Transfer agent fees | 3,183 | |
Distribution fees | 6,826 | |
Accounting fees and expenses | 594 | |
Independent trustees' compensation | 7 | |
Custodian fees and expenses | 173 | |
Registration fees | 257 | |
Audit | 44 | |
Legal | 4 | |
Miscellaneous | 17 | |
Total expenses before reductions | 21,773 | |
Expense reductions | (74) | 21,699 |
Net investment income | | 91,142 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers | 19,784 | |
Foreign currency transactions | 52 | |
Total net realized gain (loss) | | 19,836 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (68,024) | |
Assets and liabilities in foreign currencies | 263 | |
Total change in net unrealized appreciation (depreciation) | | (67,761) |
Net gain (loss) | | (47,925) |
Net increase (decrease) in net assets resulting from operations | | $ 43,217 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Six months ended
June 30, 2006
(Unaudited) | Year ended
December 31,
2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income | $ 91,142 | $ 137,169 |
Net realized gain (loss) | 19,836 | 7,920 |
Change in net unrealized appreciation (depreciation) | (67,761) | (65,133) |
Net increase (decrease) in net assets resulting
from operations | 43,217 | 79,956 |
Distributions to shareholders from net investment income | (85,480) | (132,248) |
Distributions to shareholders from net realized gain | - | (36,255) |
Total distributions | (85,480) | (168,503) |
Share transactions - net increase (decrease) | 544,628 | 1,236,680 |
Total increase (decrease) in net assets | 502,365 | 1,148,133 |
| | |
Net Assets | | |
Beginning of period | 3,476,399 | 2,328,266 |
End of period (including undistributed net investment income of $7,097 and undistributed net investment income of $1,435, respectively) | $ 3,978,764 | $ 3,476,399 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.54 | $ 11.93 | $ 11.63 | $ 10.34 | $ 10.11 | $ 10.12 |
Income from Investment Operations | | | | | | |
Net investment income E | .292 | .571 | .600 | .617 | .668 | .730 |
Net realized and unrealized gain (loss) | (.137) | (.255) | .445 | 1.321 | .214 | (.081) |
Total from investment operations | .155 | .316 | 1.045 | 1.938 | .882 | .649 |
Distributions from net investment income | (.275) | (.551) | (.575) | (.648) | (.652) | (.659) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.275) | (.706) | (.745) | (.648) | (.652) | (.659) |
Net asset value, end of period | $ 11.42 | $ 11.54 | $ 11.93 | $ 11.63 | $ 10.34 | $ 10.11 |
Total Return B, C, D | 1.34% | 2.75% | 9.31% | 19.20% | 9.09% | 6.53% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | .98% A | .99% | 1.00% | 1.01% | 1.04% | 1.07% |
Expenses net of fee waivers, if any | .98% A | .99% | 1.00% | 1.01% | 1.04% | 1.07% |
Expenses net of all reductions | .98% A | .99% | 1.00% | 1.00% | 1.04% | 1.07% |
Net investment income | 5.10% A | 4.92% | 5.20% | 5.58% | 6.65% | 7.18% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 758 | $ 647 | $ 372 | $ 187 | $ 57 | $ 33 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class T
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.54 | $ 11.92 | $ 11.62 | $ 10.33 | $ 10.11 | $ 10.11 |
Income from Investment Operations | | | | | | |
Net investment income E | .289 | .564 | .593 | .604 | .660 | .725 |
Net realized and unrealized gain (loss) | (.137) | (.245) | .443 | 1.322 | .203 | (.074) |
Total from investment operations | .152 | .319 | 1.036 | 1.926 | .863 | .651 |
Distributions from net investment income | (.272) | (.544) | (.566) | (.636) | (.643) | (.651) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.272) | (.699) | (.736) | (.636) | (.643) | (.651) |
Net asset value, end of period | $ 11.42 | $ 11.54 | $ 11.92 | $ 11.62 | $ 10.33 | $ 10.11 |
Total Return B, C, D | 1.32% | 2.77% | 9.23% | 19.09% | 8.89% | 6.55% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Expenses net of fee waivers, if any | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Expenses net of all reductions | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Net investment income | 5.05% A | 4.86% | 5.13% | 5.47% | 6.57% | 7.10% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 1,690 | $ 1,427 | $ 808 | $ 515 | $ 279 | $ 238 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class B
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.57 | $ 11.95 | $ 11.65 | $ 10.35 | $ 10.12 | $ 10.13 |
Income from Investment Operations | | | | | | |
Net investment income E | .249 | .486 | .513 | .533 | .595 | .658 |
Net realized and unrealized gain (loss) | (.148) | (.249) | .441 | 1.330 | .212 | (.085) |
Total from investment operations | .101 | .237 | .954 | 1.863 | .807 | .573 |
Distributions from net investment income | (.231) | (.462) | (.484) | (.563) | (.577) | (.583) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.231) | (.617) | (.654) | (.563) | (.577) | (.583) |
Net asset value, end of period | $ 11.44 | $ 11.57 | $ 11.95 | $ 11.65 | $ 10.35 | $ 10.12 |
Total Return B, C, D | .87% | 2.06% | 8.45% | 18.38% | 8.28% | 5.74% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.78% A | 1.78% | 1.78% | 1.77% | 1.78% | 1.81% |
Expenses net of fee waivers, if any | 1.75% A | 1.75% | 1.78% | 1.77% | 1.78% | 1.81% |
Expenses net of all reductions | 1.75% A | 1.75% | 1.78% | 1.77% | 1.78% | 1.81% |
Net investment income | 4.33% A | 4.16% | 4.42% | 4.81% | 5.91% | 6.44% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 330 | $ 342 | $ 319 | $ 287 | $ 147 | $ 116 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class C
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.53 | $ 11.91 | $ 11.61 | $ 10.32 | $ 10.10 | $ 10.11 |
Income from Investment Operations | | | | | | |
Net investment income E | .243 | .475 | .505 | .525 | .585 | .647 |
Net realized and unrealized gain (loss) | (.146) | (.246) | .444 | 1.320 | .204 | (.082) |
Total from investment operations | .097 | .229 | .949 | 1.845 | .789 | .565 |
Distributions from net investment income | (.227) | (.454) | (.479) | (.555) | (.569) | (.575) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.227) | (.609) | (.649) | (.555) | (.569) | (.575) |
Net asset value, end of period | $ 11.40 | $ 11.53 | $ 11.91 | $ 11.61 | $ 10.32 | $ 10.10 |
Total Return B, C, D | .83% | 1.99% | 8.43% | 18.24% | 8.10% | 5.67% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Expenses net of fee waivers, if any | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Expenses net of all reductions | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Net investment income | 4.26% A | 4.09% | 4.37% | 4.74% | 5.83% | 6.35% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 585 | $ 540 | $ 405 | $ 277 | $ 68 | $ 40 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.63 | $ 12.02 | $ 11.71 | $ 10.40 | $ 10.17 | $ 10.18 |
Income from Investment Operations | | | | | | |
Net investment income D | .305 | .599 | .627 | .635 | .685 | .725 |
Net realized and unrealized gain (loss) | (.140) | (.262) | .449 | 1.338 | .210 | (.059) |
Total from investment operations | .165 | .337 | 1.076 | 1.973 | .895 | .666 |
Distributions from net investment income | (.285) | (.572) | (.596) | (.663) | (.665) | (.676) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.285) | (.727) | (.766) | (.663) | (.665) | (.676) |
Net asset value, end of period | $ 11.51 | $ 11.63 | $ 12.02 | $ 11.71 | $ 10.40 | $ 10.17 |
Total Return B, C | 1.42% | 2.91% | 9.53% | 19.44% | 9.17% | 6.67% |
Ratios to Average Net Assets E, G | | | | | |
Expenses before reductions | .80% A | .81% | .81% | .87% | .92% | .94% |
Expenses net of fee waivers, if any | .80% A | .81% | .81% | .87% | .92% | .94% |
Expenses net of all reductions | .80% A | .80% | .81% | .87% | .92% | .94% |
Net investment income | 5.29% A | 5.10% | 5.38% | 5.71% | 6.78% | 7.31% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 615 | $ 520 | $ 424 | $ 291 | $ 120 | $ 42 |
Portfolio turnover rate F | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Strategic 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 Fund may invest in fixed-income Central Investment Portfolios (CIPs), referred to as the Central Funds, and affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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 Funds, which are also consistently followed by the Central Funds:
Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Security Valuation - continued
published prices for the same securities. Investments in open-end mutual funds, including the Central Funds, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
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, including the Fund's investment activity in the Central Funds, 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. 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.
Semiannual Report
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 each Fund 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 the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to short-term capital gains, foreign currency transactions, certain foreign taxes, prior period premium and discount on debt securities, defaulted bonds, market discount, partnerships, non-taxable dividends, deferred trustees compensation, financing transactions, and losses deferred due to wash sales and excise tax regulations.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 79,109 |
Unrealized depreciation | (78,616) |
Net unrealized appreciation (depreciation) | $ 493 |
Cost for federal income tax purposes | $ 3,947,321 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
2. Operating Policies.
Repurchase Agreements. 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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
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's terms, 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, 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.
Semiannual Report
2. Operating Policies - continued
Mortgage Dollar Rolls. 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 may 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, a fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $1,484,606 and $1,151,206, respectively.
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 ..12% 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 annualized management fee rate was .57% 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,
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
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
Fee | Service
Fee | Paid to
FDC | Retained
by FDC |
Class A | 0% | .15% | $ 532 | $ 16 |
Class T | 0% | .25% | 1,963 | 100 |
Class B | .65% | .25% | 1,517 | 1,099 |
Class C | .75% | .25% | 2,814 | 892 |
| | | $ 6,826 | $ 2,107 |
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, some of which is paid to financial intermediaries for selling 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, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained
by FDC |
Class A | $ 388 |
Class T | 110 |
Class B* | 397 |
Class C* | 62 |
| $ 957 |
* 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 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 shareholder reports, except proxy statements. For the period the total transfer agent fees
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4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
paid by each class to FIIOC, were as follows:
| Amount | % of
Average
Net Assets |
Class A | $ 692 | .20* |
Class T | 1,136 | .15* |
Class B | 395 | .24* |
Class C | 504 | .18* |
Institutional Class | 456 | .16* |
| $ 3,183 | |
* Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The fee is based on the level of average net assets for the month.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Fund may also invest in CIPs managed by FIMM, or Fidelity Management & Research Company Inc. (FMRC), each an affiliate of FMR.
The Floating Rate Central Investment Portfolio seeks a high level of income by normally investing in floating rate loans and other floating rate securities.
The Fund's Schedule of Investments lists the Central Fund as an investment of the Fund but does not include the underlying holdings of the Central Fund. Based on its investment objectives, the Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the Central Fund and the Fund.
A complete unaudited list of holdings for the Central Fund, as of the Fund's report date, is available upon request or at advisor.fidelity.com. The reports are located just after the Fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the Central Fund financial statements are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 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, which amounts to $3 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual 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.
The following classes were in reimbursement during the period:
| Expense
Limitations | Reimbursement
from adviser |
Class B | 1.75% | $ 47 |
In addition, 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 $23. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| Transfer Agent
expense reduction |
Class A | $ 3 |
Class C | 1 |
| $ 4 |
7. Credit Risk.
The Fund's relatively large investment in countries with limited or developing capital markets may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The yields of emerging market debt obligations reflect, among other things, perceived credit risk. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the Fund's investments and the income they generate, as well as the Fund's ability to repatriate such amounts.
Semiannual Report
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
From net investment income | | |
Class A | $ 16,859 | $ 24,357 |
Class T | 37,035 | 53,100 |
Class B | 6,724 | 13,236 |
Class C | 11,069 | 18,751 |
Institutional Class | 13,793 | 22,804 |
Total | $ 85,480 | $ 132,248 |
From net realized gain | | |
Class A | $ - | $ 6,205 |
Class T | - | 13,720 |
Class B | - | 4,302 |
Class C | - | 6,019 |
Institutional Class | - | 6,009 |
Total | $ - | $ 36,255 |
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Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 | Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
Class A | | | | |
Shares sold | 18,599 | 35,042 | $ 214,748 | $ 408,757 |
Reinvestment of distributions | 1,183 | 2,123 | 13,655 | 24,731 |
Shares redeemed | (9,471) | (12,325) | (109,298) | (143,648) |
Net increase (decrease) | 10,311 | 24,840 | $ 119,105 | $ 289,840 |
Class T | | | | |
Shares sold | 38,505 | 73,391 | $ 444,572 | $ 855,542 |
Reinvestment of distributions | 3,007 | 5,375 | 34,691 | 62,638 |
Shares redeemed | (17,151) | (22,830) | (197,922) | (265,605) |
Net increase (decrease) | 24,361 | 55,936 | $ 281,341 | $ 652,575 |
Class B | | | | |
Shares sold | 3,087 | 8,646 | $ 35,716 | $ 100,980 |
Reinvestment of distributions | 423 | 1,104 | 4,895 | 12,908 |
Shares redeemed | (4,219) | (6,915) | (48,817) | (80,693) |
Net increase (decrease) | (709) | 2,835 | $ (8,206) | $ 33,195 |
Class C | | | | |
Shares sold | 9,905 | 20,463 | $ 114,108 | $ 238,454 |
Reinvestment of distributions | 679 | 1,502 | 7,826 | 17,494 |
Shares redeemed | (6,157) | (9,092) | (70,964) | (105,690) |
Net increase (decrease) | 4,427 | 12,873 | $ 50,970 | $ 150,258 |
Institutional Class | | | | |
Shares sold | 14,604 | 15,959 | $ 169,771 | $ 187,439 |
Reinvestment of distributions | 979 | 2,098 | 11,381 | 24,620 |
Shares redeemed | (6,850) | (8,622) | (79,734) | (101,247) |
Net increase (decrease) | 8,733 | 9,435 | $ 101,418 | $ 110,812 |
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Strategic Income Fund
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
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Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Strategic Income Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for the one-year period and the first quartile for the three- and five-year periods. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and five-year periods, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 29% means that 71% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Strategic Income Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
Semiannual Report
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expenses of each of Class A, Class T, Class B, and Institutional Class ranked below its competitive median for 2005, and the total expenses of Class C ranked above its competitive median for 2005. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable, although in one case above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Semiannual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
Fidelity Investments Money Management, Inc.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
SI-USAN-0806
1.787775.103
(Fidelity Investment logo)(registered trademark)
(Fidelity Investment logo)(registered trademark)
Fidelity ® Advisor
Strategic Income
Fund - Institutional Class
Semiannual Report
June 30, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | <Click Here> | Ned Johnson's message to shareholders. |
Shareholder Expense Example | <Click Here> | An example of shareholder expenses. |
Investment Changes | <Click Here> | A summary of major shifts in the fund's investments over the past six months. |
Investments | <Click Here> | A complete list of the fund's investments with their market values. |
Financial Statements | <Click Here> | Statements of assets and liabilities, operations, and changes in net assets,
as well as financial highlights. |
Notes | <Click Here> | Notes to the financial statements. |
Board Approval of Investment Advisory Contracts and Management Fees | <Click Here> | |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
This report 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Semiannual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2006 to June 30, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. In addition, the fund, as a shareholder in the underlying affiliated central fund, will indirectly bear its pro rata share of the fees and expenses incurred by the underlying affiliated central fund. These fees and expenses are not included in the fund's annualized expense ratio used to calculate the expense estimate in the table below.
Semiannual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
January 1, 2006 | Ending
Account Value
June 30, 2006 | Expenses Paid
During Period*
January 1, 2006
to June 30, 2006 |
Class A | | | |
Actual | $ 1,000.00 | $ 1,013.40 | $ 4.89 |
HypotheticalA | $ 1,000.00 | $ 1,019.93 | $ 4.91 |
Class T | | | |
Actual | $ 1,000.00 | $ 1,013.20 | $ 5.14 |
HypotheticalA | $ 1,000.00 | $ 1,019.69 | $ 5.16 |
Class B | | | |
Actual | $ 1,000.00 | $ 1,008.70 | $ 8.72 |
HypotheticalA | $ 1,000.00 | $ 1,016.12 | $ 8.75 |
Class C | | | |
Actual | $ 1,000.00 | $ 1,008.30 | $ 9.06 |
HypotheticalA | $ 1,000.00 | $ 1,015.77 | $ 9.10 |
Institutional Class | | | |
Actual | $ 1,000.00 | $ 1,014.20 | $ 4.00 |
HypotheticalA | $ 1,000.00 | $ 1,020.83 | $ 4.01 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The fees and expenses of the underlying affiliated central fund in which the fund invests are not included in the fund's annualized expense ratio.
| Annualized
Expense Ratio |
Class A | .98% |
Class T | 1.03% |
Class B | 1.75% |
Class C | 1.82% |
Institutional Class | .80% |
Semiannual Report
Investment Changes
Top Five Holdings as of June 30, 2006 |
(by issuer, excluding cash equivalents) | % of fund's
net assets | % of fund's net assets
6 months ago |
U.S. Treasury Obligations | 14.6 | 16.3 |
Fannie Mae | 8.2 | 6.6 |
Freddie Mac | 3.7 | 3.5 |
French Government | 2.7 | 0.2 |
Japan Government | 2.1 | 1.7 |
| 31.3 | |
Top Five Market Sectors as of June 30, 2006 |
| % of fund's
net assets | % of fund's net assets
6 months ago |
Consumer Discretionary | 10.2 | 10.9 |
Telecommunication Services | 6.8 | 7.2 |
Financials | 5.1 | 5.2 |
Energy | 5.1 | 4.7 |
Information Technology | 4.4 | 3.7 |
Quality Diversification (% of fund's net assets) |
As of June 30, 2006 | As of December 31, 2005 |
| U.S.Government and U.S.Government
Agency
Obligations 27.0% | | | U.S.Government and U.S.Government
Agency
Obligations 27.1% | |
| AAA, AA, A 12.5% | | | AAA, AA, A 11.9% | |
| BBB 4.5% | | | BBB 5.5% | |
| BB 17.5% | | | BB 14.6% | |
| B 19.9% | | | B 21.5% | |
| CCC, CC, C 5.9% | | | CCC, CC, C 5.9% | |
| Not Rated 2.3% | | | Not Rated 3.2% | |
| Equities 0.8% | | | Equities 1.1% | |
| Short-Term
Investments and
Net Other Assets 9.6% | | | Short-Term
Investments and
Net Other Assets 9.2% | |
We have used ratings from Moody's® Investors Services, Inc. Where Moody's ratings are not available, we have used S&P® ratings. |
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 funds. |
Asset Allocation (% of fund's net assets) |
As of June 30, 2006 * | As of December 31, 2005 ** |
| Corporate Bonds 35.3% | | | Corporate Bonds 36.6% | |
| U.S. Government and U.S. Government
Agency
Obligations 26.9% | | | U.S. Government and
U.S. Government
Agency
Obligations 27.1% | |
| Foreign Government
& Government
Agency
Obligations 21.6% | | | Foreign Government
& Government
Agency
Obligations 20.8% | |
| Floating Rate Loans 5.1% | | | Floating Rate Loans 4.5% | |
| Stocks 0.8% | | | Stocks 1.1% | |
| Other Investments 0.7% | | | Other Investments 0.7% | |
| Short-Term
Investments and
Net Other
Assets *** 9.6% | | | Short-Term
Investments and
Net Other
Assets **** 9.2% | |
* Foreign investments | 31.4% | | ** Foreign investments | 32.0% | |
*** Includes short-term
foreign government
obligations of .2% | | **** Includes short-term
foreign government
obligations of .3% | |
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 funds. |
For an unaudited list of holdings for each fixed-income central fund, visit advisor.fidelity.com. |
Semiannual Report
Investments June 30, 2006 (Unaudited)
Showing Percentage of Net Assets
Corporate Bonds - 35.0% |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Convertible Bonds - 0.1% |
CONSUMER DISCRETIONARY - 0.1% |
Media - 0.1% |
Liberty Media Corp. (Sprint Corp. PCS Series 1) 3.75% 2/15/30 | | $ 6,685 | | $ 3,780 |
INFORMATION TECHNOLOGY - 0.0% |
Semiconductors & Semiconductor Equipment - 0.0% |
ON Semiconductor Corp. 0% 4/15/24 | | 450 | | 381 |
TOTAL CONVERTIBLE BONDS | | 4,161 |
Nonconvertible Bonds - 34.9% |
CONSUMER DISCRETIONARY - 7.8% |
Auto Components - 0.5% |
Affinia Group, Inc. 9% 11/30/14 | | 3,475 | | 3,162 |
Delco Remy International, Inc.: | | | | |
9.375% 4/15/12 | | 590 | | 327 |
11% 5/1/09 | | 695 | | 407 |
Stoneridge, Inc. 11.5% 5/1/12 | | 35 | | 33 |
Tenneco, Inc. 8.625% 11/15/14 | | 5,980 | | 5,965 |
TRW Automotive Acquisition Corp.: | | | | |
9.375% 2/15/13 | | 3,753 | | 4,025 |
11% 2/15/13 | | 2,988 | | 3,272 |
United Components, Inc. 9.375% 6/15/13 | | 360 | | 356 |
Visteon Corp. 7% 3/10/14 | | 2,390 | | 1,960 |
| | 19,507 |
Automobiles - 0.0% |
Fiat Finance & Trade Ltd. 5.625% 11/15/11 | EUR | 1,300 | | 1,605 |
Diversified Consumer Services - 0.1% |
Affinion Group, Inc. 11.5% 10/15/15 (f) | | 840 | | 838 |
Service Corp. International (SCI): | | | | |
6.75% 4/1/16 | | 2,800 | | 2,590 |
8% 6/15/17 (f)(h) | | 2,420 | | 2,275 |
| | 5,703 |
Hotels, Restaurants & Leisure - 2.2% |
Carrols Corp. 9% 1/15/13 | | 4,095 | | 4,075 |
Festival Fun Parks LLC 10.875% 4/15/14 (f) | | 2,725 | | 2,698 |
Galaxy Entertainment Finance Co. Ltd.: | | | | |
9.875% 12/15/12 (f) | | 1,110 | | 1,157 |
10.42% 12/15/10 (f)(h) | | 1,470 | | 1,538 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Hotels, Restaurants & Leisure - continued |
Gaylord Entertainment Co.: | | | | |
6.75% 11/15/14 | | $ 9,210 | | $ 8,588 |
8% 11/15/13 | | 920 | | 929 |
Herbst Gaming, Inc.: | | | | |
7% 11/15/14 | | 2,500 | | 2,400 |
8.125% 6/1/12 | | 835 | | 843 |
ITT Corp. 7.375% 11/15/15 | | 2,560 | | 2,598 |
Kerzner International Ltd. 6.75% 10/1/15 | | 7,250 | | 7,567 |
Landry's Seafood Restaurants, Inc. 7.5% 12/15/14 | | 2,935 | | 2,730 |
Mandalay Resort Group: | | | | |
6.375% 12/15/11 | | 4,220 | | 4,035 |
6.5% 7/31/09 | | 1,995 | | 1,968 |
MGM MIRAGE: | | | | |
6% 10/1/09 | | 1,050 | | 1,021 |
6.625% 7/15/15 | | 3,140 | | 2,936 |
6.75% 9/1/12 | | 1,310 | | 1,267 |
6.75% 4/1/13 (f) | | 2,230 | | 2,144 |
6.875% 4/1/16 (f) | | 8,230 | | 7,746 |
8.5% 9/15/10 | | 435 | | 453 |
Mohegan Tribal Gaming Authority 6.875% 2/15/15 | | 2,140 | | 2,017 |
MTR Gaming Group, Inc. 9% 6/1/12 (f) | | 980 | | 1,000 |
Penn National Gaming, Inc. 6.75% 3/1/15 | | 1,375 | | 1,286 |
Scientific Games Corp. 6.25% 12/15/12 | | 660 | | 617 |
Speedway Motorsports, Inc. 6.75% 6/1/13 | | 3,495 | | 3,408 |
Starwood Hotels & Resorts Worldwide, Inc.: | | | | |
7.375% 5/1/07 | | 1,480 | | 1,487 |
7.875% 5/1/12 | | 985 | | 1,018 |
Station Casinos, Inc.: | | | | |
6% 4/1/12 | | 1,790 | | 1,669 |
6.5% 2/1/14 | | 5,000 | | 4,669 |
Town Sports International Holdings, Inc. 0% 2/1/14 (d) | | 5,035 | | 3,990 |
Universal City Development Partners Ltd./UCDP Finance, Inc. 11.75% 4/1/10 | | 2,555 | | 2,782 |
Vail Resorts, Inc. 6.75% 2/15/14 | | 5,060 | | 4,858 |
Virgin River Casino Corp./RBG LLC/B&BB, Inc.: | | | | |
0% 1/15/13 (d) | | 1,070 | | 728 |
9% 1/15/12 | | 575 | | 587 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Hotels, Restaurants & Leisure - continued |
Waterford Gaming LLC/Waterford Gaming Finance Corp. 8.625% 9/15/12 (f) | | $ 472 | | $ 500 |
Wheeling Island Gaming, Inc. 10.125% 12/15/09 | | 735 | | 760 |
| | 88,069 |
Household Durables - 0.5% |
D.R. Horton, Inc. 7.875% 8/15/11 | | 170 | | 178 |
Fortune Brands, Inc. 4% 1/30/13 | EUR | 1,100 | | 1,330 |
Goodman Global Holdings, Inc. 8.3294% 6/15/12 (h) | | 3,082 | | 3,101 |
K. Hovnanian Enterprises, Inc.: | | | | |
6% 1/15/10 | | 730 | | 683 |
6.25% 1/15/15 | | 1,120 | | 983 |
7.75% 5/15/13 | | 5,070 | | 4,639 |
Kimball Hill, Inc. 10.5% 12/15/12 | | 2,210 | | 2,055 |
Meritage Homes Corp. 6.25% 3/15/15 | | 1,790 | | 1,504 |
Technical Olympic USA, Inc.: | | | | |
7.5% 1/15/15 | | 2,535 | | 2,117 |
10.375% 7/1/12 | | 760 | | 730 |
Urbi, Desarrollos Urbanos, SA de CV 8.5% 4/19/16 (f) | | 4,285 | | 4,306 |
| | 21,626 |
Leisure Equipment & Products - 0.0% |
Riddell Bell Holdings, Inc. 8.375% 10/1/12 | | 720 | | 706 |
Media - 3.6% |
AMC Entertainment, Inc. 11% 2/1/16 | | 2,610 | | 2,812 |
CanWest Media, Inc. 8% 9/15/12 | | 860 | | 866 |
CCH I Holdings LLC/CCH I Capital Corp. 11.75% 5/15/14 | | 830 | | 527 |
CCH I LLC/CCH I Capital Corp. 11% 10/1/15 | | 8,148 | | 6,967 |
Charter Communications Holding II LLC/Charter Communications Holdings II Capital Corp.: | | | | |
10.25% 9/15/10 | | 6,750 | | 6,558 |
CSC Holdings, Inc.: | | | | |
7.25% 4/15/12 (f)(h) | | 7,060 | | 6,831 |
7.625% 4/1/11 | | 2,580 | | 2,574 |
7.625% 7/15/18 | | 22,500 | | 22,275 |
7.875% 2/15/18 | | 15,015 | | 15,015 |
EchoStar DBS Corp.: | | | | |
6.375% 10/1/11 | | 3,705 | | 3,543 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Media - continued |
EchoStar DBS Corp.: - continued | | | | |
6.625% 10/1/14 | | $ 9,095 | | $ 8,527 |
Globo Comunicacoes e Participacoes SA: | | | | |
(Reg. S) 7.375% 10/20/11 (e) | | 8,630 | | 8,619 |
7.375% 10/20/11 (e)(f) | | 68 | | 67 |
Haights Cross Communications, Inc. 12.5% 8/15/11 (d) | | 1,550 | | 837 |
Houghton Mifflin Co.: | | | | |
0% 10/15/13 (d) | | 5,985 | | 4,938 |
8.25% 2/1/11 | | 1,905 | | 1,917 |
9.875% 2/1/13 | | 6,890 | | 7,097 |
iesy Repository GmbH 10.375% 2/15/15 (f) | | 2,970 | | 2,822 |
Liberty Media Corp.: | | | | |
5.7% 5/15/13 | | 8,315 | | 7,556 |
8.5% 7/15/29 | | 5,320 | | 5,174 |
Livent, Inc. yankee 9.375% 10/15/04 (c) | | 300 | | 9 |
PanAmSat Corp.: | | | | |
6.375% 1/15/08 | | 490 | | 486 |
9% 8/15/14 | | 2,860 | | 2,917 |
9% 6/15/16 (f)(g) | | 2,240 | | 2,262 |
Rainbow National LLC & RNS Co. Corp.: | | | | |
8.75% 9/1/12 (f) | | 3,280 | | 3,428 |
10.375% 9/1/14 (f) | | 11,090 | | 12,227 |
Sun Media Corp. Canada 7.625% 2/15/13 | | 635 | | 648 |
Vertis, Inc.: | | | | |
10.875% 6/15/09 | | 3,775 | | 3,709 |
13.5% 12/7/09 (f) | | 500 | | 415 |
Videotron Ltee 6.875% 1/15/14 | | 550 | | 523 |
| | 142,146 |
Multiline Retail - 0.3% |
Marks & Spencer Group PLC 5.125% 11/7/06 | EUR | 2,000 | | 2,574 |
Neiman Marcus Group, Inc.: | | | | |
9% 10/15/15 (f) | | 4,940 | | 5,144 |
10.375% 10/15/15 (f) | | 2,015 | | 2,126 |
| | 9,844 |
Specialty Retail - 0.3% |
AutoNation, Inc.: | | | | |
7% 4/15/14 (f) | | 4,715 | | 4,597 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER DISCRETIONARY - continued |
Specialty Retail - continued |
AutoNation, Inc.: - continued | | | | |
7.0447% 4/15/13 (f)(h) | | $ 1,000 | | $ 998 |
Burlington Coat Factory Warehouse Corp. 11.125% 4/15/14 (f) | | 4,430 | | 4,297 |
| | 9,892 |
Textiles, Apparel & Luxury Goods - 0.3% |
AAC Group Holding Corp. 0% 10/1/12 (d) | | 3,925 | | 3,062 |
Levi Strauss & Co.: | | | | |
8.875% 4/1/16 (f) | | 4,460 | | 4,237 |
9.75% 1/15/15 | | 3,880 | | 3,899 |
| | 11,198 |
TOTAL CONSUMER DISCRETIONARY | | 310,296 |
CONSUMER STAPLES - 0.5% |
Food & Staples Retailing - 0.2% |
Rite Aid Corp.: | | | | |
6.875% 8/15/13 | | 300 | | 259 |
6.875% 12/15/28 (f) | | 2,090 | | 1,536 |
7.7% 2/15/27 | | 6,510 | | 5,403 |
| | 7,198 |
Food Products - 0.3% |
Dean Foods Co.: | | | | |
6.625% 5/15/09 | | 90 | | 90 |
6.9% 10/15/17 | | 979 | | 918 |
Hines Nurseries, Inc. 10.25% 10/1/11 | | 370 | | 352 |
Michael Foods, Inc. 8% 11/15/13 | | 420 | | 413 |
National Beef Packing Co. LLC/National Beef Finance Corp. 10.5% 8/1/11 | | 900 | | 909 |
NPI Merger Corp.: | | | | |
9.23% 10/15/13 (f)(h) | | 710 | | 723 |
10.75% 4/15/14 (f) | | 820 | | 844 |
Philipp Brothers Chemicals, Inc. 9.875% 6/1/08 | | 1,909 | | 1,909 |
Reddy Ice Holdings, Inc. 0% 11/1/12 (d) | | 3,250 | | 2,633 |
Swift & Co.: | | | | |
10.125% 10/1/09 | | 915 | | 929 |
Corporate Bonds - continued |
| Principal Amount (000s) (l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
CONSUMER STAPLES - continued |
Food Products - continued |
Swift & Co.: - continued | | | | |
12.5% 1/1/10 | | $ 1,400 | | $ 1,414 |
Tate & Lyle International Finance PLC 5.75% 10/6/06 | EUR | 800 | | 1,030 |
| | 12,164 |
Household Products - 0.0% |
Central Garden & Pet Co. 9.125% 2/1/13 | | 260 | | 265 |
Personal Products - 0.0% |
Elizabeth Arden, Inc. 7.75% 1/15/14 | | 470 | | 461 |
Tobacco - 0.0% |
BAT Holdings BV 4.375% 9/15/14 | EUR | 1,500 | | 1,837 |
TOTAL CONSUMER STAPLES | | 21,925 |
ENERGY - 4.7% |
Energy Equipment & Services - 0.7% |
CHC Helicopter Corp. 7.375% 5/1/14 | | 6,185 | | 5,845 |
Hanover Compressor Co.: | | | | |
7.5% 4/15/13 | | 530 | | 513 |
8.625% 12/15/10 | | 490 | | 502 |
9% 6/1/14 | | 4,260 | | 4,398 |
Ocean Rig Norway AS 8.375% 7/1/13 (f) | | 1,020 | | 1,046 |
Petroliam Nasional BHD (Petronas) 7.625% 10/15/26 (Reg. S) | | 10,005 | | 11,327 |
Seabulk International, Inc. 9.5% 8/15/13 | | 3,290 | | 3,635 |
| | 27,266 |
Oil, Gas & Consumable Fuels - 4.0% |
ANR Pipeline, Inc.: | | | | |
7.375% 2/15/24 | | 2,165 | | 2,062 |
8.875% 3/15/10 | | 2,520 | | 2,621 |
Atlas Pipeline Partners LP/Atlas Pipeline Partners Finance Corp. 8.125% 12/15/15 (f) | | 4,710 | | 4,710 |
Chaparral Energy, Inc. 8.5% 12/1/15 (f) | | 2,530 | | 2,524 |
Chesapeake Energy Corp.: | | | | |
6.5% 8/15/17 | | 8,855 | | 8,124 |
6.875% 11/15/20 | | 4,255 | | 3,936 |
7% 8/15/14 | | 865 | | 841 |
7.5% 6/15/14 | | 850 | | 848 |
7.625% 7/15/13 | | 4,500 | | 4,517 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Colorado Interstate Gas Co. 6.8% 11/15/15 | | $ 5,320 | | $ 5,140 |
El Paso Production Holding Co. 7.75% 6/1/13 | | 4,000 | | 4,040 |
Encore Acquisition Co. 6.25% 4/15/14 | | 1,500 | | 1,386 |
Energy Partners Ltd. 8.75% 8/1/10 | | 3,530 | | 3,451 |
EXCO Resources, Inc. 7.25% 1/15/11 | | 570 | | 537 |
Forest Oil Corp. 8% 12/15/11 | | 480 | | 491 |
Gaz Capital SA Luxembourg 7.8% 9/27/10 | EUR | 1,400 | | 1,965 |
Grupo TMM SA de CV 10.5% 8/1/07 (f) | | 1,617 | | 1,625 |
Harvest Operations Corp. 7.875% 10/15/11 | | 1,170 | | 1,112 |
Houston Exploration Co. 7% 6/15/13 | | 410 | | 402 |
InterNorth, Inc. 9.625% 3/15/06 (c) | | 935 | | 318 |
Massey Energy Co. 6.875% 12/15/13 | | 2,350 | | 2,186 |
MOL Hungarian Oil & Gas 3.875% 10/5/15 | EUR | 700 | | 775 |
Northwest Pipeline Corp.: | | | | |
6.625% 12/1/07 | | 285 | | 285 |
8.125% 3/1/10 | | 400 | | 420 |
Pan American Energy LLC 7.125% 10/27/09 (f) | | 2,475 | | 2,438 |
Pemex Project Funding Master Trust: | | | | |
5.5% 2/24/25 (f) | EUR | 750 | | 875 |
7.75% 9/28/49 | | 14,614 | | 14,304 |
8.625% 2/1/22 | | 5,490 | | 6,176 |
Petrobras Energia SA 9.375% 10/30/13 | | 2,495 | | 2,607 |
Petrohawk Energy Corp. 9.125% 7/15/13 (f)(g) | | 6,000 | | 5,970 |
Petrozuata Finance, Inc.: | | | | |
7.63% 4/1/09 (f) | | 3,732 | | 3,704 |
8.22% 4/1/17 (f) | | 4,515 | | 4,289 |
Plains Exploration & Production Co. 8.75% 7/1/12 | | 1,610 | | 1,674 |
Pogo Producing Co.: | | | | |
6.875% 10/1/17 | | 4,290 | | 3,947 |
7.875% 5/1/13 (f) | | 2,605 | | 2,612 |
Range Resources Corp. 7.375% 7/15/13 | | 2,190 | | 2,157 |
Ship Finance International Ltd. 8.5% 12/15/13 | | 7,015 | | 6,734 |
Southern Star Central Corp. 6.75% 3/1/16 (f) | | 1,560 | | 1,486 |
Targa Resources, Inc./Targa Resources Finance Corp. 8.5% 11/1/13 (f) | | 1,220 | | 1,177 |
Teekay Shipping Corp. 8.875% 7/15/11 | | 3,330 | | 3,480 |
Tennessee Gas Pipeline Co.: | | | | |
7% 10/15/28 | | 550 | | 508 |
7.5% 4/1/17 | | 7,600 | | 7,676 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Tennessee Gas Pipeline Co.: - continued | | | | |
7.625% 4/1/37 | | $ 1,035 | | $ 996 |
8.375% 6/15/32 | | 1,155 | | 1,224 |
Transcontinental Gas Pipe Line Corp.: | | | | |
7% 8/15/11 | | 330 | | 336 |
8.875% 7/15/12 | | 1,455 | | 1,608 |
Venoco, Inc. 8.75% 12/15/11 | | 1,470 | | 1,419 |
Vintage Petroleum, Inc. 8.25% 5/1/12 | | 1,000 | | 1,058 |
Williams Co., Inc. Credit Linked Certificate Trust III 6.75% 4/15/09 (f) | | 1,820 | | 1,804 |
Williams Companies, Inc.: | | | | |
6.375% 10/1/10 (f) | | 7,650 | | 7,440 |
7.625% 7/15/19 | | 7,152 | | 7,250 |
7.75% 6/15/31 | | 230 | | 227 |
7.875% 9/1/21 | | 1,880 | | 1,908 |
8.75% 3/15/32 | | 1,245 | | 1,355 |
YPF SA: | | | | |
10% 11/2/28 | | 4,210 | | 4,805 |
yankee 9.125% 2/24/09 | | 2,755 | | 2,851 |
| | 160,411 |
TOTAL ENERGY | | 187,677 |
FINANCIALS - 4.4% |
Capital Markets - 0.2% |
Bank of Scotland International Australia Ltd. 4.4614% 9/7/06 (h) | CAD | 1,500 | | 1,344 |
E*TRADE Financial Corp. 7.375% 9/15/13 | | 4,570 | | 4,547 |
Mizuho Capital Investment Europe 1 Ltd. 5.02% (h) | EUR | 800 | | 1,004 |
| | 6,895 |
Commercial Banks - 1.1% |
Australia & New Zealand Banking Group Ltd. 4.6186% 12/29/06 (h) | CAD | 1,500 | | 1,344 |
Banco Nacional de Desenvolvimento Economico e Social 5.727% 6/16/08 (h) | | 2,915 | | 2,864 |
Bank of Tokyo-Mitsubishi Ltd. 3.5% 12/16/15 (h) | EUR | 1,150 | | 1,419 |
BIE Bank & Trust Ltd. 16.8% 3/13/07 | BRL | 5,690 | | 2,644 |
Commonwealth Bank of Australia 4.4229% 11/28/06 (h) | CAD | 1,750 | | 1,568 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
FINANCIALS - continued |
Commercial Banks - continued |
Dresdner Bank AG 10.375% 8/17/09 (f) | | $ 6,340 | | $ 6,760 |
European Investment Bank 4% 10/15/37 | EUR | 2,600 | | 3,050 |
Kazkommerts International BV 5.125% 3/23/11 | EUR | 1,750 | | 2,166 |
Korea Development Bank (Reg.) 0.87% 6/28/10 | JPY | 600,000 | | 5,065 |
Kyivstar GSM 7.75% 4/27/12 (Issued by Dresdner Bank AG for Kyivstar GSM) (f) | | 3,585 | | 3,477 |
Rabobank Nederland 4.3286% 2/23/07 (h) | CAD | 250 | | 224 |
Shinsei Bank Ltd. 3.75% 2/23/16 (h) | EUR | 1,250 | | 1,537 |
Standard Chartered Bank PLC 3.625% 2/3/17 (e) | EUR | 385 | | 471 |
Sumitomo Mitsui Banking Corp. (Reg. S) 4.375% 10/15/49 (h) | EUR | 2,000 | | 2,406 |
UBS Luxembourg SA 8% 2/11/10 | | 3,200 | | 3,188 |
Vimpel Communications 10% 6/16/09 (Issued by UBS Luxembourg SA for Vimpel Communications) | | 6,185 | | 6,525 |
| | 44,708 |
Consumer Finance - 1.3% |
Ford Credit Europe PLC 4.061% 9/30/09 (h) | EUR | 1,500 | | 1,741 |
Ford Motor Credit Co. 6.625% 6/16/08 | | 7,650 | | 7,281 |
General Motors Acceptance Corp.: | | | | |
6% 10/16/06 | EUR | 2,000 | | 2,558 |
6.75% 12/1/14 | | 9,520 | | 8,758 |
6.875% 9/15/11 | | 5,190 | | 4,943 |
6.875% 8/28/12 | | 6,460 | | 6,086 |
8% 11/1/31 | | 19,175 | | 18,264 |
| | 49,631 |
Diversified Financial Services - 0.6% |
Canada Housing Trust No. 1 4.65% 9/15/09 | CAD | 16,600 | | 14,904 |
CCO Holdings LLC/CCO Holdings Capital Corp. 8.75% 11/15/13 | | 955 | | 925 |
Citigroup, Inc. 4.25% 2/25/30 (h) | EUR | 1,500 | | 1,715 |
Global Cash Access LLC/Global Cash Access Finance Corp. 8.75% 3/15/12 | | 2,056 | | 2,167 |
MUFG Capital Finance 2 Ltd. 4.85% (h) | EUR | 1,300 | | 1,580 |
MUFG Capital Finance 3 Ltd. 2.68% (h) | JPY | 150,000 | | 1,269 |
Red Arrow International Leasing 8.375% 6/30/12 | RUB | 33,077 | | 1,254 |
| | 23,814 |
Insurance - 0.2% |
Amlin PLC 6.5% 12/19/26 (h) | GBP | 1,000 | | 1,768 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
FINANCIALS - continued |
Insurance - continued |
Brit Insurance Holdings PLC 6.625% 12/9/30 (h) | GBP | 500 | | $ 885 |
Eureko BV 5.125% (h) | EUR | 1,500 | | 1,891 |
Fukoku Mutual Life Insurance Co. 4.5% 9/28/25 (h) | EUR | 1,200 | | 1,432 |
Wuerttembergische Lebens AG 5.375% 6/1/26 (h) | EUR | 800 | | 986 |
| | 6,962 |
Real Estate Investment Trusts - 0.4% |
BF Saul REIT 7.5% 3/1/14 | | $ 3,400 | | 3,451 |
Rouse Co. LP/TRC, Inc. 6.75% 5/1/13 (f) | | 6,640 | | 6,492 |
Senior Housing Properties Trust: | | | | |
7.875% 4/15/15 | | 2,641 | | 2,681 |
8.625% 1/15/12 | | 4,370 | | 4,632 |
| | 17,256 |
Real Estate Management & Development - 0.2% |
American Real Estate Partners/American Real Estate Finance Corp.: | | | | |
7.125% 2/15/13 | | 3,630 | | 3,489 |
8.125% 6/1/12 | | 4,955 | | 4,992 |
| | 8,481 |
Thrifts & Mortgage Finance - 0.4% |
Residential Capital Corp.: | | | | |
6.375% 6/30/10 | | 6,985 | | 6,890 |
6.875% 6/30/15 | | 3,885 | | 3,881 |
6.8983% 4/17/09 (f)(h) | | 6,640 | | 6,615 |
| | 17,386 |
TOTAL FINANCIALS | | 175,133 |
HEALTH CARE - 0.9% |
Health Care Providers & Services - 0.6% |
AmeriPath, Inc. 10.5% 4/1/13 | | 2,805 | | 2,938 |
CRC Health Group, Inc. 10.75% 2/1/16 (f) | | 1,880 | | 1,913 |
Fresenius Medical Care Capital Trust IV 7.875% 6/15/11 | | 1,000 | | 1,010 |
HCA, Inc.: | | | | |
5.75% 3/15/14 | | 745 | | 665 |
6.75% 7/15/13 | | 5,015 | | 4,795 |
LifeCare Holdings, Inc. 9.25% 8/15/13 | | 2,215 | | 1,551 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
HEALTH CARE - continued |
Health Care Providers & Services - continued |
Psychiatric Solutions, Inc. 10.625% 6/15/13 | | $ 197 | | $ 218 |
Rural/Metro Corp. 9.875% 3/15/15 | | 1,355 | | 1,396 |
Skilled Healthcare Group, Inc. 11% 1/15/14 (f) | | 5,480 | | 5,809 |
Team Finance LLC/Health Finance Corp. 11.25% 12/1/13 | | 3,040 | | 3,101 |
U.S. Oncology, Inc. 9% 8/15/12 | | 1,300 | | 1,349 |
| | 24,745 |
Life Sciences Tools & Services - 0.1% |
Bio-Rad Laboratories, Inc. 7.5% 8/15/13 | | 1,770 | | 1,788 |
Polypore, Inc. 8.75% 5/15/12 | | 1,675 | | 1,587 |
| | 3,375 |
Pharmaceuticals - 0.2% |
Elan Finance PLC/Elan Finance Corp. 7.75% 11/15/11 | | 1,585 | | 1,518 |
Leiner Health Products, Inc. 11% 6/1/12 | | 1,885 | | 1,781 |
VWR International, Inc.: | | | | |
6.875% 4/15/12 | | 115 | | 109 |
8% 4/15/14 | | 3,647 | | 3,556 |
| | 6,964 |
TOTAL HEALTH CARE | | 35,084 |
INDUSTRIALS - 2.2% |
Aerospace & Defense - 0.1% |
Hexcel Corp. 6.75% 2/1/15 | | 2,350 | | 2,280 |
Orbimage Holdings, Inc. 14.2% 7/1/12 (f)(h) | | 1,720 | | 1,862 |
| | 4,142 |
Airlines - 0.4% |
Continental Airlines, Inc. pass thru trust certificates: | | | | |
6.748% 9/15/18 | | 88 | | 83 |
6.9% 7/2/18 | | 661 | | 625 |
8.312% 10/2/12 | | 470 | | 454 |
8.388% 5/1/22 | | 784 | | 760 |
9.798% 4/1/21 | | 2,765 | | 2,882 |
Delta Air Lines, Inc.: | | | | |
7.9% 12/15/09 (c) | | 12,630 | | 3,648 |
8.3% 12/15/29 (c) | | 1,900 | | 551 |
10% 8/15/08 (c) | | 750 | | 203 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INDUSTRIALS - continued |
Airlines - continued |
Delta Air Lines, Inc. pass thru trust certificates 7.57% 11/18/10 | | $ 1,280 | | $ 1,285 |
Northwest Airlines Corp. 10% 2/1/09 (c) | | 1,465 | | 703 |
Northwest Airlines, Inc.: | | | | |
7.875% 3/15/08 (c) | | 1,065 | | 535 |
8.875% 6/1/06 (c) | | 1,355 | | 650 |
10.5% 4/1/09 (c) | | 173 | | 69 |
Northwest Airlines, Inc. pass thru trust certificates: | | | | |
7.248% 7/2/14 | | 487 | | 149 |
7.95% 9/1/16 | | 23 | | 23 |
8.07% 1/2/15 | | 1,320 | | 1,281 |
NWA Trust 10.23% 6/21/14 | | 239 | | 229 |
| | 14,130 |
Building Products - 0.0% |
ACIH, Inc. 0% 12/15/12 (d)(f) | | 300 | | 238 |
NTK Holdings, Inc. 0% 3/1/14 (d) | | 410 | | 296 |
| | 534 |
Commercial Services & Supplies - 0.3% |
ALH Finance LLC/ALH Finance Corp. 8.5% 1/15/13 | | 160 | | 154 |
Allied Security Escrow Corp. 11.375% 7/15/11 | | 2,255 | | 2,190 |
Allied Waste North America, Inc.: | | | | |
6.5% 11/15/10 | | 830 | | 799 |
7.125% 5/15/16 (f) | | 3,240 | | 3,062 |
Browning-Ferris Industries, Inc.: | | | | |
7.4% 9/15/35 | | 1,640 | | 1,443 |
9.25% 5/1/21 | | 680 | | 694 |
FTI Consulting, Inc. 7.625% 6/15/13 | | 720 | | 727 |
Mac-Gray Corp. 7.625% 8/15/15 | | 680 | | 683 |
R.H. Donnelley Finance Corp. I 10.875% 12/15/12 (f) | | 550 | | 603 |
Williams Scotsman, Inc. 8.5% 10/1/15 | | 2,850 | | 2,814 |
| | 13,169 |
Construction & Engineering - 0.0% |
Blount, Inc. 8.875% 8/1/12 | | 1,250 | | 1,256 |
Electrical Equipment - 0.2% |
General Cable Corp. 9.5% 11/15/10 | | 3,055 | | 3,192 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INDUSTRIALS - continued |
Electrical Equipment - continued |
Polypore, Inc. 0% 10/1/12 (d) | | $ 5,840 | | $ 3,884 |
Sensus Metering Systems, Inc. 8.625% 12/15/13 | | 900 | | 878 |
| | 7,954 |
Machinery - 0.1% |
Chart Industries, Inc. 9.125% 10/15/15 (f) | | 1,160 | | 1,189 |
Cummins, Inc. 7.125% 3/1/28 | | 2,250 | | 2,133 |
Invensys PLC 9.875% 3/15/11 (f) | | 295 | | 320 |
| | 3,642 |
Marine - 0.3% |
American Commercial Lines LLC/ACL Finance Corp. 9.5% 2/15/15 | | 539 | | 590 |
H-Lines Finance Holding Corp. 0% 4/1/13 (d) | | 1,424 | | 1,225 |
OMI Corp. 7.625% 12/1/13 | | 6,125 | | 6,110 |
Ultrapetrol Bahamas Ltd. 9% 11/24/14 | | 1,795 | | 1,616 |
| | 9,541 |
Road & Rail - 0.5% |
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.: | | | | |
7.576% 5/15/14 (f)(h) | | 510 | | 511 |
7.625% 5/15/14 (f) | | 1,340 | | 1,307 |
7.75% 5/15/16 (f) | | 1,280 | | 1,245 |
Hertz Corp. 8.875% 1/1/14 (f) | | 3,820 | | 3,916 |
Kansas City Southern Railway Co.: | | | | |
7.5% 6/15/09 | | 3,165 | | 3,181 |
9.5% 10/1/08 | | 1,350 | | 1,411 |
TFM SA de CV: | | | | |
9.375% 5/1/12 | | 6,450 | | 6,837 |
yankee 10.25% 6/15/07 | | 865 | | 891 |
| | 19,299 |
Trading Companies & Distributors - 0.3% |
Ahern Rentals, Inc. 9.25% 8/15/13 | | 550 | | 556 |
Ashtead Holdings PLC 8.625% 8/1/15 (f) | | 1,190 | | 1,211 |
Neff Rent LLC/Neff Finance Corp. 11.25% 6/15/12 (f) | | 9,840 | | 10,578 |
| | 12,345 |
TOTAL INDUSTRIALS | | 86,012 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INFORMATION TECHNOLOGY - 3.8% |
Communications Equipment - 0.9% |
Hughes Network Systems LLC / HNS Finance Corp. 9.5% 4/15/14 (f) | | $ 6,290 | | $ 6,227 |
L-3 Communications Corp. 6.375% 10/15/15 | | 3,840 | | 3,667 |
Lucent Technologies, Inc.: | | | | |
6.45% 3/15/29 | | 12,535 | | 10,592 |
6.5% 1/15/28 | | 3,740 | | 3,160 |
Nortel Networks Corp.: | | | | |
9.7581% 7/15/11 (f)(h) | | 3,760 | | 3,826 |
10.125% 7/15/13 (f) | | 3,730 | | 3,795 |
10.75% 7/15/16 (f) | | 3,760 | | 3,863 |
| | 35,130 |
Electronic Equipment & Instruments - 0.3% |
Altra Industrial Motion, Inc. 9% 12/1/11 | | 970 | | 970 |
Celestica, Inc. 7.875% 7/1/11 | | 12,340 | | 12,001 |
| | 12,971 |
IT Services - 0.8% |
Iron Mountain, Inc.: | | | | |
6.625% 1/1/16 | | 10,955 | | 9,777 |
7.75% 1/15/15 | | 4,830 | | 4,637 |
8.25% 7/1/11 | | 535 | | 532 |
8.625% 4/1/13 | | 2,900 | | 2,915 |
SunGard Data Systems, Inc.: | | | | |
9.125% 8/15/13 (f) | | 5,280 | | 5,498 |
9.4306% 8/15/13 (f)(h) | | 2,830 | | 2,972 |
10.25% 8/15/15 (f) | | 6,955 | | 7,233 |
| | 33,564 |
Office Electronics - 0.9% |
Xerox Capital Trust I 8% 2/1/27 | | 4,585 | | 4,631 |
Xerox Corp.: | | | | |
6.4% 3/15/16 | | 8,000 | | 7,560 |
6.875% 8/15/11 | | 3,240 | | 3,208 |
7.125% 6/15/10 | | 3,720 | | 3,753 |
7.2% 4/1/16 | | 3,345 | | 3,320 |
7.625% 6/15/13 | | 12,425 | | 12,518 |
| | 34,990 |
Semiconductors & Semiconductor Equipment - 0.8% |
Amkor Technology, Inc. 9.25% 6/1/16 | | 2,955 | | 2,792 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
INFORMATION TECHNOLOGY - continued |
Semiconductors & Semiconductor Equipment - continued |
Avago Technologies Finance Ltd.: | | | | |
10.7306% 6/1/13 (f)(h) | | $ 4,560 | | $ 4,777 |
11.875% 12/1/15 (f) | | 5,150 | | 5,588 |
Freescale Semiconductor, Inc. 7.125% 7/15/14 | | 11,740 | | 11,857 |
New ASAT Finance Ltd. 9.25% 2/1/11 | | 2,100 | | 1,743 |
Viasystems, Inc. 10.5% 1/15/11 | | 4,065 | | 4,024 |
| | 30,781 |
Software - 0.1% |
SERENA Software, Inc. 10.375% 3/15/16 (f) | | 4,105 | | 4,146 |
TOTAL INFORMATION TECHNOLOGY | | 151,582 |
MATERIALS - 3.0% |
Chemicals - 0.8% |
America Rock Salt Co. LLC 9.5% 3/15/14 | | 3,940 | | 3,979 |
BCP Crystal U.S. Holdings Corp. 9.625% 6/15/14 | | 8,045 | | 8,729 |
Braskem SA: | | | | |
(Reg. S) 11.75% 1/22/14 | | 1,185 | | 1,333 |
11.75% 1/22/14 (f) | | 325 | | 366 |
Crystal US Holding 3 LLC/Crystal US Sub 3 Corp.: | | | | |
Series A, 0% 10/1/14 (d) | | 1,380 | | 1,083 |
Series B, 0% 10/1/14 (d) | | 12,655 | | 9,808 |
Huntsman LLC 11.625% 10/15/10 | | 466 | | 516 |
JohnsonDiversey Holdings, Inc. 0% 5/15/13 (d) | | 6,095 | | 5,257 |
Lyondell Chemical Co. 11.125% 7/15/12 | | 930 | | 1,011 |
Phibro Animal Health Corp. 13% 12/1/07 unit | | 1,575 | | 1,638 |
| | 33,720 |
Construction Materials - 0.0% |
Texas Industries, Inc. 7.25% 7/15/13 | | 630 | | 628 |
Containers & Packaging - 0.5% |
AEP Industries, Inc. 7.875% 3/15/13 | | 640 | | 627 |
BWAY Corp. 10% 10/15/10 | | 1,175 | | 1,237 |
Constar International, Inc. 11% 12/1/12 | | 2,085 | | 1,564 |
Crown Cork & Seal Finance PLC yankee 7% 12/15/06 | | 830 | | 832 |
Crown Cork & Seal, Inc.: | | | | |
7.375% 12/15/26 | | 355 | | 310 |
7.5% 12/15/96 | | 3,685 | | 2,893 |
8% 4/15/23 | | 2,980 | | 2,757 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
MATERIALS - continued |
Containers & Packaging - continued |
Owens-Brockway Glass Container, Inc.: | | | | |
6.75% 12/1/14 | | $ 895 | | $ 828 |
7.75% 5/15/11 | | 320 | | 322 |
8.25% 5/15/13 | | 3,390 | | 3,407 |
8.75% 11/15/12 | | 2,325 | | 2,418 |
8.875% 2/15/09 | | 1,170 | | 1,199 |
Sealed Air Finance 5.625% 7/19/06 | EUR | 250 | | 320 |
Tekni-Plex, Inc. 10.875% 8/15/12 (f) | | 980 | | 1,068 |
| | 19,782 |
Metals & Mining - 1.5% |
AK Steel Corp. 7.75% 6/15/12 | | 3,055 | | 2,994 |
Compass Minerals International, Inc.: | | | | |
0% 12/15/12 (d) | | 1,330 | | 1,267 |
0% 6/1/13 (d) | | 2,260 | | 2,062 |
CSN Islands VIII Corp. 9.75% 12/16/13 (f) | | 5,830 | | 6,209 |
CSN Islands X Corp. (Reg. S) 9.5% 7/14/49 | | 5,795 | | 5,752 |
Edgen Acquisition Corp. 9.875% 2/1/11 | | 1,340 | | 1,327 |
Evraz Securities SA 10.875% 8/3/09 | | 6,600 | | 7,128 |
Freeport-McMoRan Copper & Gold, Inc.: | | | | |
6.875% 2/1/14 | | 4,200 | | 4,043 |
10.125% 2/1/10 | | 740 | | 781 |
Gerdau AmeriSteel Corp./GUSAP Partners 10.375% 7/15/11 | | 1,335 | | 1,442 |
Gerdau SA 8.875% (f) | | 2,590 | | 2,525 |
International Steel Group, Inc. 6.5% 4/15/14 | | 10,550 | | 9,996 |
Ispat Inland ULC 9.75% 4/1/14 | | 932 | | 1,025 |
Norilsk Nickel Finance Luxembourg SA 7.125% 9/30/09 | | 4,570 | | 4,547 |
RathGibson, Inc. 11.25% 2/15/14 (f) | | 5,905 | | 6,023 |
Steel Dynamics, Inc.: | | | | |
9.5% 3/15/09 | | 2,155 | | 2,242 |
| | 59,363 |
Paper & Forest Products - 0.2% |
Georgia-Pacific Corp. 8% 1/15/24 | | 1,125 | | 1,080 |
Millar Western Forest Products Ltd. 7.75% 11/15/13 | | 1,835 | | 1,404 |
NewPage Corp.: | | | | |
10.93% 5/1/12 (h) | | 1,770 | | 1,929 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
MATERIALS - continued |
Paper & Forest Products - continued |
NewPage Corp.: - continued | | | | |
12% 5/1/13 | | $ 1,930 | | $ 1,998 |
P.H. Glatfelter Co. 7.125% 5/1/16 (f) | | 550 | | 542 |
| | 6,953 |
TOTAL MATERIALS | | 120,446 |
TELECOMMUNICATION SERVICES - 6.3% |
Diversified Telecommunication Services - 3.9% |
AT&T Corp. 7.75% 11/21/06 (h) | EUR | 1,250 | | 1,613 |
Citizens Communications Co. 9% 8/15/31 | | 6,725 | | 6,826 |
Embarq Corp.: | | | | |
6.738% 6/1/13 | | 2,509 | | 2,501 |
7.082% 6/1/16 | | 1,116 | | 1,110 |
7.995% 6/1/36 | | 8,700 | | 8,744 |
Empresa Brasileira de Telecomm SA 11% 12/15/08 | | 4,046 | | 4,390 |
Eschelon Operating Co. 8.375% 3/15/10 | | 2,196 | | 2,092 |
Level 3 Financing, Inc.: | | | | |
11.4238% 3/15/11 (f)(h) | | 3,050 | | 3,119 |
12.25% 3/15/13 (f) | | 9,580 | | 10,179 |
Mobifon Holdings BV 12.5% 7/31/10 | | 7,225 | | 8,092 |
New Skies Satellites BV: | | | | |
9.125% 11/1/12 | | 3,145 | | 3,326 |
10.4144% 11/1/11 (h) | | 750 | | 774 |
Nordic Telephone Co. Holdings Aps 8.875% 5/1/16 (f) | | 1,830 | | 1,857 |
NTL Cable PLC 8.75% 4/15/14 | | 6,865 | | 6,796 |
PanAmSat Holding Corp. 0% 11/1/14 (d) | | 5,375 | | 3,924 |
Qwest Capital Funding, Inc.: | | | | |
7.625% 8/3/21 | | 370 | | 346 |
7.75% 2/15/31 | | 370 | | 346 |
Qwest Corp.: | | | | |
7.875% 9/1/11 | | 2,980 | | 2,995 |
8.5794% 6/15/13 (h) | | 9,470 | | 10,015 |
8.875% 3/15/12 | | 25,740 | | 27,156 |
Telecom Egypt SAE: | | | | |
10.7% 2/4/10 (h) | EGP | 3,565 | | 612 |
10.95% 2/4/10 | EGP | 3,565 | | 635 |
Telefonica de Argentina SA 9.125% 11/7/10 | | 5,952 | | 6,041 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
TELECOMMUNICATION SERVICES - continued |
Diversified Telecommunication Services - continued |
Telenet Group Holding NV 0% 6/15/14 (d)(f) | | $ 10,537 | | $ 8,930 |
U.S. West Capital Funding, Inc.: | | | | |
6.5% 11/15/18 | | 285 | | 251 |
6.875% 7/15/28 | | 1,855 | | 1,595 |
U.S. West Communications: | | | | |
6.875% 9/15/33 | | 13,988 | | 12,100 |
7.125% 11/15/43 | | 220 | | 196 |
7.2% 11/10/26 | | 3,115 | | 2,905 |
7.25% 9/15/25 | | 1,780 | | 1,655 |
7.25% 10/15/35 | | 3,210 | | 2,921 |
7.5% 6/15/23 | | 1,880 | | 1,777 |
8.875% 6/1/31 | | 340 | | 347 |
Wind Acquisition Finance SA 10.75% 12/1/15 (f) | | 3,720 | | 3,943 |
Windstream Corp. 8.625% 8/1/16 (f)(g) | | 4,120 | | 4,202 |
| | 154,311 |
Wireless Telecommunication Services - 2.4% |
American Tower Corp. 7.125% 10/15/12 | | 10,745 | | 10,987 |
Centennial Cellular Operating Co./Centennial Communications Corp. 10.125% 6/15/13 | | 7,015 | | 7,366 |
Centennial Communications Corp./Centennial Cellular Operating Co. LLC/Centennial Puerto Rico Operations Corp. 8.125% 2/1/14 | | 2,460 | | 2,386 |
Digicel Ltd. 9.25% 9/1/12 (f) | | 1,880 | | 1,936 |
Inmarsat Finance PLC 7.625% 6/30/12 | | 414 | | 424 |
Intelsat Ltd.: | | | | |
6.5% 11/1/13 | | 4,545 | | 3,483 |
7.625% 4/15/12 | | 8,785 | | 7,434 |
9.25% 6/15/16 (f)(g) | | 2,240 | | 2,310 |
11.25% 6/15/16 (f)(g) | | 5,990 | | 6,125 |
Intelsat Subsidiary Holding Co. Ltd. 9.6138% 1/15/12 (h) | | 4,860 | | 4,921 |
Millicom International Cellular SA 10% 12/1/13 | | 5,695 | | 6,321 |
Mobile Telesystems Finance SA 8.375% 10/14/10 (f) | | 10,795 | | 10,782 |
Nextel Communications, Inc.: | | | | |
5.95% 3/15/14 | | 1,150 | | 1,121 |
6.875% 10/31/13 | | 6,365 | | 6,556 |
7.375% 8/1/15 | | 15,530 | | 15,978 |
Rogers Communications, Inc. 8.4544% 12/15/10 (h) | | 1,740 | | 1,788 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
TELECOMMUNICATION SERVICES - continued |
Wireless Telecommunication Services - continued |
Telecom Personal SA 9.25% 12/22/10 (f) | | $ 5,590 | | $ 5,534 |
UbiquiTel Operating Co. 9.875% 3/1/11 | | 1,705 | | 1,854 |
| | 97,306 |
TOTAL TELECOMMUNICATION SERVICES | | 251,617 |
UTILITIES - 1.3% |
Electric Utilities - 0.4% |
AES Gener SA 7.5% 3/25/14 | | 3,410 | | 3,419 |
Chivor SA E.S.P. 9.75% 12/30/14 (f) | | 3,255 | | 3,499 |
Edison Mission Energy: | | | | |
7.5% 6/15/13 (f) | | 3,710 | | 3,617 |
7.75% 6/15/16 (f) | | 3,710 | | 3,613 |
MSW Energy Holdings II LLC/MSW Finance Co. II, Inc. 7.375% 9/1/10 | | 1,170 | | 1,170 |
| | 15,318 |
Gas Utilities - 0.7% |
AmeriGas Partners LP/AmeriGas Eagle Finance Corp. 7.125% 5/20/16 | | 6,000 | | 5,768 |
Dynegy Holdings, Inc. 8.375% 5/1/16 (f) | | 2,090 | | 2,059 |
Southern Natural Gas Co.: | | | | |
7.35% 2/15/31 | | 7,350 | | 6,983 |
8% 3/1/32 | | 4,170 | | 4,358 |
8.875% 3/15/10 | | 2,600 | | 2,704 |
Transportadora de Gas del Sur SA (Reg. S) 6.5% 12/15/10 (e) | | 6,022 | | 5,812 |
| | 27,684 |
Independent Power Producers & Energy Traders - 0.1% |
Enron Corp.: | | | | |
6.4% 7/15/06 (c) | | 545 | | 185 |
6.625% 11/15/05 (c) | | 2,200 | | 748 |
6.725% 11/17/08 (c)(h) | | 684 | | 227 |
6.75% 8/1/09 (c) | | 550 | | 187 |
6.875% 10/15/07 (c) | | 1,330 | | 452 |
6.95% 7/15/28 (c) | | 1,204 | | 400 |
7.125% 5/15/07 (c) | | 235 | | 80 |
7.375% 5/15/19 (c) | | 1,400 | | 476 |
7.875% 6/15/03 (c) | | 235 | | 80 |
Corporate Bonds - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Nonconvertible Bonds - continued |
UTILITIES - continued |
Independent Power Producers & Energy Traders - continued |
Enron Corp.: - continued | | | | |
8.375% 5/23/05 (c) | | $ 2,500 | | $ 838 |
9.125% 4/1/03 (c) | | 50 | | 17 |
9.875% 6/15/03 (c) | | 220 | | 75 |
Tenaska Alabama Partners LP 7% 6/30/21 (f) | | 1,148 | | 1,114 |
| | 4,879 |
Multi-Utilities - 0.1% |
Aquila, Inc. 14.875% 7/1/12 | | 1,615 | | 2,136 |
TECO Energy, Inc. 6.75% 5/1/15 | | 1,020 | | 1,020 |
Utilicorp United, Inc. 9.95% 2/1/11 (h) | | 39 | | 43 |
| | 3,199 |
TOTAL UTILITIES | | 51,080 |
TOTAL NONCONVERTIBLE BONDS | | 1,390,852 |
TOTAL CORPORATE BONDS (Cost $1,399,117) | 1,395,013 |
U.S. Government and Government Agency Obligations - 24.4% |
|
U.S. Government Agency Obligations - 9.8% |
Fannie Mae: | | | | |
3.25% 1/15/08 | | 58,580 | | 56,677 |
3.25% 2/15/09 | | 6,040 | | 5,720 |
4.25% 5/15/09 | | 9,450 | | 9,157 |
4.5% 10/15/08 | | 16,934 | | 16,599 |
4.625% 1/15/08 | | 13,254 | | 13,086 |
4.625% 10/15/13 | | 248 | | 235 |
4.75% 12/15/10 | | 83,058 | | 80,692 |
4.875% 4/15/09 | | 43,850 | | 43,203 |
5.125% 1/2/14 | | 1,380 | | 1,324 |
6.125% 3/15/12 | | 900 | | 927 |
6.25% 2/1/11 | | 380 | | 389 |
6.375% 6/15/09 | | 16,590 | | 17,002 |
Federal Home Loan Bank: | | | | |
4.5% 10/14/08 | | 5,975 | | 5,854 |
5.8% 9/2/08 | | 1,680 | | 1,687 |
U.S. Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
U.S. Government Agency Obligations - continued |
Freddie Mac: | | | | |
4% 8/17/07 | | $ 521 | | $ 512 |
4.125% 4/2/07 | | 3,824 | | 3,785 |
4.125% 10/18/10 | | 65,000 | | 61,637 |
4.25% 7/15/09 | | 22,489 | | 21,754 |
4.875% 2/17/09 | | 9,051 | | 8,932 |
4.875% 11/15/13 | | 4,100 | | 3,945 |
5.125% 4/18/08 | | 14,000 | | 13,914 |
5.25% 7/18/11 | | 18,440 | | 18,237 |
Private Export Funding Corp.: | | | | |
secured 5.685% 5/15/12 | | 1,285 | | 1,295 |
4.974% 8/15/13 | | 1,515 | | 1,462 |
Small Business Administration guaranteed development participation certificates Series 2003 P10B, 5.136% 8/10/13 | | 1,518 | | 1,468 |
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | | 389,493 |
U.S. Treasury Inflation Protected Obligations - 3.6% |
U.S. Treasury Inflation-Indexed Notes: | | | | |
0.875% 4/15/10 | | 22,862 | | 21,567 |
1.875% 7/15/13 | | 50,661 | | 48,666 |
2% 1/15/14 | | 22,567 | | 21,781 |
2.375% 4/15/11 | | 51,760 | | 51,553 |
TOTAL U.S. TREASURY INFLATION PROTECTED OBLIGATIONS | | 143,567 |
U.S. Treasury Obligations - 11.0% |
U.S. Treasury Bonds 6.125% 8/15/29 | | 82,650 | | 91,896 |
U.S. Treasury Notes: | | | | |
3.75% 5/15/08 | | 97,629 | | 95,149 |
4% 3/15/10 | | 4,715 | | 4,540 |
4.25% 11/15/13 | | 7,930 | | 7,504 |
4.25% 8/15/14 | | 67,500 | | 63,569 |
4.25% 11/15/14 | | 40,920 | | 38,484 |
4.25% 8/15/15 | | 10,000 | | 9,357 |
4.5% 2/15/09 | | 50,000 | | 49,209 |
U.S. Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
U.S. Treasury Obligations - continued |
U.S. Treasury Notes: - continued | | | | |
4.5% 11/15/15 | | $ 30,500 | | $ 29,051 |
4.75% 5/15/14 | | 50,662 | | 49,421 |
TOTAL U.S. TREASURY OBLIGATIONS | | 438,180 |
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $999,922) | 971,240 |
U.S. Government Agency - Mortgage Securities - 1.5% |
|
Fannie Mae - 1.4% |
4% 5/1/19 | | 35 | | 32 |
4.5% 12/1/18 | | 6,781 | | 6,437 |
4.614% 7/1/34 (h) | | 5,279 | | 5,228 |
4.761% 11/1/33 (h) | | 4,021 | | 3,968 |
4.782% 6/1/35 (h) | | 1,907 | | 1,864 |
4.882% 7/1/34 (h) | | 1,906 | | 1,877 |
4.895% 11/1/35 (h) | | 2,708 | | 2,679 |
5% 3/1/18 to 7/1/35 | | 5,080 | | 4,880 |
5.035% 5/1/35 (h) | | 3,589 | | 3,531 |
5.5% 5/1/11 to 11/1/35 | | 21,431 | | 21,055 |
5.916% 1/1/36 (h) | | 548 | | 546 |
6% 8/1/13 to 1/1/26 | | 99 | | 99 |
6.5% 6/1/24 to 3/1/35 | | 1,778 | | 1,793 |
7% 9/1/25 | | 5 | | 5 |
7.5% 1/1/28 | | 86 | | 90 |
TOTAL FANNIE MAE | | 54,084 |
Freddie Mac - 0.1% |
4.704% 9/1/35 (h) | | 5,600 | | 5,501 |
8.5% 3/1/20 | | 23 | | 25 |
TOTAL FREDDIE MAC | | 5,526 |
Government National Mortgage Association - 0.0% |
6% 1/15/09 to 5/15/09 | | 49 | | 50 |
6.5% 4/15/26 to 5/15/26 | | 50 | | 51 |
7% 9/15/25 to 8/15/31 | | 118 | | 122 |
U.S. Government Agency - Mortgage Securities - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Government National Mortgage Association - continued |
7.5% 2/15/22 to 8/15/28 | | $ 221 | | $ 230 |
8% 9/15/26 to 12/15/26 | | 34 | | 35 |
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION | | 488 |
TOTAL U.S. GOVERNMENT AGENCY - MORTGAGE SECURITIES (Cost $61,629) | 60,098 |
Asset-Backed Securities - 0.2% |
|
Affinity PLC Series 2002-A CLass C, 6.57% 5/15/09 (h) | GBP | 790 | | 1,468 |
Driver One GmbH Series 1 Class B, 3.106% 5/21/10 (h) | EUR | 360 | | 461 |
Greene King Finance PLC Series A1, 5.1141% 6/15/31 (h) | GBP | 1,000 | | 1,850 |
Lambda Finance BV Series 2005-1X Class C1, 5.79% 11/15/29 (h) | GBP | 500 | | 928 |
Punch Taverns Finance PLC 4.9469% 4/15/09 (h) | GBP | 618 | | 1,144 |
Sedna Finance Corp.: | | | | |
3.605% 12/23/14 (h) | EUR | 500 | | 640 |
3.709% 3/15/16 (h) | EUR | 1,150 | | 1,476 |
Unique Public Finance Co. PLC Series A4, 5.659% 6/30/27 | GBP | 60 | | 114 |
TOTAL ASSET-BACKED SECURITIES (Cost $7,847) | 8,081 |
Collateralized Mortgage Obligations - 1.2% |
|
Private Sponsor - 0.2% |
EPIC PLC Series BROD Class D, 0% 1/22/16 (h) | EUR | 400 | | 512 |
Granite Mortgages PLC 3.139% 1/20/43 (h) | EUR | 400 | | 513 |
Holmes Financing No. 8 PLC floater Series 3 Class C, 3.357% 7/15/40 (h) | EUR | 500 | | 644 |
Lansdowne Mortgage Securities No. 1 PLC: | | | | |
Series M1, 3.189% 6/15/45 (h) | EUR | 850 | | 1,087 |
Series M2 Class 3M, 3.379% 6/15/45 (h) | EUR | 450 | | 576 |
Collateralized Mortgage Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Private Sponsor - continued |
Permanent Financing No. 1 PLC 5.1% 6/10/09 (h) | EUR | 400 | | $ 519 |
RMAC PLC Series 2005-NS4X Class M2A, 5.25% 12/12/43 (h) | GBP | 1,700 | | 3,144 |
TOTAL PRIVATE SPONSOR | | 6,995 |
U.S. Government Agency - 1.0% |
Fannie Mae planned amortization class: | | | | |
Series 2003-24 CLass PB, 4.5% 12/25/12 | | $ 2,351 | | 2,326 |
Series 2006-64 Class PA, 5.5% 2/25/30 | | 7,625 | | 7,587 |
Fannie Mae guaranteed REMIC pass thru certificates: | | | | |
floater Series 2005-45 Class XA, 5.6625% 6/25/35 (h) | | 8,493 | | 8,477 |
planned amortization class: | | | | |
Series 2006-4 Class PB, 6% 9/25/35 | | 6,570 | | 6,575 |
Series 2006-49 Class CA, 6% 2/25/31 | | 5,329 | | 5,347 |
Freddie Mac Multi-class participation certificates guaranteed planned amortization class Series 3013 Class AF, 5.4488% 5/15/35 (h) | | 9,968 | | 9,933 |
TOTAL U.S. GOVERNMENT AGENCY | | 40,245 |
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $47,185) | 47,240 |
Commercial Mortgage Securities - 0.2% |
|
Immeo Residential Finance PLC Series 1 Class D, 3.709% 3/15/13 (h) | EUR | 415 | | 531 |
Opera Finance PLC 4.8481% 7/31/13 (h) | GBP | 1,000 | | 1,853 |
Real Estate Capital Foundation Ltd. Series 3 Class A, 4.8006% 7/15/16 (h) | GBP | 2,000 | | 3,683 |
Trafford Centre Finance Ltd. 5.465% 4/28/35 (h) | GBP | 556 | | 1,025 |
TOTAL COMMERCIAL MORTGAGE SECURITIES (Cost $6,939) | 7,092 |
Foreign Government and Government Agency Obligations - 21.8% |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Arab Republic 8.0203% to 9.7504% 8/22/06 to 2/27/07 | EGP | 13,955 | | $ 2,330 |
Argentine Republic: | | | | |
discount (with partial capitalization through 12/31/13) 8.28% 12/31/33 | | $ 3,054 | | 2,718 |
par 1.33% 12/31/38 (h) | | 22,180 | | 7,985 |
4.889% 8/3/12 (h) | | 16,647 | | 15,418 |
7% 3/28/11 | | 7,295 | | 6,753 |
Austrian Republic 5% 12/20/24 (f) | CAD | 2,000 | | 1,765 |
Banco Central del Uruguay: | | | | |
Brady par A 6.75% 2/19/21 | | 1,000 | | 995 |
value recovery A rights 1/2/21 (j) | | 1,000,000 | | 0 |
value recovery B rights 1/2/21 (j) | | 750,000 | | 0 |
Brazilian Federative Republic: | | | | |
6% 9/15/13 | | 2,125 | | 2,057 |
7.375% 2/3/15 | EUR | 500 | | 681 |
8% 1/15/18 | | 9,241 | | 9,768 |
8.75% 2/4/25 | | 5,290 | | 5,793 |
10.5% 7/14/14 | | 3,800 | | 4,573 |
11% 8/17/40 | | 24,870 | | 30,864 |
12.25% 3/6/30 | | 10,050 | | 14,673 |
12.75% 1/15/20 | | 4,685 | | 6,676 |
Canadian Government: | | | | |
4.5% 9/1/07 | CAD | 5,000 | | 4,480 |
5.25% 6/1/12 | CAD | 42,950 | | 39,891 |
5.5% 6/1/09 | CAD | 5,500 | | 5,067 |
5.75% 6/1/29 | CAD | 6,750 | | 6,977 |
Central Bank of Nigeria: | | | | |
Brady 6.25% 11/15/20 | | 4,750 | | 4,714 |
promissory note 5.092% 1/5/10 | | 2,417 | | 2,272 |
warrants 11/15/20 (j) | | 2,750 | | 179 |
City of Kiev 8.75% 8/8/08 | | 2,800 | | 2,849 |
Colombian Republic: | | | | |
11.75% 3/1/10 | COP | 6,147,000 | | 2,553 |
12% 10/22/15 | COP | 6,051,000 | | 2,610 |
Danish Kingdom 3.125% 10/15/10 | EUR | 3,000 | | 3,732 |
Dominican Republic: | | | | |
Brady 5.7925% 8/30/09 (h) | | 2,607 | | 2,596 |
6.1875% 8/30/24 (h) | | 12,223 | | 11,581 |
9.5% 9/27/11 | | 5,448 | | 5,775 |
Ecuador Republic: | | | | |
9% 8/15/30 (Reg. S) (e) | | 7,595 | | 7,310 |
9.375% 12/15/15 (f) | | 5,950 | | 5,891 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Ecuador Republic: - continued | | | | |
euro par 5% 2/28/25 | | $ 1,545 | | $ 1,149 |
Finnish Government 3.875% 9/15/17 | EUR | 49,700 | | 62,155 |
French Government: | | | | |
3% 1/12/11 | EUR | 42,000 | | 51,884 |
3.25% 4/25/16 | EUR | 47,640 | | 56,949 |
4% 4/25/55 | EUR | 750 | | 897 |
German Federal Republic: | | | | |
3% 4/11/08 | EUR | 15,400 | | 19,513 |
5% 7/4/12 | EUR | 12,670 | | 17,131 |
Indonesian Republic: | | | | |
6.75% 3/10/14 | | 5,875 | | 5,787 |
7.25% 4/20/15 (f) | | 2,200 | | 2,211 |
7.25% 4/20/15 | | 650 | | 653 |
Islamic Republic of Pakistan 7.125% 3/31/16 (f) | | 1,165 | | 1,078 |
Israeli State (guaranteed by U.S. Government through Agency for International Development) 5.5% 9/18/23 | | 4,750 | | 4,714 |
Italian Republic 4% 2/1/37 | EUR | 5,500 | | 6,258 |
Japan Government: | | | | |
Real Return Bond: | | | | |
0.49% 7/20/20 (h) | JPY | 1,125,000 | | 9,214 |
1.22% 11/20/20 (h) | JPY | 1,300,000 | | 10,924 |
0.9% 12/22/08 | JPY | 200,000 | | 1,747 |
1.4% 3/21/11 | JPY | 425,000 | | 3,722 |
1.5% 3/20/14 | JPY | 4,615,000 | | 39,540 |
1.8% 3/20/16 | JPY | 1,267,000 | | 10,974 |
2.4% 12/20/34 | JPY | 750,000 | | 6,403 |
Lebanon, Republic of: | | | | |
8.5669% 11/30/09 (f)(h) | | 1,840 | | 1,925 |
8.5669% 11/30/09 (h) | | 5,085 | | 5,320 |
Pakistan International Sukuk Co. Ltd. 6.95% 1/27/10 (h) | | 4,355 | | 4,420 |
Panamanian Republic Brady discount 5.5625% 7/17/26 (h) | | 1,425 | | 1,425 |
Peruvian Republic: | | | | |
3% 3/7/27 (e) | | 900 | | 596 |
5.875% 3/7/27 (h) | | 1,470 | | 1,433 |
7.35% 7/21/25 | | 3,730 | | 3,562 |
euro Brady past due interest 5% 3/7/17 (h) | | 9,895 | | 9,548 |
Philippine Republic: | | | | |
5.3203% 12/1/09 (h) | | 745 | | 730 |
8.25% 1/15/14 | | 5,445 | | 5,649 |
8.375% 2/15/11 | | 5,530 | | 5,758 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Philippine Republic: - continued | | | | |
8.875% 3/17/15 | | $ 4,860 | | $ 5,261 |
9% 2/15/13 | | 7,480 | | 8,050 |
9.875% 1/15/19 | | 7,375 | | 8,500 |
10.625% 3/16/25 | | 3,995 | | 4,954 |
Republic of Iraq 5.8% 1/15/28 (f) | | 3,780 | | 2,533 |
Republic of Serbia 3.75% 11/1/24 (e)(f) | | 565 | | 470 |
Russian Federation: | | | | |
5% 3/31/30 (e)(f) | | 3,900 | | 4,154 |
5% 3/31/30 (Reg. S) (e) | | 35,730 | | 38,052 |
12.75% 6/24/28 (Reg. S) | | 5,820 | | 9,821 |
euro 10% 6/26/07 | | 3,175 | | 3,290 |
State of Qatar 9.75% 6/15/30 (Reg. S) | | 6,005 | | 8,392 |
Turkish Republic: | | | | |
0% 4/9/08 | TRY | 4,245 | | 1,903 |
11.75% 6/15/10 | | 13,695 | | 15,407 |
11.875% 1/15/30 | | 13,030 | | 17,786 |
13.1525% to 16.4124% 6/27/07 | TRY | 10,485 | | 5,431 |
Ukraine Government: | | | | |
(Reg. S) 6.875% 3/4/11 | | 5,925 | | 5,792 |
8.235% 8/5/09 (h) | | 11,025 | | 11,549 |
United Kingdom, Great Britain & Northern Ireland: | | | | |
4.25% 3/7/11 | GBP | 13,000 | | 23,509 |
4.25% 6/7/32 | GBP | 850 | | 1,536 |
4.25% 3/7/36 | GBP | 8,150 | | 14,840 |
4.75% 6/7/10 | GBP | 250 | | 461 |
4.75% 9/7/15 | GBP | 4,300 | | 7,966 |
5% 3/7/25 | GBP | 670 | | 1,309 |
8% 6/7/21 | GBP | 7,800 | | 19,555 |
8.75% 8/25/17 | GBP | 515 | | 1,284 |
United Mexican States: | | | | |
7.5% 4/8/33 | | 8,085 | | 8,590 |
8.3% 8/15/31 | | 12,535 | | 14,478 |
11.5% 5/15/26 | | 4,630 | | 6,790 |
Uruguay Republic 7.5% 3/15/15 | | 1,820 | | 1,756 |
Venezuelan Republic: | | | | |
oil recovery rights 4/15/20 (j) | | 3,260 | | 111 |
5.375% 8/7/10 | | 3,415 | | 3,239 |
6% 12/9/20 | | 2,165 | | 1,873 |
6.09% 4/20/11 (h) | | 7,350 | | 7,332 |
7% 12/1/18 (Reg. S) | | 2,290 | | 2,198 |
7.65% 4/21/25 | | 3,300 | | 3,284 |
Foreign Government and Government Agency Obligations - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
Venezuelan Republic: - continued | | | | |
9.25% 9/15/27 | | $ 5,125 | | $ 6,035 |
10.75% 9/19/13 | | 5,560 | | 6,605 |
13.625% 8/15/18 | | 5,355 | | 7,631 |
Vietnamese Socialist Republic Brady par 3.75% 3/12/28 (e) | | 2,110 | | 1,646 |
TOTAL FOREIGN GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (Cost $844,300) | 868,168 |
Common Stocks - 0.7% |
| | Shares | | |
CONSUMER DISCRETIONARY - 0.7% |
Auto Components - 0.0% |
Intermet Corp. (a)(k) | | 113,725 | | 1,304 |
Diversified Consumer Services - 0.1% |
Coinmach Service Corp. unit | | 330,000 | | 5,425 |
Hotels, Restaurants & Leisure - 0.1% |
Centerplate, Inc. unit | | 165,925 | | 2,223 |
Media - 0.5% |
NTL, Inc. | | 750,369 | | 18,684 |
NTL, Inc. warrants 1/13/11 | | 6 | | 0 |
| | | 18,684 |
TOTAL CONSUMER DISCRETIONARY | | | 27,636 |
TELECOMMUNICATION SERVICES - 0.0% |
Wireless Telecommunication Services - 0.0% |
DigitalGlobe, Inc. (a)(f) | | 895 | | 2 |
UTILITIES - 0.0% |
Electric Utilities - 0.0% |
Portland General Electric Co. | | 10,867 | | 271 |
TOTAL COMMON STOCKS (Cost $24,042) | | 27,909 |
Preferred Stocks - 0.1% |
| | Shares | | Value (Note 1) (000s) |
Convertible Preferred Stocks - 0.0% |
MATERIALS - 0.0% |
Chemicals - 0.0% |
Celanese Corp. 4.25% | | 6,600 | | $ 201 |
Nonconvertible Preferred Stocks - 0.1% |
CONSUMER DISCRETIONARY - 0.1% |
Media - 0.1% |
Spanish Broadcasting System, Inc. Class B, 10.75% | | 1,690 | | 1,821 |
Specialty Retail - 0.0% |
GNC Corp. Series A, 12.00% | | 1,170 | | 1,404 |
TOTAL CONSUMER DISCRETIONARY | | | 3,225 |
HEALTH CARE - 0.0% |
Health Care Providers & Services - 0.0% |
Fresenius Medical Care Capital Trust II 7.875% | | 1,260 | | 1,282 |
TELECOMMUNICATION SERVICES - 0.0% |
Diversified Telecommunication Services - 0.0% |
PTV, Inc. Series A, 10.00% (a) | | 119 | | 0 |
TOTAL NONCONVERTIBLE PREFERRED STOCKS | | | 4,507 |
TOTAL PREFERRED STOCKS (Cost $4,312) | | 4,708 |
Floating Rate Loans - 3.5% |
| Principal Amount (000s)(l) | | |
CONSUMER DISCRETIONARY - 0.9% |
Auto Components - 0.2% |
Dana Corp. term loan 7.65% 4/13/08 (h) | | $ 340 | | 340 |
Goodyear Tire & Rubber Co.: | | | | |
Tranche 2, term loan 7.9544% 4/30/10 (h) | | 2,235 | | 2,241 |
Tranche 3, term loan 8.7044% 3/1/11 (h) | | 3,550 | | 3,577 |
Lear Corp. term loan 7.9781% 4/25/12 (h) | | 2,470 | | 2,451 |
| | 8,609 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
CONSUMER DISCRETIONARY - continued |
Automobiles - 0.1% |
AM General LLC: | | | | |
Tranche B1, term loan 9.6758% 11/1/11 (h) | | $ 2,210 | | $ 2,243 |
Tranche C2, term loan 14.2088% 5/2/12 (h) | | 1,300 | | 1,339 |
| | 3,582 |
Diversified Consumer Services - 0.0% |
Coinmach Corp. Tranche B1, term loan 7.719% 12/19/12 (h) | | 200 | | 200 |
Hotels, Restaurants & Leisure - 0.0% |
Hilton Head Communications LP Tranche B, term loan 9.5% 3/31/08 (h) | | 1,800 | | 1,710 |
Media - 0.3% |
Charter Communications Operating LLC Tranche B, term loan 7.755% 4/28/13 (h) | | 6,242 | | 6,250 |
CSC Holdings, Inc. Tranche B, term loan 7.0345% 3/29/13 (h) | | 6,364 | | 6,324 |
UPC Broadband Holding BV: | | | | |
Tranche J2, term loan 7.1077% 3/31/13 (h) | | 525 | | 523 |
Tranche K2, term loan 7.1077% 12/31/13 (h) | | 525 | | 523 |
| | 13,620 |
Multiline Retail - 0.1% |
Neiman Marcus Group, Inc. term loan 7.77% 4/6/13 (h) | | 2,316 | | 2,334 |
Specialty Retail - 0.2% |
Toys 'R' US, Inc. term loan 8.1091% 12/9/08 (h) | | 6,110 | | 6,049 |
TOTAL CONSUMER DISCRETIONARY | | 36,104 |
CONSUMER STAPLES - 0.0% |
Beverages - 0.0% |
Constellation Brands, Inc. Tranche B, term loan 6.7865% 6/5/13 (h) | | 1,370 | | 1,373 |
ENERGY - 0.2% |
Oil, Gas & Consumable Fuels - 0.2% |
Coffeyville Resources LLC: | | | | |
Credit-Linked Deposit 7.9% 7/8/11 (h) | | 180 | | 180 |
Tranche 2, term loan 12.1875% 7/8/13 (h) | | 2,020 | | 2,060 |
Tranche B1, term loan 7.9456% 7/8/12 (h) | | 268 | | 268 |
Helix Energy Solutions Group, Inc. term loan 7.4973% 5/9/13 (h) | | 1,370 | | 1,367 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
ENERGY - continued |
Oil, Gas & Consumable Fuels - continued |
Targa Resources, Inc./Targa Resources Finance Corp.: | | | | |
Credit-Linked Deposit 7.6238% 10/31/12 (h) | | $ 540 | | $ 545 |
term loan: | | | | |
7.3266% 10/31/12 (h) | | 2,233 | | 2,255 |
7.4769% 10/31/07 (h) | | 1,650 | | 1,650 |
| | 8,325 |
FINANCIALS - 0.5% |
Diversified Financial Services - 0.4% |
MGM Holdings II, Inc. Tranche B, term loan 7.7488% 4/8/12 (h) | | 2,304 | | 2,313 |
Olympus Cable Holdings LLC Tranche B, term loan 10.25% 9/30/10 (h) | | 5,220 | | 5,011 |
The NASDAQ Stock Market, Inc.: | | | | |
Tranche B, term loan 6.975% 4/18/12 (h) | | 4,578 | | 4,578 |
Tranche C, term loan 6.9833% 4/18/12 (h) | | 2,654 | | 2,654 |
| | 14,556 |
Real Estate Investment Trusts - 0.1% |
Capital Automotive (REIT) Tranche B, term loan 6.86% 12/16/10 (h) | | 3,820 | | 3,810 |
Newkirk Master LP Tranche B, term loan 6.8338% 8/11/08 (h) | | 139 | | 139 |
| | 3,949 |
TOTAL FINANCIALS | | 18,505 |
HEALTH CARE - 0.1% |
Health Care Providers & Services - 0.1% |
DaVita, Inc. Tranche B, term loan 7.1305% 10/5/12 (h) | | 4,823 | | 4,829 |
INDUSTRIALS - 0.3% |
Airlines - 0.2% |
Delta Air Lines, Inc.: | | | | |
Tranche B, term loan 10.0225% 3/16/08 (h) | | 250 | | 254 |
Tranche C, term loan 12.7725% 3/16/08 (h) | | 4,010 | | 4,130 |
UAL Corp.: | | | | |
Tranche B, term loan 8.625% 2/1/12 (h) | | 3,246 | | 3,283 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
INDUSTRIALS - continued |
Airlines - continued |
UAL Corp.: - continued | | | | |
Tranche DD, term loan 9.125% 2/1/12 (h) | | $ 464 | | $ 469 |
US Airways Group, Inc. term loan 8.9988% 3/31/11 (h) | | 560 | | 562 |
| | 8,698 |
Building Products - 0.0% |
Mueller Group, Inc. term loan 7.4655% 10/3/12 (h) | | 144 | | 144 |
Commercial Services & Supplies - 0.0% |
Allied Waste Industries, Inc.: | | | | |
term loan 6.7593% 1/15/12 (h) | | 551 | | 549 |
Tranche A, Credit-Linked Deposit 6.8464% 1/15/12 (h) | | 214 | | 213 |
| | 762 |
Industrial Conglomerates - 0.0% |
Walter Industries, Inc. term loan 7.0638% 10/3/12 (h) | | 144 | | 144 |
Machinery - 0.0% |
Chart Industries, Inc. Tranche B, term loan 7.1875% 10/17/12 (h) | | 97 | | 97 |
Road & Rail - 0.1% |
Hertz Corp.: | | | | |
Credit-Linked Deposit 7.6744% 12/21/12 (h) | | 143 | | 144 |
Tranche B, term loan 7.4142% 12/21/12 (h) | | 1,022 | | 1,025 |
Tranche DD, term loan 12/21/12 (m) | | 119 | | 119 |
| | 1,288 |
TOTAL INDUSTRIALS | | 11,133 |
INFORMATION TECHNOLOGY - 0.5% |
Communications Equipment - 0.1% |
Nortel Networks Corp. Tranche A, term loan: | | | | |
7.375% 2/15/07 (h) | | 4,450 | | 4,444 |
IT Services - 0.3% |
SunGard Data Systems, Inc. Tranche B, term loan 7.66% 2/10/13 (h) | | 10,801 | | 10,841 |
Software - 0.1% |
Infor Global Solutions AG: | | | | |
Tranche 1, term loan 7.8% 4/18/11 (h) | | 2,330 | | 2,327 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
INFORMATION TECHNOLOGY - continued |
Software - continued |
Infor Global Solutions AG: - continued | | | | |
Tranche 2, term loan 12.05% 4/18/12 (h) | | $ 1,310 | | $ 1,336 |
Tranche 2, term loan 12.3% 4/18/12 (h) | | 2,160 | | 2,198 |
| | 5,861 |
TOTAL INFORMATION TECHNOLOGY | | 21,146 |
MATERIALS - 0.5% |
Chemicals - 0.0% |
Solutia, Inc. Tranche B, term loan 8.72% 3/31/07 (h) | | 210 | | 211 |
Paper & Forest Products - 0.5% |
Georgia-Pacific Corp.: | | | | |
Tranche 2, term loan 8.3% 12/23/13 (h) | | 6,390 | | 6,446 |
Tranche B1, term loan 7.3394% 12/23/12 (h) | | 11,821 | | 11,806 |
| | 18,252 |
TOTAL MATERIALS | | 18,463 |
TELECOMMUNICATION SERVICES - 0.4% |
Diversified Telecommunication Services - 0.3% |
NTL Cable PLC term loan 10.3% 3/3/07 (h) | | 1,600 | | 1,598 |
Wind Telecomunicazioni Spa: | | | | |
Tranche 2, term loan 11.2819% 3/21/15 (h) | | 2,840 | | 2,954 |
Tranche B, term loan 7.7819% 9/21/13 (h) | | 1,420 | | 1,432 |
Tranche C, term loan 8.2819% 9/21/14 (h) | | 1,420 | | 1,432 |
Windstream Corp. term loan 7.26% 7/17/11 (h) | | 4,510 | | 4,524 |
| | 11,940 |
Wireless Telecommunication Services - 0.1% |
Crown Castle Operating Co. Tranche B, term loan 7.65% 6/1/14 (h) | | 2,240 | | 2,251 |
Leap Wireless International, Inc. Tranche B, term loan 8.2488% 6/16/13 (h) | | 630 | | 633 |
| | 2,884 |
TOTAL TELECOMMUNICATION SERVICES | | 14,824 |
Floating Rate Loans - continued |
| Principal Amount (000s)(l) | | Value (Note 1) (000s) |
UTILITIES - 0.1% |
Independent Power Producers & Energy Traders - 0.1% |
NRG Energy, Inc.: | | | | |
Credit-Linked Deposit 7.4988% 2/1/13 (h) | | $ 748 | | $ 747 |
term loan 7.2306% 2/1/13 (h) | | 3,274 | | 3,280 |
| | 4,027 |
TOTAL FLOATING RATE LOANS (Cost $137,845) | 138,729 |
Sovereign Loan Participations - 0.1% |
|
Indonesian Republic loan participation: | | | | |
- Barclays Bank 6.375% 3/28/13 (h) | | 194 | | 188 |
- Citibank 6.375% 3/28/13 (h) | | 678 | | 658 |
- Credit Suisse First Boston 6.375% 3/28/13 (h) | | 3,045 | | 2,954 |
- Deutsche Bank: | | | | |
1.204% 3/28/13 (h) | JPY | 83,518 | | 690 |
6.375% 3/28/13 (h) | | 871 | | 845 |
TOTAL SOVEREIGN LOAN PARTICIPATIONS (Cost $4,965) | 5,335 |
Commercial Paper - 0.2% |
|
Ebury Finance Ltd. 2.88% 7/10/06 | EUR | 500 | | 639 |
Lake Constance Funding Ltd. 2.88% 7/12/06 | EUR | 5,000 | | 6,390 |
TOTAL COMMERCIAL PAPER (Cost $6,875) | 7,029 |
Fixed-Income Funds - 2.1% |
| | Shares | | |
Fidelity Floating Rate Central Investment Portfolio (i)
(Cost $82,239) | | 820,098 | | 82,149 |
Money Market Funds - 8.2% |
| | Shares | | Value (Note 1) (000s) |
Fidelity Cash Central Fund, 5.11% (b)
(Cost $325,023) | | 325,022,717 | | $ 325,023 |
TOTAL INVESTMENT PORTFOLIO - 99.2% (Cost $3,952,240) | | | 3,947,814 |
NET OTHER ASSETS - 0.8% | | | 30,950 |
NET ASSETS - 100% | | $ 3,978,764 |
Currency Abbreviations |
BRL | - | Brazilian real |
CAD | - | Canadian dollar |
COP | - | Colombian peso |
EGP | - | Egyptian pound |
EUR | - | European Monetary Unit |
GBP | - | British pound |
JPY | - | Japanese yen |
RUB | - | Russian ruble |
TRY | - | New Turkish Lira |
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Non-income producing - Issuer is in default. |
(d) Security initially issued in zero coupon form which converts to coupon form at a specified rate and date. The rate shown is the rate at period end. |
(e) Security initially issued at one coupon which converts to a higher coupon at a specified date. The rate shown is the rate at period end. |
(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 $333,070,000 or 8.4% 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) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited list of holdings for each fixed-income central fund, as of the investing fund's report date, is available upon request or at advisor.fidelity.com. The reports are located just after the fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central fund's financial statements are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request. |
(j) Quantity represents share amount. |
(k) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $1,304,000 or 0.0% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost (000s) |
Intermet Corp. | 11/9/05 | $ 2,153 |
(l) Principal amount is stated in United States dollars unless otherwise noted. |
(m) Position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $119,000 and $119,000, respectively. The interest rate will be determined at time of settlement. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned
(Amounts in thousands) |
Fidelity Cash Central Fund | $ 5,794 |
Fidelity Floating Rate Central Investment Portfolio | 2,746 |
Total | $ 8,540 |
|
Additional information regarding the fund's fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows: |
Fund
(Amounts in thousands) | Value, beginning of period | Purchases | Sales Proceeds | Value,
end of
period | % ownership,
end of
period |
Fidelity Floating Rate Central Investment Portfolio | $ 82,231 | $ - | $ - | $ 82,149 | 6.5% |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 68.6% |
United Kingdom | 2.8% |
Canada | 2.7% |
France | 2.7% |
Brazil | 2.4% |
Japan | 2.2% |
Argentina | 1.7% |
Finland | 1.6% |
Russia | 1.4% |
Venezuela | 1.4% |
Germany | 1.3% |
Luxembourg | 1.3% |
Mexico | 1.1% |
Turkey | 1.0% |
Others (individually less than 1%) | 7.8% |
| 100.0% |
The information in the above table is based on the combined investments of the fund and its pro-rata share of the investments of Fidelity's fixed-income central funds. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements
Statement of Assets and Liabilities
Amounts in thousands (except per-share amounts) | June 30, 2006 (Unaudited) |
| | |
Assets | | |
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $3,544,978) | $ 3,540,642 | |
Affiliated Central Funds (cost $407,262) | 407,172 | |
Total Investments (cost $3,952,240) | | $ 3,947,814 |
Cash | | 926 |
Foreign currency held at value (cost $5) | | 5 |
Receivable for investments sold | | 13,532 |
Receivable for fund shares sold | | 26,748 |
Dividends receivable | | 112 |
Interest receivable | | 53,251 |
Prepaid expenses | | 6 |
Receivable from investment adviser for expense reductions | | 10 |
Other receivables | | 69 |
Total assets | | 4,042,473 |
| | |
Liabilities | | |
Payable for investments purchased
Regular delivery | $ 26,168 | |
Delayed delivery | 20,413 | |
Payable for fund shares redeemed | 11,117 | |
Distributions payable | 2,187 | |
Accrued management fee | 1,862 | |
Distribution fees payable | 1,169 | |
Other affiliated payables | 648 | |
Other payables and accrued expenses | 145 | |
Total liabilities | | 63,709 |
| | |
Net Assets | | $ 3,978,764 |
Net Assets consist of: | | |
Paid in capital | | $ 3,957,643 |
Undistributed net investment income | | 7,097 |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | | 18,344 |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | | (4,320) |
Net Assets | | $ 3,978,764 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
Amounts in thousands (except per-share amounts) | June 30, 2006 (Unaudited) |
| | |
Calculation of Maximum Offering Price
Class A:
Net Asset Value and redemption price per share
($758,050 ÷ 66,366 shares) | | $ 11.42 |
| | |
Maximum offering price per share (100/95.25 of $11.42) | | $ 11.99 |
Class T:
Net Asset Value and redemption price per share
($1,690,455 ÷ 148,046 shares) | | $ 11.42 |
| | |
Maximum offering price per share (100/96.50 of $11.42) | | $ 11.83 |
Class B:
Net Asset Value and offering price per share
($330,260 ÷ 28,857 shares)A | | $ 11.44 |
| | |
Class C:
Net Asset Value and offering price per share
($584,522 ÷ 51,254 shares)A | | $ 11.40 |
| | |
Institutional Class:
Net Asset Value, offering price and redemption price per share ($615,477 ÷ 53,458 shares) | | $ 11.51 |
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.
Semiannual Report
Statement of Operations
Amounts in thousands | Six months ended June 30, 2006 (Unaudited) |
| | |
Investment Income | | |
Dividends | | $ 474 |
Interest | | 103,827 |
Income from affiliated Central Funds | | 8,540 |
Total income | | 112,841 |
| | |
Expenses | | |
Management fee | $ 10,668 | |
Transfer agent fees | 3,183 | |
Distribution fees | 6,826 | |
Accounting fees and expenses | 594 | |
Independent trustees' compensation | 7 | |
Custodian fees and expenses | 173 | |
Registration fees | 257 | |
Audit | 44 | |
Legal | 4 | |
Miscellaneous | 17 | |
Total expenses before reductions | 21,773 | |
Expense reductions | (74) | 21,699 |
Net investment income | | 91,142 |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | | |
Investment securities: | | |
Unaffiliated issuers | 19,784 | |
Foreign currency transactions | 52 | |
Total net realized gain (loss) | | 19,836 |
Change in net unrealized appreciation (depreciation) on: Investment securities | (68,024) | |
Assets and liabilities in foreign currencies | 263 | |
Total change in net unrealized appreciation (depreciation) | | (67,761) |
Net gain (loss) | | (47,925) |
Net increase (decrease) in net assets resulting from operations | | $ 43,217 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Statements - continued
Statement of Changes in Net Assets
Amounts in thousands | Six months ended
June 30, 2006
(Unaudited) | Year ended
December 31,
2005 |
Increase (Decrease) in Net Assets | | |
Operations | | |
Net investment income | $ 91,142 | $ 137,169 |
Net realized gain (loss) | 19,836 | 7,920 |
Change in net unrealized appreciation (depreciation) | (67,761) | (65,133) |
Net increase (decrease) in net assets resulting
from operations | 43,217 | 79,956 |
Distributions to shareholders from net investment income | (85,480) | (132,248) |
Distributions to shareholders from net realized gain | - | (36,255) |
Total distributions | (85,480) | (168,503) |
Share transactions - net increase (decrease) | 544,628 | 1,236,680 |
Total increase (decrease) in net assets | 502,365 | 1,148,133 |
| | |
Net Assets | | |
Beginning of period | 3,476,399 | 2,328,266 |
End of period (including undistributed net investment income of $7,097 and undistributed net investment income of $1,435, respectively) | $ 3,978,764 | $ 3,476,399 |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report
Financial Highlights - Class A
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.54 | $ 11.93 | $ 11.63 | $ 10.34 | $ 10.11 | $ 10.12 |
Income from Investment Operations | | | | | | |
Net investment income E | .292 | .571 | .600 | .617 | .668 | .730 |
Net realized and unrealized gain (loss) | (.137) | (.255) | .445 | 1.321 | .214 | (.081) |
Total from investment operations | .155 | .316 | 1.045 | 1.938 | .882 | .649 |
Distributions from net investment income | (.275) | (.551) | (.575) | (.648) | (.652) | (.659) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.275) | (.706) | (.745) | (.648) | (.652) | (.659) |
Net asset value, end of period | $ 11.42 | $ 11.54 | $ 11.93 | $ 11.63 | $ 10.34 | $ 10.11 |
Total Return B, C, D | 1.34% | 2.75% | 9.31% | 19.20% | 9.09% | 6.53% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | .98% A | .99% | 1.00% | 1.01% | 1.04% | 1.07% |
Expenses net of fee waivers, if any | .98% A | .99% | 1.00% | 1.01% | 1.04% | 1.07% |
Expenses net of all reductions | .98% A | .99% | 1.00% | 1.00% | 1.04% | 1.07% |
Net investment income | 5.10% A | 4.92% | 5.20% | 5.58% | 6.65% | 7.18% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 758 | $ 647 | $ 372 | $ 187 | $ 57 | $ 33 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class T
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.54 | $ 11.92 | $ 11.62 | $ 10.33 | $ 10.11 | $ 10.11 |
Income from Investment Operations | | | | | | |
Net investment income E | .289 | .564 | .593 | .604 | .660 | .725 |
Net realized and unrealized gain (loss) | (.137) | (.245) | .443 | 1.322 | .203 | (.074) |
Total from investment operations | .152 | .319 | 1.036 | 1.926 | .863 | .651 |
Distributions from net investment income | (.272) | (.544) | (.566) | (.636) | (.643) | (.651) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.272) | (.699) | (.736) | (.636) | (.643) | (.651) |
Net asset value, end of period | $ 11.42 | $ 11.54 | $ 11.92 | $ 11.62 | $ 10.33 | $ 10.11 |
Total Return B, C, D | 1.32% | 2.77% | 9.23% | 19.09% | 8.89% | 6.55% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Expenses net of fee waivers, if any | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Expenses net of all reductions | 1.03% A | 1.05% | 1.07% | 1.11% | 1.13% | 1.15% |
Net investment income | 5.05% A | 4.86% | 5.13% | 5.47% | 6.57% | 7.10% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 1,690 | $ 1,427 | $ 808 | $ 515 | $ 279 | $ 238 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class B
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.57 | $ 11.95 | $ 11.65 | $ 10.35 | $ 10.12 | $ 10.13 |
Income from Investment Operations | | | | | | |
Net investment income E | .249 | .486 | .513 | .533 | .595 | .658 |
Net realized and unrealized gain (loss) | (.148) | (.249) | .441 | 1.330 | .212 | (.085) |
Total from investment operations | .101 | .237 | .954 | 1.863 | .807 | .573 |
Distributions from net investment income | (.231) | (.462) | (.484) | (.563) | (.577) | (.583) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.231) | (.617) | (.654) | (.563) | (.577) | (.583) |
Net asset value, end of period | $ 11.44 | $ 11.57 | $ 11.95 | $ 11.65 | $ 10.35 | $ 10.12 |
Total Return B, C, D | .87% | 2.06% | 8.45% | 18.38% | 8.28% | 5.74% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.78% A | 1.78% | 1.78% | 1.77% | 1.78% | 1.81% |
Expenses net of fee waivers, if any | 1.75% A | 1.75% | 1.78% | 1.77% | 1.78% | 1.81% |
Expenses net of all reductions | 1.75% A | 1.75% | 1.78% | 1.77% | 1.78% | 1.81% |
Net investment income | 4.33% A | 4.16% | 4.42% | 4.81% | 5.91% | 6.44% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 330 | $ 342 | $ 319 | $ 287 | $ 147 | $ 116 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Class C
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.53 | $ 11.91 | $ 11.61 | $ 10.32 | $ 10.10 | $ 10.11 |
Income from Investment Operations | | | | | | |
Net investment income E | .243 | .475 | .505 | .525 | .585 | .647 |
Net realized and unrealized gain (loss) | (.146) | (.246) | .444 | 1.320 | .204 | (.082) |
Total from investment operations | .097 | .229 | .949 | 1.845 | .789 | .565 |
Distributions from net investment income | (.227) | (.454) | (.479) | (.555) | (.569) | (.575) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.227) | (.609) | (.649) | (.555) | (.569) | (.575) |
Net asset value, end of period | $ 11.40 | $ 11.53 | $ 11.91 | $ 11.61 | $ 10.32 | $ 10.10 |
Total Return B, C, D | .83% | 1.99% | 8.43% | 18.24% | 8.10% | 5.67% |
Ratios to Average Net Assets F, H | | | | | |
Expenses before reductions | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Expenses net of fee waivers, if any | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Expenses net of all reductions | 1.82% A | 1.82% | 1.82% | 1.84% | 1.87% | 1.89% |
Net investment income | 4.26% A | 4.09% | 4.37% | 4.74% | 5.83% | 6.35% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 585 | $ 540 | $ 405 | $ 277 | $ 68 | $ 40 |
Portfolio turnover rate G | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
G Amounts do not include the portfolio activity of the affiliated central fund.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Financial Highlights - Institutional Class
| Six months ended
June 30, 2006 | Years ended December 31, |
| (Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 |
Selected Per-Share Data | | | | | |
Net asset value, beginning of period | $ 11.63 | $ 12.02 | $ 11.71 | $ 10.40 | $ 10.17 | $ 10.18 |
Income from Investment Operations | | | | | | |
Net investment income D | .305 | .599 | .627 | .635 | .685 | .725 |
Net realized and unrealized gain (loss) | (.140) | (.262) | .449 | 1.338 | .210 | (.059) |
Total from investment operations | .165 | .337 | 1.076 | 1.973 | .895 | .666 |
Distributions from net investment income | (.285) | (.572) | (.596) | (.663) | (.665) | (.676) |
Distributions from net realized gain | - | (.155) | (.170) | - | - | - |
Total distributions | (.285) | (.727) | (.766) | (.663) | (.665) | (.676) |
Net asset value, end of period | $ 11.51 | $ 11.63 | $ 12.02 | $ 11.71 | $ 10.40 | $ 10.17 |
Total Return B, C | 1.42% | 2.91% | 9.53% | 19.44% | 9.17% | 6.67% |
Ratios to Average Net Assets E, G | | | | | |
Expenses before reductions | .80% A | .81% | .81% | .87% | .92% | .94% |
Expenses net of fee waivers, if any | .80% A | .81% | .81% | .87% | .92% | .94% |
Expenses net of all reductions | .80% A | .80% | .81% | .87% | .92% | .94% |
Net investment income | 5.29% A | 5.10% | 5.38% | 5.71% | 6.78% | 7.31% |
Supplemental Data | | | | | | |
Net assets, end of period (in millions) | $ 615 | $ 520 | $ 424 | $ 291 | $ 120 | $ 42 |
Portfolio turnover rate F | 95% A | 109% | 94% | 153% | 111% | 120% |
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 Amounts do not include the activity of the affiliated central fund.
F Amounts do not include the portfolio activity of the affiliated central fund.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from 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.
Semiannual Report
Notes to Financial Statements
For the period ended June 30, 2006 (Unaudited)
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Strategic 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 Fund may invest in fixed-income Central Investment Portfolios (CIPs), referred to as the Central Funds, and affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. 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 Funds, which are also consistently followed by the Central Funds:
Security Valuation. Investments are valued and net asset value per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. The frequency of when fair value pricing is used is unpredictable. The value of securities used for NAV calculation under fair value pricing may differ from
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
1. Significant Accounting Policies - continued
Security Valuation - continued
published prices for the same securities. Investments in open-end mutual funds, including the Central Funds, are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
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, including the Fund's investment activity in the Central Funds, 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. 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.
Semiannual Report
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 each Fund 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 the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
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 dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to short-term capital gains, foreign currency transactions, certain foreign taxes, prior period premium and discount on debt securities, defaulted bonds, market discount, partnerships, non-taxable dividends, deferred trustees compensation, financing transactions, and losses deferred due to wash sales and excise tax regulations.
The federal tax cost of investments and unrealized appreciation (depreciation) as of period end were as follows:
Unrealized appreciation | $ 79,109 |
Unrealized depreciation | (78,616) |
Net unrealized appreciation (depreciation) | $ 493 |
Cost for federal income tax purposes | $ 3,947,321 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
2. Operating Policies.
Repurchase Agreements. 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 which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
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's terms, 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, 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.
Semiannual Report
2. Operating Policies - continued
Mortgage Dollar Rolls. 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 may 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, a fund's right to repurchase or sell securities may be limited.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and U.S. government securities, aggregated $1,484,606 and $1,151,206, respectively.
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 ..12% 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 annualized management fee rate was .57% 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,
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
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
Fee | Service
Fee | Paid to
FDC | Retained
by FDC |
Class A | 0% | .15% | $ 532 | $ 16 |
Class T | 0% | .25% | 1,963 | 100 |
Class B | .65% | .25% | 1,517 | 1,099 |
Class C | .75% | .25% | 2,814 | 892 |
| | | $ 6,826 | $ 2,107 |
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, some of which is paid to financial intermediaries for selling 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, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
| Retained
by FDC |
Class A | $ 388 |
Class T | 110 |
Class B* | 397 |
Class C* | 62 |
| $ 957 |
* 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 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 shareholder reports, except proxy statements. For the period the total transfer agent fees
Semiannual Report
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
paid by each class to FIIOC, were as follows:
| Amount | % of
Average
Net Assets |
Class A | $ 692 | .20* |
Class T | 1,136 | .15* |
Class B | 395 | .24* |
Class C | 504 | .18* |
Institutional Class | 456 | .16* |
| $ 3,183 | |
* Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The fee is based on the level of average net assets for the month.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Fund may also invest in CIPs managed by FIMM, or Fidelity Management & Research Company Inc. (FMRC), each an affiliate of FMR.
The Floating Rate Central Investment Portfolio seeks a high level of income by normally investing in floating rate loans and other floating rate securities.
The Fund's Schedule of Investments lists the Central Fund as an investment of the Fund but does not include the underlying holdings of the Central Fund. Based on its investment objectives, the Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks, including the risk that a counterparty to one or more of these transactions may be unable or unwilling to comply with the terms of the governing agreement. This may result in a decline in value of the Central Fund and the Fund.
A complete unaudited list of holdings for the Central Fund, as of the Fund's report date, is available upon request or at advisor.fidelity.com. The reports are located just after the Fund's financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the Central Fund financial statements are available on the EDGAR Database on the SEC's web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 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, which amounts to $3 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual 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.
The following classes were in reimbursement during the period:
| Expense
Limitations | Reimbursement
from adviser |
Class B | 1.75% | $ 47 |
In addition, 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 $23. During the period, credits reduced each class' transfer agent expense as noted in the table below.
| Transfer Agent
expense reduction |
Class A | $ 3 |
Class C | 1 |
| $ 4 |
7. Credit Risk.
The Fund's relatively large investment in countries with limited or developing capital markets may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The yields of emerging market debt obligations reflect, among other things, perceived credit risk. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the Fund's investments and the income they generate, as well as the Fund's ability to repatriate such amounts.
Semiannual Report
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
From net investment income | | |
Class A | $ 16,859 | $ 24,357 |
Class T | 37,035 | 53,100 |
Class B | 6,724 | 13,236 |
Class C | 11,069 | 18,751 |
Institutional Class | 13,793 | 22,804 |
Total | $ 85,480 | $ 132,248 |
From net realized gain | | |
Class A | $ - | $ 6,205 |
Class T | - | 13,720 |
Class B | - | 4,302 |
Class C | - | 6,019 |
Institutional Class | - | 6,009 |
Total | $ - | $ 36,255 |
Semiannual Report
Notes to Financial Statements (Unaudited) - continued
(Amounts in thousands except ratios)
10. Share Transactions.
Transactions for each class of shares were as follows:
| Shares | Dollars |
| Six months ended
June 30,
2006 | Year ended
December 31,
2005 | Six months ended
June 30,
2006 | Year ended
December 31,
2005 |
Class A | | | | |
Shares sold | 18,599 | 35,042 | $ 214,748 | $ 408,757 |
Reinvestment of distributions | 1,183 | 2,123 | 13,655 | 24,731 |
Shares redeemed | (9,471) | (12,325) | (109,298) | (143,648) |
Net increase (decrease) | 10,311 | 24,840 | $ 119,105 | $ 289,840 |
Class T | | | | |
Shares sold | 38,505 | 73,391 | $ 444,572 | $ 855,542 |
Reinvestment of distributions | 3,007 | 5,375 | 34,691 | 62,638 |
Shares redeemed | (17,151) | (22,830) | (197,922) | (265,605) |
Net increase (decrease) | 24,361 | 55,936 | $ 281,341 | $ 652,575 |
Class B | | | | |
Shares sold | 3,087 | 8,646 | $ 35,716 | $ 100,980 |
Reinvestment of distributions | 423 | 1,104 | 4,895 | 12,908 |
Shares redeemed | (4,219) | (6,915) | (48,817) | (80,693) |
Net increase (decrease) | (709) | 2,835 | $ (8,206) | $ 33,195 |
Class C | | | | |
Shares sold | 9,905 | 20,463 | $ 114,108 | $ 238,454 |
Reinvestment of distributions | 679 | 1,502 | 7,826 | 17,494 |
Shares redeemed | (6,157) | (9,092) | (70,964) | (105,690) |
Net increase (decrease) | 4,427 | 12,873 | $ 50,970 | $ 150,258 |
Institutional Class | | | | |
Shares sold | 14,604 | 15,959 | $ 169,771 | $ 187,439 |
Reinvestment of distributions | 979 | 2,098 | 11,381 | 24,620 |
Shares redeemed | (6,850) | (8,622) | (79,734) | (101,247) |
Net increase (decrease) | 8,733 | 9,435 | $ 101,418 | $ 110,812 |
Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Advisor Strategic Income Fund
On January 19, 2006, the Board of Trustees, including the Independent Trustees (together, the Board), voted to approve a general research services agreement (the Agreement) between FMR, FMR Co., Inc. (FMRC), Fidelity Investments Money Management, Inc. (FIMM), and Fidelity Research & Analysis Company (FRAC) (together, the Investment Advisers) for the fund, effective January 20, 2006, pursuant to which FRAC may provide general research and investment advisory support services to FMRC and FIMM. The Board considered that it has approved previously various sub-advisory agreements for the fund with affiliates of FMR that allow FMR to obtain research, non-discretionary advice, or discretionary portfolio management at no additional expense to the fund. The Board, assisted by the advice of fund counsel and independent Trustees' counsel, considered a broad range of information and determined that it would be beneficial for the fund to access the research and investment advisory support services supplied by FRAC at no additional expense to the fund.
The Board reached this determination in part because the new arrangement will involve no changes in (i) the contractual terms of and fees payable under the fund's management contract or sub-advisory agreements; (ii) the investment process or strategies employed in the management of the fund's assets; (iii) the nature or level of services provided under the fund's management contract or sub-advisory agreements; (iv) the day-to-day management of the fund or the persons primarily responsible for such management; or (v) the ultimate control or beneficial ownership of FMR, FMRC, or FIMM. The Board also considered that the establishment of the Agreement would not necessitate prior shareholder approval of the Agreement or result in an assignment and termination of the fund's management contract or sub-advisory agreements under the Investment Company Act of 1940.
Because the Board was approving an arrangement with FRAC under which the fund will not bear any additional management fees or expenses and under which the fund's portfolio manager would not change, it did not consider the fund's investment performance, competitiveness of management fee and total expenses, costs of services and profitability, or economies of scale to be significant factors in its decision.
In connection with its future renewal of the fund's management contract and sub-advisory agreements, the Board will consider: (i) the nature, extent, and quality of services provided to the fund, including shareholder and administrative services and investment performance; (ii) the competitiveness of the fund's management fee and total expenses; (iii) the costs of the services and profitability, including the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering, and servicing the fund and its shareholders; and (iv) whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the fund's Agreement is fair and reasonable, and that the fund's Agreement should be approved.
Each year, typically in June, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Fixed-Income Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its June 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Semiannual Report
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in June 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. The following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Semiannual Report
Fidelity Advisor Strategic Income Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for the one-year period and the first quartile for the three- and five-year periods. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and five-year periods, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 29% means that 71% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Fidelity Advisor Strategic Income Fund
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005. Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
Semiannual Report
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expenses of each of Class A, Class T, Class B, and Institutional Class ranked below its competitive median for 2005, and the total expenses of Class C ranked above its competitive median for 2005. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable, although in one case above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
Semiannual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Semiannual Report
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) funds and accounts managed by Fidelity other than the Fidelity funds, including fee arrangements; (iii) the total expenses of certain funds and classes relative to competitors; (iv) fund performance trends; and (v) Fidelity's fee structures.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
Fidelity Investments Money Management, Inc.
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
The Bank of New York
New York, NY
SII-USAN-0806
1.787776.103
(Fidelity Investment logo)(registered trademark)
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Fidelity Advisor Series II's Board of Trustees.
Item 11. 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Not applicable. |
(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. |
(a) | (3) | Not applicable. |
(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/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 21, 2006 |
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/Christine Reynolds |
| Christine Reynolds |
| President and Treasurer |
| |
Date: | August 21, 2006 |
By: | /s/Joseph B. Hollis |
| Joseph B. Hollis |
| Chief Financial Officer |
| |
Date: | August 21, 2006 |
