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UNITED STATES FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4707
Fidelity Advisor Series II 82 Devonshire St., Boston, Massachusetts 02109 Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109 Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end:
October 31
Date of reporting period:
April 30, 2006
Item 1. Reports to Stockholders
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Exact name of registrant as specified in charter)
(Address of principal executive offices) (Zip code)
(Name and address of agent for service)
Fidelity® Advisor
Mortgage Securities
Fund Class A, Class T, Class B
and Class C
Semiannual Report April 30, 2006 |
Contents | ||||
Chairmans Message | 3 | Ned Johnsons message to | ||
shareholders. | ||||
Shareholder Expense | 4 | An example of shareholder expenses. | ||
Example | ||||
Investment Changes | 6 | A summary of major shifts in the funds | ||
investments over the past six months. | ||||
Investments | 7 | A complete list of the funds | ||
investments with their market values. | ||||
Financial Statements | 17 | Statements of assets and liabilities, | ||
operations, and changes in net assets, | ||||
as well as financial highlights. | ||||
Notes | 27 | Notes to the financial statements. | ||
Board Approval of | 36 | |||
Investment Advisory | ||||
Contracts and | ||||
Management Fees |
To view a funds 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 Commis sions (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 & Poors, 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 SECs web site at http://www.sec.gov. A funds Forms N Q may be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information regarding the operation of the SECs Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a funds port folio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelitys 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 |
2 |
Chairmans Message
(photograph of Edward C. Johnson
3d)
Dear Shareholder:
Although many securities markets made
gains in early 2006, there is only one certainty when it comes to investing:
There is no sure thing. There are, however, a number of time tested, fundamental
investment 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 doesnt
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 portfolios 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 invest ing regularly can help lower
the average cost of your purchases. Investing a certain amount of money each
month or quarter helps ensure you wont 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
3 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 (November 1, 2005 to April 30, 2006).
Actual Expenses |
The first line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
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.
Semiannual Report |
4 |
Expenses Paid | ||||||||||||
Beginning | Ending | During Period* | ||||||||||
Account Value | Account Value | November 1, 2005 | ||||||||||
November 1, 2005 | April 30, 2006 | to April 30, 2006 | ||||||||||
Class A | ||||||||||||
Actual | $ 1,000.00 | $ 1,009.70 | $ 3.74 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,021.08 | $ 3.76 | |||||||||
Class T | ||||||||||||
Actual | $ 1,000.00 | $ 1,010.30 | $ 4.04 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 | |||||||||
Class B | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.90 | $ 7.51 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,017.31 | $ 7.55 | |||||||||
Class C | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.60 | $ 7.91 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,016.91 | $ 7.95 | |||||||||
Fidelity Mortgage Securities Fund | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.20 | $ 2.24 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 | |||||||||
Institutional Class | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.80 | $ 2.59 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.22 | $ 2.61 | |||||||||
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 funds annualized expense ratio.
Annualized | ||
Expense Ratio | ||
Class A | 75% | |
Class T | 81% | |
Class B | 1.51% | |
Class C | 1.59% | |
Fidelity Mortgage Securities Fund | 45% | |
Institutional Class | 52% |
5 Semiannual Report
Investment Changes | ||||
Coupon Distribution as of April 30, 2006 | ||||
% of funds | % of funds investments | |||
investments | 6 months ago | |||
Less than 4% | 2.2 | 2.0 | ||
4 4.99% | 15.6 | 30.1 | ||
5 5.99% | 60.1 | 36.9 | ||
6 6.99% | 15.2 | 14.2 | ||
7% and over | 3.2 | 3.4 |
Coupon distribution shows the range of stated interest rates on the funds investments, excluding short term investments.
Average Years to Maturity as of April 30, 2006 | ||||
6 months ago | ||||
Years | 5.7 | 4.5 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the funds bonds, weighted by dollar amount.
Duration as of April 30, 2006 | ||||||
6 months ago | ||||||
Years | 4.0 | 3.3 |
Duration shows how much a bond funds price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five year duration is likely to lose about 5% of its value. Other factors also can influence a bond funds performance and share price. Accordingly, a bond funds actual performance may differ from this example.
(dagger) Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelitys fixed income central fund.
For an unaudited list of holdings for each fixed income central fund, visit fidelity.com. and/or advisor.fidelity.com, as applicable.
Semiannual Report 6
Investments April 30, 2006 (Unaudited) | ||||||||
Showing Percentage of Net Assets | ||||||||
U.S. Government Agency Mortgage Securities 85.5% | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae 63.9% | ||||||||
3.734% 1/1/35 (d) | $ 439 | $ 431 | ||||||
3.749% 12/1/34 (d) | 351 | 345 | ||||||
3.752% 10/1/33 (d) | 297 | 290 | ||||||
3.782% 12/1/34 (d) | 67 | 66 | ||||||
3.792% 6/1/34 (d) | 1,386 | 1,340 | ||||||
3.824% 6/1/33 (d) | 228 | 224 | ||||||
3.829% 1/1/35 (d) | 284 | 280 | ||||||
3.847% 1/1/35 (d) | 857 | 842 | ||||||
3.853% 11/1/34 (d) | 1,716 | 1,689 | ||||||
3.854% 10/1/33 (d) | 7,169 | 7,018 | ||||||
3.869% 1/1/35 (d) | 514 | 506 | ||||||
3.879% 6/1/33 (d) | 1,188 | 1,166 | ||||||
3.902% 10/1/34 (d) | 332 | 327 | ||||||
3.913% 5/1/34 (d) | 112 | 112 | ||||||
3.917% 12/1/34 (d) | 267 | 263 | ||||||
3.947% 11/1/34 (d) | 553 | 545 | ||||||
3.957% 1/1/35 (d) | 362 | 356 | ||||||
3.96% 5/1/33 (d) | 107 | 105 | ||||||
3.972% 12/1/34 (d) | 283 | 279 | ||||||
3.978% 12/1/34 (d) | 358 | 353 | ||||||
3.983% 12/1/34 (d) | 1,869 | 1,843 | ||||||
3.988% 1/1/35 (d) | 231 | 228 | ||||||
4% 6/1/18 to 5/1/19 | 20,248 | 18,933 | ||||||
4.003% 12/1/34 (d) | 173 | 171 | ||||||
4.006% 2/1/35 (d) | 247 | 243 | ||||||
4.013% 1/1/35 (d) | 499 | 492 | ||||||
4.021% 2/1/35 (d) | 224 | 221 | ||||||
4.042% 12/1/34 (d) | 516 | 509 | ||||||
4.048% 10/1/18 (d) | 275 | 270 | ||||||
4.05% 1/1/35 (d) | 143 | 141 | ||||||
4.051% 1/1/35 (d) | 232 | 229 | ||||||
4.066% 4/1/33 (d) | 103 | 101 | ||||||
4.067% 1/1/35 (d) | 476 | 470 | ||||||
4.09% 2/1/35 (d) | 191 | 188 | ||||||
4.091% 2/1/35 (d) | 480 | 474 | ||||||
4.092% 2/1/35 (d) | 183 | 180 | ||||||
4.106% 2/1/35 (d) | 903 | 892 | ||||||
4.109% 1/1/35 (d) | 518 | 511 | ||||||
4.113% 11/1/34 (d) | 403 | 398 | ||||||
4.115% 2/1/35 (d) | 582 | 575 | ||||||
4.121% 1/1/35 (d) | 492 | 485 | ||||||
4.122% 1/1/35 (d) | 904 | 893 |
See accompanying notes which are an integral part of the financial statements.
7 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
4.144% 1/1/35 (d) | $ 781 | $ 774 | ||||||
4.153% 2/1/35 (d) | 496 | 489 | ||||||
4.166% 11/1/34 (d) | 123 | 122 | ||||||
4.176% 1/1/35 (d) | 432 | 427 | ||||||
4.178% 1/1/35 (d) | 916 | 906 | ||||||
4.178% 1/1/35 (d) | 634 | 616 | ||||||
4.188% 10/1/34 (d) | 769 | 763 | ||||||
4.22% 3/1/34 (d) | 267 | 261 | ||||||
4.223% 1/1/35 (d) | 281 | 278 | ||||||
4.25% 2/1/35 (d) | 320 | 311 | ||||||
4.267% 2/1/35 (d) | 181 | 179 | ||||||
4.28% 8/1/33 (d) | 615 | 608 | ||||||
4.283% 3/1/35 (d) | 285 | 281 | ||||||
4.287% 7/1/34 (d) | 231 | 230 | ||||||
4.299% 5/1/35 (d) | 414 | 410 | ||||||
4.304% 12/1/34 (d) | 183 | 181 | ||||||
4.316% 3/1/33 (d) | 152 | 148 | ||||||
4.356% 1/1/35 (d) | 316 | 308 | ||||||
4.357% 4/1/35 (d) | 193 | 190 | ||||||
4.362% 2/1/34 (d) | 711 | 699 | ||||||
4.392% 1/1/35 (d) | 362 | 359 | ||||||
4.393% 11/1/34 (d) | 3,823 | 3,790 | ||||||
4.395% 5/1/35 (d) | 911 | 901 | ||||||
4.398% 2/1/35 (d) | 463 | 452 | ||||||
4.434% 10/1/34 (d) | 1,463 | 1,452 | ||||||
4.436% 4/1/34 (d) | 476 | 471 | ||||||
4.438% 3/1/35 (d) | 422 | 412 | ||||||
4.465% 8/1/34 (d) | 924 | 910 | ||||||
4.474% 5/1/35 (d) | 305 | 302 | ||||||
4.481% 1/1/35 (d) | 434 | 430 | ||||||
4.5% 4/1/18 to 4/1/35 | 254,071 | 236,188 | ||||||
4.504% 8/1/34 (d) | 598 | 597 | ||||||
4.54% 2/1/35 (d) | 1,948 | 1,933 | ||||||
4.543% 2/1/35 (d) | 208 | 207 | ||||||
4.545% 7/1/35 (d) | 1,116 | 1,105 | ||||||
4.546% 2/1/35 (d) | 305 | 303 | ||||||
4.704% 3/1/35 (d) | 525 | 515 | ||||||
4.726% 7/1/34 (d) | 871 | 859 | ||||||
4.798% 12/1/32 (d) | 420 | 419 | ||||||
4.798% 12/1/34 (d) | 332 | 328 | ||||||
5% 9/1/16 to 12/1/34 | 98,875 | 96,108 | ||||||
5% 5/1/36 (b) | 78,531 | 74,288 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
8 |
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
5% 5/1/36 (b) | $ 46,000 | $ 43,515 | ||||||
5% 5/1/36 (b) | 102,043 | 96,529 | ||||||
5% 5/1/36 (b) | 14,900 | 14,095 | ||||||
5.104% 5/1/35 (d) | 2,074 | 2,072 | ||||||
5.197% 6/1/35 (d) | 1,474 | 1,474 | ||||||
5.5% 1/1/09 to 2/1/36 | 219,507 | 215,648 | ||||||
5.5% 5/1/36 (b) | 101,791 | 98,862 | ||||||
5.5% 5/11/36 (b) | 40,000 | 38,849 | ||||||
6% 4/1/08 to 6/1/35 | 143,689 | 144,273 | ||||||
6% 5/1/36 (b)(c) | 30,222 | 30,087 | ||||||
6.5% 2/1/20 to 12/1/35 | 61,976 | 63,197 | ||||||
6.5% 5/1/36 (b) | 3,041 | 3,092 | ||||||
7% 3/1/17 to 7/1/33 | 7,048 | 7,262 | ||||||
7.5% 4/1/22 to 9/1/32 | 3,090 | 3,211 | ||||||
8% 9/1/07 to 12/1/29 | 28 | 30 | ||||||
8.5% 1/1/16 to 7/1/31 | 389 | 413 | ||||||
9% 6/1/09 to 10/1/30 | 937 | 1,010 | ||||||
9.5% 5/1/07 to 8/1/22 | 170 | 185 | ||||||
11% 8/1/10 | 95 | 101 | ||||||
12.25% 5/1/13 to 5/1/15 | 36 | 41 | ||||||
12.5% 8/1/15 to 3/1/16 | 47 | 53 | ||||||
12.75% 2/1/15 | 5 | 6 | ||||||
13.5% 9/1/14 to 12/1/14 | 33 | 39 | ||||||
1,239,538 | ||||||||
Freddie Mac 21.1% | ||||||||
4% 4/1/19 | 5,608 | 5,227 | ||||||
4.05% 12/1/34 (d) | 332 | 326 | ||||||
4.106% 12/1/34 (d) | 466 | 459 | ||||||
4.152% 1/1/35 (d) | 422 | 416 | ||||||
4.263% 3/1/35 (d) | 420 | 414 | ||||||
4.294% 5/1/35 (d) | 745 | 735 | ||||||
4.304% 12/1/34 (d) | 439 | 427 | ||||||
4.33% 1/1/35 (d) | 975 | 962 | ||||||
4.353% 2/1/35 (d) | 895 | 883 | ||||||
4.443% 3/1/35 (d) | 436 | 424 | ||||||
4.45% 2/1/34 (d) | 424 | 416 | ||||||
4.462% 6/1/35 (d) | 667 | 657 | ||||||
4.482% 3/1/35 (d) | 487 | 474 | ||||||
4.484% 3/1/35 (d) | 3,036 | 2,985 | ||||||
4.5% 8/1/33 | 4,728 | 4,349 |
See accompanying notes which are an integral part of the financial statements.
9 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Freddie Mac continued | ||||||||
4.552% 2/1/35 (d) | $ 698 | $ 681 | ||||||
5% 7/1/33 to 9/1/35 | 129,426 | 122,406 | ||||||
5.007% 4/1/35 (d) | 2,325 | 2,314 | ||||||
5.405% 8/1/33 (d) | 193 | 193 | ||||||
5.5% 6/1/09 to 2/1/36 | 233,613 | 227,732 | ||||||
6% 5/1/16 to 10/1/34 | 14,035 | 14,074 | ||||||
6.5% 1/1/24 to 12/1/33 | 11,597 | 11,837 | ||||||
7.5% 2/1/08 to 7/1/32 | 10,024 | 10,391 | ||||||
8% 10/1/07 to 4/1/21 | 71 | 73 | ||||||
8.5% 7/1/09 to 9/1/20 | 169 | 178 | ||||||
9% 9/1/08 to 5/1/21 | 495 | 528 | ||||||
10% 1/1/09 to 5/1/19 | 144 | 154 | ||||||
10.5% 8/1/10 to 2/1/16 | 14 | 15 | ||||||
12.5% 5/1/12 to 12/1/14 | 90 | 100 | ||||||
13% 12/1/13 to 6/1/15 | 135 | 154 | ||||||
409,984 | ||||||||
Government National Mortgage Association 0.5% | ||||||||
6.5% 5/15/28 to 7/15/34 | 2,108 | 2,172 | ||||||
7% 2/15/24 to 7/15/32 | 3,418 | 3,558 | ||||||
7.5% 12/15/06 to 4/15/32 | 1,976 | 2,069 | ||||||
8% 12/15/06 to 12/15/25 | 788 | 828 | ||||||
8.5% 8/15/16 to 10/15/28 | 1,209 | 1,298 | ||||||
9% 11/20/17 | 2 | 2 | ||||||
10.5% 12/20/15 to 2/20/18 | 78 | 88 | ||||||
13% 10/15/13 | 7 | 8 | ||||||
13.5% 7/15/11 | 10 | 11 | ||||||
10,034 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE SECURITIES | ||||||||
(Cost $1,704,239) | 1,659,556 | |||||||
Asset Backed Securities 0.8% | ||||||||
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, | ||||||||
4.9406% 2/28/41 (d) | 4,008 | 4,009 | ||||||
Fremont NIMS Trust Series 2004-C Class A, 5.25% | ||||||||
8/25/34 (a) | 203 | 203 | ||||||
GSAMP Trust Series 2005-MTR1 Class A1, 5.0994% | ||||||||
10/25/35 (d) | 4,576 | 4,576 | ||||||
Long Beach Mortgage Loan Trust Series 2003-3 Class M1, | ||||||||
5.7094% 7/25/33 (d) | 3,741 | 3,760 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
10 |
Asset Backed Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Ocala Funding LLC Series 2006-1A Class A, 6.2181% | ||||||||
3/20/11 (a)(d) | $ 2,100 | $ 2,100 | ||||||
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 | ||||||||
Class A1, 3.6% 4/25/33 | 697 | 675 | ||||||
Salomon Brothers Mortgage Securities VII, Inc. Series | ||||||||
2003-UP1 Class A, 3.45% 4/25/32 (a) | 918 | 874 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $16,243) | 16,197 | |||||||
Collateralized Mortgage Obligations 8.6% | ||||||||
Private Sponsor 1.0% | ||||||||
Adjustable Rate Mortgage Trust floater Series 2004-4 | ||||||||
Class 5A2, 5.3594% 3/25/35 (d) | 718 | 719 | ||||||
Countrywide Home Loans, Inc. sequential pay Series 2002-25 | ||||||||
Class 2A1, 5.5% 11/27/17 | 1,128 | 1,123 | ||||||
Credit Suisse First Boston Mortgage Acceptance Corp. | ||||||||
sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 2,299 | 2,300 | ||||||
CS First Boston Mortgage Securities Corp. Series 2002-15R | ||||||||
Class A1, 3.7763% 1/28/32 (a)(d) | 422 | 371 | ||||||
Gracechurch Mortgage Funding PLC floater Series 1A | ||||||||
Class DB, 5.4981% 10/11/41 (a)(d) | 2,520 | 2,519 | ||||||
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% | ||||||||
4/25/18 | 5,675 | 5,707 | ||||||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 1,239 | 1,239 | ||||||
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 316 | 319 | ||||||
WAMU Mortgage pass thru certificates sequential pay | ||||||||
Series 2002-S6 Class A25, 6% 10/25/32 | 780 | 778 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (d) | 4,865 | 4,811 | ||||||
TOTAL PRIVATE SPONSOR | 19,886 | |||||||
U.S. Government Agency 7.6% | ||||||||
Fannie Mae: | ||||||||
planned amortization class: | ||||||||
Series 1993-187 Class L, 6.5% 7/25/23 | 2,290 | 2,332 | ||||||
Series 1994-23 Class PX, 6% 8/25/23 | 2,910 | 2,900 | ||||||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049 | 10,271 | ||||||
Series 1999-15 Class PC, 6% 9/25/18 | 2,859 | 2,873 | ||||||
Series 2003-26 Class KI, 5% 12/25/15 (f) | 4,190 | 393 |
See accompanying notes which are an integral part of the financial statements.
11 Semiannual Report
Investments (Unaudited) continued | ||||||||
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Fannie Mae: continued | ||||||||
Series 2003-39 Class IA, 5.5% 10/25/22 (d)(f) | $ 3,015 | $ 527 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||||||
planned amortization class: | ||||||||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000 | 10,225 | ||||||
Series 2002-11 Class QB, 5.5% 3/25/15 | 837 | 835 | ||||||
Series 2002-49 Class KG, 5.5% 8/25/17 | 4,020 | 3,977 | ||||||
Series 2003-73 Class GA, 3.5% 5/25/31 | 12,329 | 11,425 | ||||||
sequential pay: | ||||||||
Series 2002-9 Class C, 6.5% 6/25/30 | 3,571 | 3,582 | ||||||
Series 2004-65 Class EY, 5.5% 8/25/24 | 7,265 | 6,889 | ||||||
Series 2005-41 Class LA, 5.5% 5/25/35 | 3,477 | 3,411 | ||||||
Series 2005-55 Class LY, 5.5% 7/25/25 | 6,595 | 6,289 | ||||||
Series 2002-50 Class LE, 7% 12/25/29 | 202 | 203 | ||||||
Series 2003-42 Class HS, 2.1406% 12/25/17 (d)(f) | 12,220 | 626 | ||||||
Series 2005-50 Class DZ, 5% 6/25/35 | 1,008 | 1,002 | ||||||
Series 2005-69 Class ZL, 4.5% 8/25/25 | 1,699 | 1,693 | ||||||
Freddie Mac: | ||||||||
floater Series 2344 Class FP, 5.86% 8/15/31 (d) | 1,513 | 1,542 | ||||||
planned amortization class: | ||||||||
Series 2104 Class PG, 6% 12/15/28 | 2,180 | 2,185 | ||||||
Series 2512 Class PG, 5.5% 10/15/22 | 5,100 | 4,886 | ||||||
Series 70 Class C, 9% 9/15/20 | 203 | 202 | ||||||
sequential pay: | ||||||||
Series 2114 Class ZM, 6% 1/15/29 | 1,084 | 1,092 | ||||||
Series 2516 Class AH, 5% 1/15/16 | 1,201 | 1,190 | ||||||
Freddie Mac Manufactured Housing participation certificates | ||||||||
guaranteed planned amortization class Series 2043 | ||||||||
Class CJ, 6.5% 4/15/28 | 1,862 | 1,925 | ||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
floater: | ||||||||
Series 2406: | ||||||||
Class FP, 5.89% 1/15/32 (d) | 2,988 | 3,066 | ||||||
Class PF, 5.89% 12/15/31 (d) | 2,735 | 2,819 | ||||||
Series 2410 Class PF, 5.89% 2/15/32 (d) | 5,993 | 6,173 | ||||||
Series 2412 Class GF, 5.86% 2/15/32 (d) | 1,259 | 1,296 | ||||||
Series 2958 Class TF, 0% 4/15/35 (d) | 836 | 785 | ||||||
planned amortization class: | ||||||||
Series 2568 Class KG, 5.5% 2/15/23 | 8,820 | 8,362 | ||||||
Series 2763 Class PD, 4.5% 12/15/17 | 4,360 | 4,111 | ||||||
Series 2780 Class OC, 4.5% 3/15/17 | 2,175 | 2,094 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
12 |
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
continued | ||||||||
planned amortization class: | ||||||||
Series 2802 Class OB, 6% 5/15/34 | $ 3,375 | $ 3,348 | ||||||
Series 2810 Class PD, 6% 6/15/33 | 2,540 | 2,506 | ||||||
Series 2885 Class PC, 4.5% 3/15/18 | 2,845 | 2,725 | ||||||
Series 3077 Class TO, 4/15/35 (g) | 5,146 | 3,577 | ||||||
sequential pay: | ||||||||
Series 2135 Class JE, 6% 3/15/29 | 3,328 | 3,299 | ||||||
Series 2281 Class ZB, 6% 3/15/30 | 1,439 | 1,445 | ||||||
Series 2608 Class FJ, 5.31% 3/15/17 (d) | 3,995 | 4,014 | ||||||
Series 2638 Class FA, 5.31% 11/15/16 (d) | 3,694 | 3,710 | ||||||
Series 2644 Class EF, 5.26% 2/15/18 (d) | 4,166 | 4,184 | ||||||
Series 2750 Class ZT, 5% 2/15/34 | 2,418 | 2,041 | ||||||
Series 3097 Class IA, 5.5% 3/15/33 (f) | 5,461 | 1,132 | ||||||
Series 1658 Class GZ, 7% 1/15/24 | 3,561 | 3,672 | ||||||
TOTAL U.S. GOVERNMENT AGENCY | 146,834 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||
(Cost $168,700) | 166,720 | |||||||
Commercial Mortgage Securities 3.0% | ||||||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.107% | ||||||||
2/14/43 (d)(f) | 38,930 | 1,632 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc. | ||||||||
Series 2004 ESA: | ||||||||
Class B, 4.888% 5/14/16 (a) | 560 | 552 | ||||||
Class C, 4.937% 5/14/16 (a) | 1,165 | 1,150 | ||||||
Class D, 4.986% 5/14/16 (a) | 425 | 420 | ||||||
Class E, 5.064% 5/14/16 (a) | 1,315 | 1,305 | ||||||
Class F, 5.182% 5/14/16 (a) | 315 | 313 | ||||||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, | ||||||||
0.6989% 5/15/35 (a)(d)(f) | 31,753 | 1,740 | ||||||
Chase Commercial Mortgage Securities Corp. Series 1999-2: | ||||||||
Class E, 7.734% 1/15/32 | 1,110 | 1,190 | ||||||
Class F, 7.734% 1/15/32 | 600 | 642 | ||||||
COMM floater Series 2001-FL5A Class E, 6.4013% | ||||||||
11/15/13 (a)(d) | 2,823 | 2,822 |
See accompanying notes which are an integral part of the financial statements.
13 Semiannual Report
Investments (Unaudited) continued | ||||||||
Commercial Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
CS First Boston Mortgage Securities Corp.: | ||||||||
sequential pay Series 1999-C1 Class A2, 7.29% 9/15/41 | $ 6,079 | $ 6,367 | ||||||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175 | 5,390 | ||||||
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360 | 3,585 | ||||||
Deutsche Mortgage & Asset Receiving Corp. sequential pay | ||||||||
Series 1998-C1 Class D, 7.231% 6/15/31 | 1,390 | 1,442 | ||||||
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5313% | ||||||||
2/17/24 (d) | 4,606 | 4,793 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates | ||||||||
Series 1998-49 Class MI, 0.826% 6/17/38 (d)(f) | 86,766 | 3,242 | ||||||
Greenwich Capital Commercial Funding Corp. Series 2002-C1 | ||||||||
Class SWDB, 5.857% 11/11/19 (a) | 2,600 | 2,560 | ||||||
GS Mortgage Securities Corp. II Series 1998-GLII Class E, | ||||||||
6.9671% 4/13/31 (d) | 390 | 401 | ||||||
Host Marriott Pool Trust sequential pay Series 1999-HMTA | ||||||||
Class B, 7.3% 8/3/15 (a) | 785 | 828 | ||||||
LB-UBS Commercial Mortgage Trust sequential pay | ||||||||
Series 2000-C3 Class A2, 7.95% 1/15/10 | 2,790 | 3,014 | ||||||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% | ||||||||
11/20/37 (a) | 10,815 | 8,849 | ||||||
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, | ||||||||
7.3486% 4/30/39 (a)(d) | 1,550 | 1,550 | ||||||
Trizechahn Office Properties Trust Series 2001-TZHA Class E3, | ||||||||
7.253% 3/15/13 (a) | 4,276 | 4,389 | ||||||
TOTAL COMMERCIAL MORTGAGE SECURITIES | ||||||||
(Cost $62,062) | 58,176 | |||||||
Fixed Income Funds 21.8% | ||||||||
Shares | ||||||||
Fidelity Ultra-Short Central Fund (e) | ||||||||
(Cost $421,431) | 4,247,691 | 422,603 | ||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||
Semiannual Report | 14 |
Cash Equivalents 0.7% | ||||||||||
Maturity | Value (Note 1) | |||||||||
Amount (000s) | (000s) | |||||||||
Investments in repurchase agreements (Collateralized by U.S. | ||||||||||
Government Obligations, in a joint trading account at | ||||||||||
4.78%, dated 4/28/06 due 5/1/06) | ||||||||||
(Cost $13,483) | $ 13,488 | $ 13,483 | ||||||||
TOTAL INVESTMENT PORTFOLIO 120.4% | ||||||||||
(Cost $2,386,158) | 2,336,735 | |||||||||
NET OTHER ASSETS (20.4)% | (396,533) | |||||||||
NET ASSETS 100% | $ 1,940,202 | |||||||||
Swap Agreements | ||||||||||
Expiration | Notional | Value | ||||||||
Date | Amount (000s) | (000s) | ||||||||
Interest Rate Swaps | ||||||||||
Receive quarterly a floating rate based on | ||||||||||
3-month LIBOR and pay semi-annually a | ||||||||||
fixed rate equal to 5.234% with Lehman | ||||||||||
Brothers, Inc. | March 2036 | $ 9,000 | $ 620 | |||||||
Receive semi-annually a fixed rate equal to | ||||||||||
5.132% and pay quarterly a floating rate | ||||||||||
based on 3-month LIBOR with Lehman | ||||||||||
Brothers, Inc. | March 2009 | 50,000 | (217) | |||||||
TOTAL INTEREST RATE SWAPS | 59,000 | 403 | ||||||||
Total Return Swaps | ||||||||||
Receive monthly a return equal to Lehman | ||||||||||
Brothers CMBS U.S. Aggregate Index and | ||||||||||
pay monthly a floating rate based on | ||||||||||
1-month LIBOR minus 20 basis points with | ||||||||||
Citibank | May 2006 | 20,000 | (70) | |||||||
TOTAL TOTAL RETURN SWAPS | 20,000 | (70) | ||||||||
$ 79,000 | $ 333 | |||||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||||
15 | Semiannual Report |
Investments (Unaudited) continued
Legend (a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $32,545,000 or 1.7% of net assets. (b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. (c) A portion of the security is subject to a forward commitment to sell. (d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) 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 funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central funds financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request. (f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. (g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
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 Ultra Short Central Fund | $ 10,299 |
Additional information regarding the funds fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows:
Value, | Purchases | Sales | Value, end of | % ownership, | ||||||||||
Fund | beginning of | Proceeds | period | end of period | ||||||||||
(Amounts in thousands) | period | |||||||||||||
Fidelity Ultra Short | ||||||||||||||
Central Fund | $ 447,428 | $ | $ 24,997 | $ 422,603 | 5.9% |
Income Tax Information
At October 31, 2005, the fund had a capital loss carryforward of approximately $2,479,000 all of which will expire on October 31, 2013.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 16
Financial Statements | ||||||
Statement of Assets and Liabilities | ||||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||||
Assets | ||||||
Investment in securities, at value (including repurchase | ||||||
agreements of $13,483) | ||||||
See accompanying schedule: | ||||||
Unaffiliated issuers (cost $1,964,727) | $ 1,914,132 | |||||
Affiliated Central Funds (cost $421,431) | 422,603 | |||||
Total Investments (cost $2,386,158) | $ 2,336,735 | |||||
Commitment to sell securities on a delayed delivery basis | (3,484) | |||||
Receivable for securities sold on a delayed delivery basis | 3,483 | (1) | ||||
Receivable for investments sold, regular delivery | 1,605 | |||||
Cash | 434 | |||||
Receivable for fund shares sold | 1,184 | |||||
Interest receivable | 9,016 | |||||
Swap agreements, at value | 333 | |||||
Total assets | 2,349,306 | |||||
Liabilities | ||||||
Payable for investments purchased | ||||||
Regular delivery | $ 4,764 | |||||
Delayed delivery | 400,122 | |||||
Payable for fund shares redeemed | 2,674 | |||||
Distributions payable | 600 | |||||
Accrued management fee | 522 | |||||
Distribution fees payable | 121 | |||||
Other affiliated payables | 244 | |||||
Other payables and accrued expenses | 57 | |||||
Total liabilities | 409,104 | |||||
Net Assets | $ 1,940,202 | |||||
Net Assets consist of: | ||||||
Paid in capital | $ 1,994,428 | |||||
Distributions in excess of net investment income | (2,708) | |||||
Accumulated undistributed net realized gain (loss) on | ||||||
investments | (2,427) | |||||
Net unrealized appreciation (depreciation) on | ||||||
investments | (49,091) | |||||
Net Assets | $ 1,940,202 |
See accompanying notes which are an integral part of the financial statements.
17 Semiannual Report
Financial Statements continued | ||||
Statement of Assets and Liabilities continued | ||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||
Calculation of Maximum Offering Price | ||||
Class A: | ||||
Net Asset Value and redemption price per share | ||||
($52,667 ÷ 4,847.4 shares) | $ 10.86 | |||
Maximum offering price per share (100/95.25 of $10.86) | $ 11.40 | |||
Class T: | ||||
Net Asset Value and redemption price per share | ||||
($106,514 ÷ 9,790 shares) | $ 10.88 | |||
Maximum offering price per share (100/96.50 of $10.88) | $ 11.27 | |||
Class B: | ||||
Net Asset Value and offering price per share | ||||
($82,685 ÷ 7,611 shares)A | $ 10.86 | |||
Class C: | ||||
Net Asset Value and offering price per share | ||||
($34,311 ÷ 3,161 shares)A | $ 10.85 | |||
Fidelity Mortgage Securities Fund: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($1,648,518 ÷ 151,454 shares) | $ 10.88 | |||
Institutional Class: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($15,507 ÷ 1,428 shares) | $ 10.86 | |||
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 18
Statement of Operations | ||||||
Amounts in thousands | Six months ended April 30, 2006 (Unaudited) | |||||
Investment Income | ||||||
Interest | $ 41,081 | |||||
Income from affiliated Central Funds | 10,299 | |||||
Total income | 51,380 | |||||
Expenses | ||||||
Management fee | $ 3,287 | |||||
Transfer agent fees | 1,217 | |||||
Distribution fees | 786 | |||||
Fund wide operations fee | 289 | |||||
Independent trustees compensation | 4 | |||||
Miscellaneous | 2 | |||||
Total expenses before reductions | 5,585 | |||||
Expense reductions | (7) | 5,578 | ||||
Net investment income | 45,802 | |||||
Realized and Unrealized Gain (Loss) | ||||||
Net realized gain (loss) on: | ||||||
Investment securities: | ||||||
Unaffiliated issuers | (4,646) | |||||
Affiliated Central Funds | (13) | |||||
Swap agreements | (740) | |||||
Total net realized gain (loss) | (5,399) | |||||
Change in net unrealized appreciation (depreciation) on: | ||||||
Investment securities | (16,594) | |||||
Swap agreements | 459 | |||||
Delayed delivery commitments | (1) | |||||
Total change in net unrealized appreciation | ||||||
(depreciation) | (16,136) | |||||
Net gain (loss) | (21,535) | |||||
Net increase (decrease) in net assets resulting from | ||||||
operations | $ 24,267 |
See accompanying notes which are an integral part of the financial statements.
19 Semiannual Report
Financial Statements continued | ||||||
Statement of Changes in Net Assets | ||||||
Six months ended | Year ended | |||||
April 30, 2006 | October 31, | |||||
Amounts in thousands | (Unaudited) | 2005 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income | $ 45,802 | $ 80,564 | ||||
Net realized gain (loss) | (5,399) | 1,596 | ||||
Change in net unrealized appreciation (depreciation) . | (16,136) | (52,287) | ||||
Net increase (decrease) in net assets resulting from | ||||||
operations | 24,267 | 29,873 | ||||
Distributions to shareholders from net investment income . | (46,139) | (83,034) | ||||
Distributions to shareholders from net realized gain | | (10,450) | ||||
Total distributions | (46,139) | (93,484) | ||||
Share transactions - net increase (decrease) | (179,406) | 288,375 | ||||
Total increase (decrease) in net assets | (201,278) | 224,764 | ||||
Net Assets | ||||||
Beginning of period | 2,141,480 | 1,916,716 | ||||
End of period (including distributions in excess of net | ||||||
investment income of $2,708 and distributions in | ||||||
excess of net investment income of $2,371, | ||||||
respectively) | $ 1,940,202 | $ 2,141,480 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
20 |
Financial Highlights Class A | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .235 | .408 | .365 | .282 | .502H | .630 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.267) | .181 | .112 | .172H | .613 | ||||||||
Total from investment | ||||||||||||||
operations | 107 | .141 | .546 | .394 | .674 | 1.243 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.237) | (.421) | (.366) | (.274) | (.534) | (.653) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.237) | (.481) | (.516) | (.354) | (.534) | (.653) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | 97% | 1.26% | 4.97% | 3.56% | 6.26% | 12.15% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Net investment income | 4.31%A | 3.65% | 3.24% | 2.51% | 4.55%H | 5.86% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 53 | $ 50 | $ 55 | $ 69 | $ 63 | $ 15 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
21 Semiannual Report
Financial Highlights Class T | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .232 | .400 | .353 | .270 | .492H | .622 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.118) | (.268) | .181 | .101 | .171H | .617 | ||||||||
Total from investment | ||||||||||||||
operations | .114 | .132 | .534 | .371 | .663 | 1.239 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.234) | (.412) | (.354) | (.261) | (.523) | (.639) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.234) | (.472) | (.504) | (.341) | (.523) | (.639) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C,D | 1.03% | 1.18% | 4.86% | 3.34% | 6.15% | 12.09% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Net investment income | 4.25%A | 3.57% | 3.14% | 2.39% | 4.45%H | 5.75% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 107 | $ 126 | $ 131 | $ 155 | $ 195 | $ 106 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
22 |
Financial Highlights Class B | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .194 | .323 | .278 | .197 | .421H | .551 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.257) | .172 | .112 | .171H | .611 | ||||||||
Total from investment | ||||||||||||||
operations | .066 | .066 | .450 | .309 | .592 | 1.162 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.196) | (.336) | (.280) | (.189) | (.452) | (.572) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.196) | (.396) | (.430) | (.269) | (.452) | (.572) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | .59% | .58% | 4.08% | 2.78% | 5.48% | 11.32% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of all | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.57% | 1.60% | ||||||||
Net investment income | 3.55%A | 2.89% | 2.48% | 1.75% | 3.82%H | 5.11% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 83 | $ 101 | $ 134 | $ 182 | $ 176 | $ 57 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
23 Semiannual Report
Financial Highlights Class C | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001G | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period . | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | $ 10.89 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeE | .189 | .316 | .273 | .189 | .413I | .112 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.127) | (.257) | .172 | .112 | .173I | .238 | ||||||||||
Total from investment | ||||||||||||||||
operations | .062 | .059 | .445 | .301 | .586 | .350 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.192) | (.329) | (.275) | (.181) | (.436) | (.140) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.192) | (.389) | (.425) | (.261) | (.436) | (1.40) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.85 | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | ||||||||||
Total ReturnB,C,D | .56% | .52% | 4.04% | 2.71% | 5.43% | 3.22% | ||||||||||
Ratios to Average Net AssetsF,H | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Net investment income | 3.48%A | 2.82% | 2.42% | 1.68% | 3.75%I | 4.87%A | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 34 | $ 41 | $ 58 | $ 99 | $ 74 | $ 3 | ||||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the activity of the affiliated central fund. G For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001. 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. 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 expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. I Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
24 |
Financial Highlights Fidelity Mortgage Securities Fund | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeD | .252 | .438 | .390 | .306 | .526G | .654 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.129) | (.257) | .183 | .102 | .170G | .619 | ||||||||
Total from investment | ||||||||||||||
operations | .123 | .181 | .573 | .408 | .696 | 1.273 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.253) | (.451) | (.393) | (.298) | (.556) | (.673) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.253) | (.511) | (.543) | (.378) | (.556) | (.673) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C | 1.12% | 1.61% | 5.21% | 3.68% | 6.47% | 12.44% | ||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Net investment income | 4.61%A | 3.91% | 3.48% | 2.72% | 4.76%G | 6.04% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 1,649 | $ 1,807 | $ 1,525 | $ 1,302 | $ 1,208 | $ 430 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
25 Semiannual Report
Financial Highlights Institutional Class | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeD | .247 | .432 | .387 | .302 | .513G | .644 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.117) | (.266) | .182 | .112 | .171G | .610 | ||||||||||
Total from investment | ||||||||||||||||
operations | .130 | .166 | .569 | .414 | .684 | 1.254 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.250) | (.446) | (.389) | (.294) | (.544) | (.664) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.250) | (.506) | (.539) | (.374) | (.544) | (.664) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.86 | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | ||||||||||
Total ReturnB,C | 1.18% | 1.48% | 5.19% | 3.75% | 6.36% | 12.27% | ||||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .76% | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Net investment income | 4.54%A | 3.87% | 3.45% | 2.69% | 4.65%G | 5.95% | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 16 | $ 16 | $ 13 | $ 16 | $ 12 | $ 7 | ||||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
26 |
Notes to Financial Statements
For the period ended April 30, 2006 (Unaudited)
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is regis tered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Mortgage Securities Fund, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. 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), and fixed income Central Investment Portfolios (CIPs), collectively referred to as 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, 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 quotes 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. 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 published prices for the same securities. 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.
27 Semiannual Report
Notes to Financial Statements (Unaudited) continued |
(Amounts in thousands except ratios) |
1. Significant Accounting Policies continued |
Investment Transactions and Income. Security transactions, including the funds 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. 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.
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 funds 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. Distribu tions 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. 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 prior period premium and discount on debt securities, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards, 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 | $ 5,198 | |||
Unrealized depreciation | (49,863) | |||
Net unrealized appreciation (depreciation) | $ (44,665) | |||
Cost for federal income tax purposes | $ 2,381,400 |
Semiannual
Report |
28 |
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 funds 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 underly ing securities or if the counterparty does not perform under the contracts 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 transac tions 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 funds Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses,
29 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
2. Operating Policies continued |
||
Swap Agreements continued |
respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Total return swaps are agreements to exchange the return generated by one instrument or index for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, a fund will receive a payment from the counterparty. To the extent it is less, a fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accom panying Statement of Operations as realized gains or losses, respectively.
Swaps are marked to market daily based on dealer supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a funds custodian in compliance with swap contracts. Risks may exceed amounts recognized on the State ment of Assets and Liabilities. These risks include changes in the returns of the underly ing instruments, failure of the counterparties to perform under the contracts terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the funds Schedule of Investments under the caption Swap Agreements.
Mortgage Dollar Rolls. To earn additional income, the fund may employ trading strate gies 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 differen tial 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 funds right to repurchase or sell securities may be limited.
Semiannual
Report |
30 |
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $15,247 and $50,205, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the funds 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 .32% of the funds average net assets.
Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the
Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |||||||||
Fee | Fee | FDC | by FDC | |||||||||
Class A | 0% | .15% | $ 39 | $ 1 | ||||||||
Class T | 0% | .25% | 145 | 1 | ||||||||
Class B | .65% | .25% | 414 | 300 | ||||||||
Class C | .75% | .25% | 188 | 18 | ||||||||
$ 786 | $ 320 |
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 interme diaries 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,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
31 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
4. Fees and Other Transactions with Affiliates continued | ||
Sales Load - continued |
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||||
by FDC | ||||
Class A | $ 6 | |||
Class T | 5 | |||
Class B* | 162 | |||
Class C* | 2 | |||
$ 175 |
* 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 ser vicing agent for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FSC receives an asset based fee of .10% of Fidelity Mortgage Securities Funds average net assets. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. The account fees were eliminated. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
% of | ||||||
Average | ||||||
Amount | Net Assets | |||||
Class A | $ 62 | .24* | ||||
Class T | 119 | .21* | ||||
Class B | 114 | .25* | ||||
Class C | 42 | .22* | ||||
Fidelity Mortgage Securities Fund | 867 | .10* | ||||
Institutional Class | 13 | .16* | ||||
$ 1,217 |
* Annualized
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agree ment (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b 1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annualized rate of .03% of average net assets.
Semiannual Report 32
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 fund may also invest in CIPs managed by FIMM. The Ultra Short Central Fund seeks to obtain a high level of current income consistent with preservation of capital by invest ing in U.S. dollar denominated money market and investment grade debt securities.
The funds Schedule of Investments lists the CIP as an investment of the fund but does not include the underlying holdings of the CIP. Based on its investment objectives, the CIP may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the CIP may also participate in derivatives. 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 CIP and the fund.
A complete unaudited list of holdings for the CIP, as of the funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the CIPs financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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 share holder 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 $2 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. |
Through arrangements with the funds custodian, credits realized as a result of unin vested cash balances were used to reduce the funds expenses. During the period, these credits reduced the funds management fees by $7.
33 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
7. Other. |
The funds 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 funds 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.
8. Distributions to Shareholders. | ||||||||
Distributions to shareholders of each class were as follows: | ||||||||
Six months ended | Year ended | |||||||
April 30, 2006 | October 31, 2005 | |||||||
From net investment income | ||||||||
Class A | $ 1,112 | $ 2,029 | ||||||
Class T | 2,457 | 4,745 | ||||||
Class B | 1,644 | 3,543 | ||||||
Class C | 657 | 1,456 | ||||||
Fidelity Mortgage Securities Fund | 39,894 | 70,651 | ||||||
Institutional Class | 375 | 610 | ||||||
Total | $ 46,139 | $ 83,034 | ||||||
From net realized gain | ||||||||
Class A | $ | $ 287 | ||||||
Class T | | 691 | ||||||
Class B | | 700 | ||||||
Class C | | 301 | ||||||
Fidelity Mortgage Securities Fund | | 8,396 | ||||||
Institutional Class | | 75 | ||||||
Total | $ | $ 10,450 |
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Report |
34 |
9. Share Transactions. | ||||||||||||
Transactions for each class of shares were as follows: | ||||||||||||
Shares | Dollars | |||||||||||
Six months ended | Year ended | Six months ended | Year ended | |||||||||
April 30, 2006 | October 31, 2005 | April 30, 2006 | October 31, 2005 | |||||||||
Class A | ||||||||||||
Shares sold | 1,132 | 1,644 | $ 12,460 | $ 18,382 | ||||||||
Reinvestment of | ||||||||||||
distributions | 87 | 179 | 952 | 2,002 | ||||||||
Shares redeemed | (963) | (2,106) | (10,573) | (23,537) | ||||||||
Net increase (decrease) . | 256 | (283) | $ 2,839 | $ (3,153) | ||||||||
Class T | ||||||||||||
Shares sold | 912 | 3,841 | $ 10,025 | $ 43,073 | ||||||||
Reinvestment of | ||||||||||||
distributions | 212 | 458 | 2,330 | 5,128 | ||||||||
Shares redeemed | (2,753) | (4,417) | (30,288) | (49,428) | ||||||||
Net increase (decrease) . | (1,629) | (118) | $ (17,933) | $ (1,227) | ||||||||
Class B | ||||||||||||
Shares sold | 109 | 374 | $ 1,195 | $ 4,184 | ||||||||
Reinvestment of | ||||||||||||
distributions | 120 | 308 | 1,322 | 3,440 | ||||||||
Shares redeemed | (1,817) | (3,340) | (19,958) | (37,334) | ||||||||
Net increase (decrease) . | (1,588) | (2,658) | $ (17,441) | $ (29,710) | ||||||||
Class C | ||||||||||||
Shares sold | 158 | 501 | $ 1,739 | $ 5,615 | ||||||||
Reinvestment of | ||||||||||||
distributions | 47 | 124 | 514 | 1,386 | ||||||||
Shares redeemed | (779) | (2,018) | (8,547) | (22,545) | ||||||||
Net increase (decrease) . | (574) | (1,393) | $ (6,294) | $ (15,544) | ||||||||
Fidelity Mortgage | ||||||||||||
Securities Fund | ||||||||||||
Shares sold | 12,458 | 60,281 | $ 137,177 | $ 676,321 | ||||||||
Reinvestment of | ||||||||||||
distributions | 3,365 | 6,543 | 36,994 | 73,241 | ||||||||
Shares redeemed | (28,561) | (37,075) | (314,291) | (414,945) | ||||||||
Net increase (decrease) . | (12,738) | 29,749 | $ (140,120) | $ 334,617 | ||||||||
Institutional Class | ||||||||||||
Shares sold | 297 | 733 | $ 3,254 | $ 8,212 | ||||||||
Reinvestment of | ||||||||||||
distributions | 26 | 44 | 289 | 496 | ||||||||
Shares redeemed | (366) | (476) | (4,000) | (5,316) | ||||||||
Net increase (decrease) . | (43) | 301 | $ (457) | $ 3,392 |
35 Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Mortgage Securities 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 Manage ment, 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 funds manage ment contract or sub advisory agreements; (ii) the investment process or strategies employed in the management of the funds assets; (iii) the nature or level of services provided under the funds management contract or sub advisory agreements; (iv) the day to day management of the fund or the persons primarily responsible for such man agement; 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 necessi tate prior shareholder approval of the Agreement or result in an assignment and termination of the funds 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 funds portfolio manager would not change, it did not consider the funds investment perfor mance, 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 funds 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 funds 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
Semiannual Report |
36 |
appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the funds Agreement is fair and reasonable, and that the funds Agreement should be approved.
37 Semiannual Report
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38 |
39 Semiannual Report
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40 |
41 Semiannual Report
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42 |
43 Semiannual Report
Investment
Adviser Fidelity Management & Research Company Boston, MA Investment Sub Advisers Fidelity Investments Money Management, Inc. Fidelity Management & Research (U.K.) 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 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 |
AMOR-USAN-0606 1.784898.103 |
Fidelity® Advisor Mortgage Securities Fund Institutional Class |
Semiannual Report April 30, 2006 |
Contents | ||||
Chairmans Message | 3 | Ned Johnsons message to | ||
shareholders. | ||||
Shareholder Expense | 4 | An example of shareholder expenses. | ||
Example | ||||
Investment Changes | 6 | A summary of major shifts in the funds | ||
investments over the past six months. | ||||
Investments | 7 | A complete list of the funds | ||
investments with their market values. | ||||
Financial Statements | 17 | Statements of assets and liabilities, | ||
operations, and changes in net assets, | ||||
as well as financial highlights. | ||||
Notes | 27 | Notes to the financial statements. | ||
Board Approval of | 36 | |||
Investment Advisory | ||||
Contracts and | ||||
Management Fees |
To view a funds 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 Commis sions (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 & Poors, 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 SECs web site at http://www.sec.gov. A funds Forms N Q may be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information regarding the operation of the SECs Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a funds port folio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelitys 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 |
2 |
Chairmans Message
(photograph of Edward C. Johnson
3d)
Dear Shareholder:
Although many securities markets made
gains in early 2006, there is only one certainty when it comes to investing:
There is no sure thing. There are, however, a number of time tested, fundamental
investment 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 doesnt
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 portfolios 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 wont 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
3 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 (November 1, 2005 to April 30, 2006).
Actual Expenses |
The first line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
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.
Semiannual Report |
4 |
Expenses Paid | ||||||||||||
Beginning | Ending | During Period* | ||||||||||
Account Value | Account Value | November 1, 2005 | ||||||||||
November 1, 2005 | April 30, 2006 | to April 30, 2006 | ||||||||||
Class A | ||||||||||||
Actual | $ 1,000.00 | $ 1,009.70 | $ 3.74 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,021.08 | $ 3.76 | |||||||||
Class T | ||||||||||||
Actual | $ 1,000.00 | $ 1,010.30 | $ 4.04 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 | |||||||||
Class B | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.90 | $ 7.51 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,017.31 | $ 7.55 | |||||||||
Class C | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.60 | $ 7.91 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,016.91 | $ 7.95 | |||||||||
Fidelity Mortgage Securities Fund | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.20 | $ 2.24 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 | |||||||||
Institutional Class | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.80 | $ 2.59 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.22 | $ 2.61 | |||||||||
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 funds annualized expense ratio.
Annualized | ||
Expense Ratio | ||
Class A | 75% | |
Class T | 81% | |
Class B | 1.51% | |
Class C | 1.59% | |
Fidelity Mortgage Securities Fund | 45% | |
Institutional Class | 52% |
5 Semiannual Report
Investment Changes | ||||
Coupon Distribution as of April 30, 2006 | ||||
% of funds | % of funds investments | |||
investments | 6 months ago | |||
Less than 4% | 2.2 | 2.0 | ||
4 4.99% | 15.6 | 30.1 | ||
5 5.99% | 60.1 | 36.9 | ||
6 6.99% | 15.2 | 14.2 | ||
7% and over | 3.2 | 3.4 |
Coupon distribution shows the range of stated interest rates on the funds investments, excluding short term investments.
Average Years to Maturity as of April 30, 2006 | ||||
6 months ago | ||||
Years | 5.7 | 4.5 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the funds bonds, weighted by dollar amount.
Duration as of April 30, 2006 | ||||||
6 months ago | ||||||
Years | 4.0 | 3.3 |
Duration shows how much a bond funds price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five year duration is likely to lose about 5% of its value. Other factors also can influence a bond funds performance and share price. Accordingly, a bond funds actual performance may differ from this example.
(dagger) Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelitys fixed income central fund.
For an unaudited list of holdings for each fixed income central fund, visit fidelity.com. and/or advisor.fidelity.com, as applicable.
Semiannual Report 6
Investments April 30, 2006 (Unaudited) | ||||||||
Showing Percentage of Net Assets | ||||||||
U.S. Government Agency Mortgage Securities 85.5% | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae 63.9% | ||||||||
3.734% 1/1/35 (d) | $ 439 | $ 431 | ||||||
3.749% 12/1/34 (d) | 351 | 345 | ||||||
3.752% 10/1/33 (d) | 297 | 290 | ||||||
3.782% 12/1/34 (d) | 67 | 66 | ||||||
3.792% 6/1/34 (d) | 1,386 | 1,340 | ||||||
3.824% 6/1/33 (d) | 228 | 224 | ||||||
3.829% 1/1/35 (d) | 284 | 280 | ||||||
3.847% 1/1/35 (d) | 857 | 842 | ||||||
3.853% 11/1/34 (d) | 1,716 | 1,689 | ||||||
3.854% 10/1/33 (d) | 7,169 | 7,018 | ||||||
3.869% 1/1/35 (d) | 514 | 506 | ||||||
3.879% 6/1/33 (d) | 1,188 | 1,166 | ||||||
3.902% 10/1/34 (d) | 332 | 327 | ||||||
3.913% 5/1/34 (d) | 112 | 112 | ||||||
3.917% 12/1/34 (d) | 267 | 263 | ||||||
3.947% 11/1/34 (d) | 553 | 545 | ||||||
3.957% 1/1/35 (d) | 362 | 356 | ||||||
3.96% 5/1/33 (d) | 107 | 105 | ||||||
3.972% 12/1/34 (d) | 283 | 279 | ||||||
3.978% 12/1/34 (d) | 358 | 353 | ||||||
3.983% 12/1/34 (d) | 1,869 | 1,843 | ||||||
3.988% 1/1/35 (d) | 231 | 228 | ||||||
4% 6/1/18 to 5/1/19 | 20,248 | 18,933 | ||||||
4.003% 12/1/34 (d) | 173 | 171 | ||||||
4.006% 2/1/35 (d) | 247 | 243 | ||||||
4.013% 1/1/35 (d) | 499 | 492 | ||||||
4.021% 2/1/35 (d) | 224 | 221 | ||||||
4.042% 12/1/34 (d) | 516 | 509 | ||||||
4.048% 10/1/18 (d) | 275 | 270 | ||||||
4.05% 1/1/35 (d) | 143 | 141 | ||||||
4.051% 1/1/35 (d) | 232 | 229 | ||||||
4.066% 4/1/33 (d) | 103 | 101 | ||||||
4.067% 1/1/35 (d) | 476 | 470 | ||||||
4.09% 2/1/35 (d) | 191 | 188 | ||||||
4.091% 2/1/35 (d) | 480 | 474 | ||||||
4.092% 2/1/35 (d) | 183 | 180 | ||||||
4.106% 2/1/35 (d) | 903 | 892 | ||||||
4.109% 1/1/35 (d) | 518 | 511 | ||||||
4.113% 11/1/34 (d) | 403 | 398 | ||||||
4.115% 2/1/35 (d) | 582 | 575 | ||||||
4.121% 1/1/35 (d) | 492 | 485 | ||||||
4.122% 1/1/35 (d) | 904 | 893 |
See accompanying notes which are an integral part of the financial statements.
7 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
4.144% 1/1/35 (d) | $ 781 | $ 774 | ||||||
4.153% 2/1/35 (d) | 496 | 489 | ||||||
4.166% 11/1/34 (d) | 123 | 122 | ||||||
4.176% 1/1/35 (d) | 432 | 427 | ||||||
4.178% 1/1/35 (d) | 916 | 906 | ||||||
4.178% 1/1/35 (d) | 634 | 616 | ||||||
4.188% 10/1/34 (d) | 769 | 763 | ||||||
4.22% 3/1/34 (d) | 267 | 261 | ||||||
4.223% 1/1/35 (d) | 281 | 278 | ||||||
4.25% 2/1/35 (d) | 320 | 311 | ||||||
4.267% 2/1/35 (d) | 181 | 179 | ||||||
4.28% 8/1/33 (d) | 615 | 608 | ||||||
4.283% 3/1/35 (d) | 285 | 281 | ||||||
4.287% 7/1/34 (d) | 231 | 230 | ||||||
4.299% 5/1/35 (d) | 414 | 410 | ||||||
4.304% 12/1/34 (d) | 183 | 181 | ||||||
4.316% 3/1/33 (d) | 152 | 148 | ||||||
4.356% 1/1/35 (d) | 316 | 308 | ||||||
4.357% 4/1/35 (d) | 193 | 190 | ||||||
4.362% 2/1/34 (d) | 711 | 699 | ||||||
4.392% 1/1/35 (d) | 362 | 359 | ||||||
4.393% 11/1/34 (d) | 3,823 | 3,790 | ||||||
4.395% 5/1/35 (d) | 911 | 901 | ||||||
4.398% 2/1/35 (d) | 463 | 452 | ||||||
4.434% 10/1/34 (d) | 1,463 | 1,452 | ||||||
4.436% 4/1/34 (d) | 476 | 471 | ||||||
4.438% 3/1/35 (d) | 422 | 412 | ||||||
4.465% 8/1/34 (d) | 924 | 910 | ||||||
4.474% 5/1/35 (d) | 305 | 302 | ||||||
4.481% 1/1/35 (d) | 434 | 430 | ||||||
4.5% 4/1/18 to 4/1/35 | 254,071 | 236,188 | ||||||
4.504% 8/1/34 (d) | 598 | 597 | ||||||
4.54% 2/1/35 (d) | 1,948 | 1,933 | ||||||
4.543% 2/1/35 (d) | 208 | 207 | ||||||
4.545% 7/1/35 (d) | 1,116 | 1,105 | ||||||
4.546% 2/1/35 (d) | 305 | 303 | ||||||
4.704% 3/1/35 (d) | 525 | 515 | ||||||
4.726% 7/1/34 (d) | 871 | 859 | ||||||
4.798% 12/1/32 (d) | 420 | 419 | ||||||
4.798% 12/1/34 (d) | 332 | 328 | ||||||
5% 9/1/16 to 12/1/34 | 98,875 | 96,108 | ||||||
5% 5/1/36 (b) | 78,531 | 74,288 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
8 |
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
5% 5/1/36 (b) | $ 46,000 | $ 43,515 | ||||||
5% 5/1/36 (b) | 102,043 | 96,529 | ||||||
5% 5/1/36 (b) | 14,900 | 14,095 | ||||||
5.104% 5/1/35 (d) | 2,074 | 2,072 | ||||||
5.197% 6/1/35 (d) | 1,474 | 1,474 | ||||||
5.5% 1/1/09 to 2/1/36 | 219,507 | 215,648 | ||||||
5.5% 5/1/36 (b) | 101,791 | 98,862 | ||||||
5.5% 5/11/36 (b) | 40,000 | 38,849 | ||||||
6% 4/1/08 to 6/1/35 | 143,689 | 144,273 | ||||||
6% 5/1/36 (b)(c) | 30,222 | 30,087 | ||||||
6.5% 2/1/20 to 12/1/35 | 61,976 | 63,197 | ||||||
6.5% 5/1/36 (b) | 3,041 | 3,092 | ||||||
7% 3/1/17 to 7/1/33 | 7,048 | 7,262 | ||||||
7.5% 4/1/22 to 9/1/32 | 3,090 | 3,211 | ||||||
8% 9/1/07 to 12/1/29 | 28 | 30 | ||||||
8.5% 1/1/16 to 7/1/31 | 389 | 413 | ||||||
9% 6/1/09 to 10/1/30 | 937 | 1,010 | ||||||
9.5% 5/1/07 to 8/1/22 | 170 | 185 | ||||||
11% 8/1/10 | 95 | 101 | ||||||
12.25% 5/1/13 to 5/1/15 | 36 | 41 | ||||||
12.5% 8/1/15 to 3/1/16 | 47 | 53 | ||||||
12.75% 2/1/15 | 5 | 6 | ||||||
13.5% 9/1/14 to 12/1/14 | 33 | 39 | ||||||
1,239,538 | ||||||||
Freddie Mac 21.1% | ||||||||
4% 4/1/19 | 5,608 | 5,227 | ||||||
4.05% 12/1/34 (d) | 332 | 326 | ||||||
4.106% 12/1/34 (d) | 466 | 459 | ||||||
4.152% 1/1/35 (d) | 422 | 416 | ||||||
4.263% 3/1/35 (d) | 420 | 414 | ||||||
4.294% 5/1/35 (d) | 745 | 735 | ||||||
4.304% 12/1/34 (d) | 439 | 427 | ||||||
4.33% 1/1/35 (d) | 975 | 962 | ||||||
4.353% 2/1/35 (d) | 895 | 883 | ||||||
4.443% 3/1/35 (d) | 436 | 424 | ||||||
4.45% 2/1/34 (d) | 424 | 416 | ||||||
4.462% 6/1/35 (d) | 667 | 657 | ||||||
4.482% 3/1/35 (d) | 487 | 474 | ||||||
4.484% 3/1/35 (d) | 3,036 | 2,985 | ||||||
4.5% 8/1/33 | 4,728 | 4,349 |
See accompanying notes which are an integral part of the financial statements.
9 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Freddie Mac continued | ||||||||
4.552% 2/1/35 (d) | $ 698 | $ 681 | ||||||
5% 7/1/33 to 9/1/35 | 129,426 | 122,406 | ||||||
5.007% 4/1/35 (d) | 2,325 | 2,314 | ||||||
5.405% 8/1/33 (d) | 193 | 193 | ||||||
5.5% 6/1/09 to 2/1/36 | 233,613 | 227,732 | ||||||
6% 5/1/16 to 10/1/34 | 14,035 | 14,074 | ||||||
6.5% 1/1/24 to 12/1/33 | 11,597 | 11,837 | ||||||
7.5% 2/1/08 to 7/1/32 | 10,024 | 10,391 | ||||||
8% 10/1/07 to 4/1/21 | 71 | 73 | ||||||
8.5% 7/1/09 to 9/1/20 | 169 | 178 | ||||||
9% 9/1/08 to 5/1/21 | 495 | 528 | ||||||
10% 1/1/09 to 5/1/19 | 144 | 154 | ||||||
10.5% 8/1/10 to 2/1/16 | 14 | 15 | ||||||
12.5% 5/1/12 to 12/1/14 | 90 | 100 | ||||||
13% 12/1/13 to 6/1/15 | 135 | 154 | ||||||
409,984 | ||||||||
Government National Mortgage Association 0.5% | ||||||||
6.5% 5/15/28 to 7/15/34 | 2,108 | 2,172 | ||||||
7% 2/15/24 to 7/15/32 | 3,418 | 3,558 | ||||||
7.5% 12/15/06 to 4/15/32 | 1,976 | 2,069 | ||||||
8% 12/15/06 to 12/15/25 | 788 | 828 | ||||||
8.5% 8/15/16 to 10/15/28 | 1,209 | 1,298 | ||||||
9% 11/20/17 | 2 | 2 | ||||||
10.5% 12/20/15 to 2/20/18 | 78 | 88 | ||||||
13% 10/15/13 | 7 | 8 | ||||||
13.5% 7/15/11 | 10 | 11 | ||||||
10,034 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE SECURITIES | ||||||||
(Cost $1,704,239) | 1,659,556 | |||||||
Asset Backed Securities 0.8% | ||||||||
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, | ||||||||
4.9406% 2/28/41 (d) | 4,008 | 4,009 | ||||||
Fremont NIMS Trust Series 2004-C Class A, 5.25% | ||||||||
8/25/34 (a) | 203 | 203 | ||||||
GSAMP Trust Series 2005-MTR1 Class A1, 5.0994% | ||||||||
10/25/35 (d) | 4,576 | 4,576 | ||||||
Long Beach Mortgage Loan Trust Series 2003-3 Class M1, | ||||||||
5.7094% 7/25/33 (d) | 3,741 | 3,760 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
10 |
Asset Backed Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Ocala Funding LLC Series 2006-1A Class A, 6.2181% | ||||||||
3/20/11 (a)(d) | $ 2,100 | $ 2,100 | ||||||
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 | ||||||||
Class A1, 3.6% 4/25/33 | 697 | 675 | ||||||
Salomon Brothers Mortgage Securities VII, Inc. Series | ||||||||
2003-UP1 Class A, 3.45% 4/25/32 (a) | 918 | 874 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $16,243) | 16,197 | |||||||
Collateralized Mortgage Obligations 8.6% | ||||||||
Private Sponsor 1.0% | ||||||||
Adjustable Rate Mortgage Trust floater Series 2004-4 | ||||||||
Class 5A2, 5.3594% 3/25/35 (d) | 718 | 719 | ||||||
Countrywide Home Loans, Inc. sequential pay Series 2002-25 | ||||||||
Class 2A1, 5.5% 11/27/17 | 1,128 | 1,123 | ||||||
Credit Suisse First Boston Mortgage Acceptance Corp. | ||||||||
sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 2,299 | 2,300 | ||||||
CS First Boston Mortgage Securities Corp. Series 2002-15R | ||||||||
Class A1, 3.7763% 1/28/32 (a)(d) | 422 | 371 | ||||||
Gracechurch Mortgage Funding PLC floater Series 1A | ||||||||
Class DB, 5.4981% 10/11/41 (a)(d) | 2,520 | 2,519 | ||||||
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% | ||||||||
4/25/18 | 5,675 | 5,707 | ||||||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 1,239 | 1,239 | ||||||
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 316 | 319 | ||||||
WAMU Mortgage pass thru certificates sequential pay | ||||||||
Series 2002-S6 Class A25, 6% 10/25/32 | 780 | 778 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (d) | 4,865 | 4,811 | ||||||
TOTAL PRIVATE SPONSOR | 19,886 | |||||||
U.S. Government Agency 7.6% | ||||||||
Fannie Mae: | ||||||||
planned amortization class: | ||||||||
Series 1993-187 Class L, 6.5% 7/25/23 | 2,290 | 2,332 | ||||||
Series 1994-23 Class PX, 6% 8/25/23 | 2,910 | 2,900 | ||||||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049 | 10,271 | ||||||
Series 1999-15 Class PC, 6% 9/25/18 | 2,859 | 2,873 | ||||||
Series 2003-26 Class KI, 5% 12/25/15 (f) | 4,190 | 393 |
See accompanying notes which are an integral part of the financial statements.
11 Semiannual Report
Investments (Unaudited) continued | ||||||||
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Fannie Mae: continued | ||||||||
Series 2003-39 Class IA, 5.5% 10/25/22 (d)(f) | $ 3,015 | $ 527 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||||||
planned amortization class: | ||||||||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000 | 10,225 | ||||||
Series 2002-11 Class QB, 5.5% 3/25/15 | 837 | 835 | ||||||
Series 2002-49 Class KG, 5.5% 8/25/17 | 4,020 | 3,977 | ||||||
Series 2003-73 Class GA, 3.5% 5/25/31 | 12,329 | 11,425 | ||||||
sequential pay: | ||||||||
Series 2002-9 Class C, 6.5% 6/25/30 | 3,571 | 3,582 | ||||||
Series 2004-65 Class EY, 5.5% 8/25/24 | 7,265 | 6,889 | ||||||
Series 2005-41 Class LA, 5.5% 5/25/35 | 3,477 | 3,411 | ||||||
Series 2005-55 Class LY, 5.5% 7/25/25 | 6,595 | 6,289 | ||||||
Series 2002-50 Class LE, 7% 12/25/29 | 202 | 203 | ||||||
Series 2003-42 Class HS, 2.1406% 12/25/17 (d)(f) | 12,220 | 626 | ||||||
Series 2005-50 Class DZ, 5% 6/25/35 | 1,008 | 1,002 | ||||||
Series 2005-69 Class ZL, 4.5% 8/25/25 | 1,699 | 1,693 | ||||||
Freddie Mac: | ||||||||
floater Series 2344 Class FP, 5.86% 8/15/31 (d) | 1,513 | 1,542 | ||||||
planned amortization class: | ||||||||
Series 2104 Class PG, 6% 12/15/28 | 2,180 | 2,185 | ||||||
Series 2512 Class PG, 5.5% 10/15/22 | 5,100 | 4,886 | ||||||
Series 70 Class C, 9% 9/15/20 | 203 | 202 | ||||||
sequential pay: | ||||||||
Series 2114 Class ZM, 6% 1/15/29 | 1,084 | 1,092 | ||||||
Series 2516 Class AH, 5% 1/15/16 | 1,201 | 1,190 | ||||||
Freddie Mac Manufactured Housing participation certificates | ||||||||
guaranteed planned amortization class Series 2043 | ||||||||
Class CJ, 6.5% 4/15/28 | 1,862 | 1,925 | ||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
floater: | ||||||||
Series 2406: | ||||||||
Class FP, 5.89% 1/15/32 (d) | 2,988 | 3,066 | ||||||
Class PF, 5.89% 12/15/31 (d) | 2,735 | 2,819 | ||||||
Series 2410 Class PF, 5.89% 2/15/32 (d) | 5,993 | 6,173 | ||||||
Series 2412 Class GF, 5.86% 2/15/32 (d) | 1,259 | 1,296 | ||||||
Series 2958 Class TF, 0% 4/15/35 (d) | 836 | 785 | ||||||
planned amortization class: | ||||||||
Series 2568 Class KG, 5.5% 2/15/23 | 8,820 | 8,362 | ||||||
Series 2763 Class PD, 4.5% 12/15/17 | 4,360 | 4,111 | ||||||
Series 2780 Class OC, 4.5% 3/15/17 | 2,175 | 2,094 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
12 |
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
continued | ||||||||
planned amortization class: | ||||||||
Series 2802 Class OB, 6% 5/15/34 | $ 3,375 | $ 3,348 | ||||||
Series 2810 Class PD, 6% 6/15/33 | 2,540 | 2,506 | ||||||
Series 2885 Class PC, 4.5% 3/15/18 | 2,845 | 2,725 | ||||||
Series 3077 Class TO, 4/15/35 (g) | 5,146 | 3,577 | ||||||
sequential pay: | ||||||||
Series 2135 Class JE, 6% 3/15/29 | 3,328 | 3,299 | ||||||
Series 2281 Class ZB, 6% 3/15/30 | 1,439 | 1,445 | ||||||
Series 2608 Class FJ, 5.31% 3/15/17 (d) | 3,995 | 4,014 | ||||||
Series 2638 Class FA, 5.31% 11/15/16 (d) | 3,694 | 3,710 | ||||||
Series 2644 Class EF, 5.26% 2/15/18 (d) | 4,166 | 4,184 | ||||||
Series 2750 Class ZT, 5% 2/15/34 | 2,418 | 2,041 | ||||||
Series 3097 Class IA, 5.5% 3/15/33 (f) | 5,461 | 1,132 | ||||||
Series 1658 Class GZ, 7% 1/15/24 | 3,561 | 3,672 | ||||||
TOTAL U.S. GOVERNMENT AGENCY | 146,834 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||
(Cost $168,700) | 166,720 | |||||||
Commercial Mortgage Securities 3.0% | ||||||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.107% | ||||||||
2/14/43 (d)(f) | 38,930 | 1,632 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc. | ||||||||
Series 2004 ESA: | ||||||||
Class B, 4.888% 5/14/16 (a) | 560 | 552 | ||||||
Class C, 4.937% 5/14/16 (a) | 1,165 | 1,150 | ||||||
Class D, 4.986% 5/14/16 (a) | 425 | 420 | ||||||
Class E, 5.064% 5/14/16 (a) | 1,315 | 1,305 | ||||||
Class F, 5.182% 5/14/16 (a) | 315 | 313 | ||||||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, | ||||||||
0.6989% 5/15/35 (a)(d)(f) | 31,753 | 1,740 | ||||||
Chase Commercial Mortgage Securities Corp. Series 1999-2: | ||||||||
Class E, 7.734% 1/15/32 | 1,110 | 1,190 | ||||||
Class F, 7.734% 1/15/32 | 600 | 642 | ||||||
COMM floater Series 2001-FL5A Class E, 6.4013% | ||||||||
11/15/13 (a)(d) | 2,823 | 2,822 |
See accompanying notes which are an integral part of the financial statements.
13 Semiannual Report
Investments (Unaudited) continued | ||||||||
Commercial Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
CS First Boston Mortgage Securities Corp.: | ||||||||
sequential pay Series 1999-C1 Class A2, 7.29% 9/15/41 | $ 6,079 | $ 6,367 | ||||||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175 | 5,390 | ||||||
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360 | 3,585 | ||||||
Deutsche Mortgage & Asset Receiving Corp. sequential pay | ||||||||
Series 1998-C1 Class D, 7.231% 6/15/31 | 1,390 | 1,442 | ||||||
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5313% | ||||||||
2/17/24 (d) | 4,606 | 4,793 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates | ||||||||
Series 1998-49 Class MI, 0.826% 6/17/38 (d)(f) | 86,766 | 3,242 | ||||||
Greenwich Capital Commercial Funding Corp. Series 2002-C1 | ||||||||
Class SWDB, 5.857% 11/11/19 (a) | 2,600 | 2,560 | ||||||
GS Mortgage Securities Corp. II Series 1998-GLII Class E, | ||||||||
6.9671% 4/13/31 (d) | 390 | 401 | ||||||
Host Marriott Pool Trust sequential pay Series 1999-HMTA | ||||||||
Class B, 7.3% 8/3/15 (a) | 785 | 828 | ||||||
LB-UBS Commercial Mortgage Trust sequential pay | ||||||||
Series 2000-C3 Class A2, 7.95% 1/15/10 | 2,790 | 3,014 | ||||||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% | ||||||||
11/20/37 (a) | 10,815 | 8,849 | ||||||
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, | ||||||||
7.3486% 4/30/39 (a)(d) | 1,550 | 1,550 | ||||||
Trizechahn Office Properties Trust Series 2001-TZHA Class E3, | ||||||||
7.253% 3/15/13 (a) | 4,276 | 4,389 | ||||||
TOTAL COMMERCIAL MORTGAGE SECURITIES | ||||||||
(Cost $62,062) | 58,176 | |||||||
Fixed Income Funds 21.8% | ||||||||
Shares | ||||||||
Fidelity Ultra-Short Central Fund (e) | ||||||||
(Cost $421,431) | 4,247,691 | 422,603 | ||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||
Semiannual Report | 14 |
Cash Equivalents 0.7% | ||||||||||
Maturity | Value (Note 1) | |||||||||
Amount (000s) | (000s) | |||||||||
Investments in repurchase agreements (Collateralized by U.S. | ||||||||||
Government Obligations, in a joint trading account at | ||||||||||
4.78%, dated 4/28/06 due 5/1/06) | ||||||||||
(Cost $13,483) | $ 13,488 | $ 13,483 | ||||||||
TOTAL INVESTMENT PORTFOLIO 120.4% | ||||||||||
(Cost $2,386,158) | 2,336,735 | |||||||||
NET OTHER ASSETS (20.4)% | (396,533) | |||||||||
NET ASSETS 100% | $ 1,940,202 | |||||||||
Swap Agreements | ||||||||||
Expiration | Notional | Value | ||||||||
Date | Amount (000s) | (000s) | ||||||||
Interest Rate Swaps | ||||||||||
Receive quarterly a floating rate based on | ||||||||||
3-month LIBOR and pay semi-annually a | ||||||||||
fixed rate equal to 5.234% with Lehman | ||||||||||
Brothers, Inc. | March 2036 | $ 9,000 | $ 620 | |||||||
Receive semi-annually a fixed rate equal to | ||||||||||
5.132% and pay quarterly a floating rate | ||||||||||
based on 3-month LIBOR with Lehman | ||||||||||
Brothers, Inc. | March 2009 | 50,000 | (217) | |||||||
TOTAL INTEREST RATE SWAPS | 59,000 | 403 | ||||||||
Total Return Swaps | ||||||||||
Receive monthly a return equal to Lehman | ||||||||||
Brothers CMBS U.S. Aggregate Index and | ||||||||||
pay monthly a floating rate based on | ||||||||||
1-month LIBOR minus 20 basis points with | ||||||||||
Citibank | May 2006 | 20,000 | (70) | |||||||
TOTAL TOTAL RETURN SWAPS | 20,000 | (70) | ||||||||
$ 79,000 | $ 333 | |||||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||||
15 | Semiannual Report |
Investments (Unaudited) continued
Legend (a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $32,545,000 or 1.7% of net assets. (b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. (c) A portion of the security is subject to a forward commitment to sell. (d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) 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 funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central funds financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request. (f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. (g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
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 Ultra Short Central Fund | $ 10,299 |
Additional information regarding the funds fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows:
Value, | Purchases | Sales | Value, end of | % ownership, | ||||||||||
Fund | beginning of | Proceeds | period | end of period | ||||||||||
(Amounts in thousands) | period | |||||||||||||
Fidelity Ultra Short | ||||||||||||||
Central Fund | $ 447,428 | $ | $ 24,997 | $ 422,603 | 5.9% |
Income Tax Information
At October 31, 2005, the fund had a capital loss carryforward of approximately $2,479,000 all of which will expire on October 31, 2013.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 16
Financial Statements | ||||||
Statement of Assets and Liabilities | ||||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||||
Assets | ||||||
Investment in securities, at value (including repurchase | ||||||
agreements of $13,483) | ||||||
See accompanying schedule: | ||||||
Unaffiliated issuers (cost $1,964,727) | $ 1,914,132 | |||||
Affiliated Central Funds (cost $421,431) | 422,603 | |||||
Total Investments (cost $2,386,158) | $ 2,336,735 | |||||
Commitment to sell securities on a delayed delivery basis | (3,484) | |||||
Receivable for securities sold on a delayed delivery basis | 3,483 | (1) | ||||
Receivable for investments sold, regular delivery | 1,605 | |||||
Cash | 434 | |||||
Receivable for fund shares sold | 1,184 | |||||
Interest receivable | 9,016 | |||||
Swap agreements, at value | 333 | |||||
Total assets | 2,349,306 | |||||
Liabilities | ||||||
Payable for investments purchased | ||||||
Regular delivery | $ 4,764 | |||||
Delayed delivery | 400,122 | |||||
Payable for fund shares redeemed | 2,674 | |||||
Distributions payable | 600 | |||||
Accrued management fee | 522 | |||||
Distribution fees payable | 121 | |||||
Other affiliated payables | 244 | |||||
Other payables and accrued expenses | 57 | |||||
Total liabilities | 409,104 | |||||
Net Assets | $ 1,940,202 | |||||
Net Assets consist of: | ||||||
Paid in capital | $ 1,994,428 | |||||
Distributions in excess of net investment income | (2,708) | |||||
Accumulated undistributed net realized gain (loss) on | ||||||
investments | (2,427) | |||||
Net unrealized appreciation (depreciation) on | ||||||
investments | (49,091) | |||||
Net Assets | $ 1,940,202 |
See accompanying notes which are an integral part of the financial statements.
17 Semiannual Report
Financial Statements continued | ||||
Statement of Assets and Liabilities continued | ||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||
Calculation of Maximum Offering Price | ||||
Class A: | ||||
Net Asset Value and redemption price per share | ||||
($52,667 ÷ 4,847.4 shares) | $ 10.86 | |||
Maximum offering price per share (100/95.25 of $10.86) | $ 11.40 | |||
Class T: | ||||
Net Asset Value and redemption price per share | ||||
($106,514 ÷ 9,790 shares) | $ 10.88 | |||
Maximum offering price per share (100/96.50 of $10.88) | $ 11.27 | |||
Class B: | ||||
Net Asset Value and offering price per share | ||||
($82,685 ÷ 7,611 shares)A | $ 10.86 | |||
Class C: | ||||
Net Asset Value and offering price per share | ||||
($34,311 ÷ 3,161 shares)A | $ 10.85 | |||
Fidelity Mortgage Securities Fund: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($1,648,518 ÷ 151,454 shares) | $ 10.88 | |||
Institutional Class: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($15,507 ÷ 1,428 shares) | $ 10.86 | |||
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 18
Statement of Operations | ||||||
Amounts in thousands | Six months ended April 30, 2006 (Unaudited) | |||||
Investment Income | ||||||
Interest | $ 41,081 | |||||
Income from affiliated Central Funds | 10,299 | |||||
Total income | 51,380 | |||||
Expenses | ||||||
Management fee | $ 3,287 | |||||
Transfer agent fees | 1,217 | |||||
Distribution fees | 786 | |||||
Fund wide operations fee | 289 | |||||
Independent trustees compensation | 4 | |||||
Miscellaneous | 2 | |||||
Total expenses before reductions | 5,585 | |||||
Expense reductions | (7) | 5,578 | ||||
Net investment income | 45,802 | |||||
Realized and Unrealized Gain (Loss) | ||||||
Net realized gain (loss) on: | ||||||
Investment securities: | ||||||
Unaffiliated issuers | (4,646) | |||||
Affiliated Central Funds | (13) | |||||
Swap agreements | (740) | |||||
Total net realized gain (loss) | (5,399) | |||||
Change in net unrealized appreciation (depreciation) on: | ||||||
Investment securities | (16,594) | |||||
Swap agreements | 459 | |||||
Delayed delivery commitments | (1) | |||||
Total change in net unrealized appreciation | ||||||
(depreciation) | (16,136) | |||||
Net gain (loss) | (21,535) | |||||
Net increase (decrease) in net assets resulting from | ||||||
operations | $ 24,267 |
See accompanying notes which are an integral part of the financial statements.
19 Semiannual Report
Financial Statements continued | ||||||
Statement of Changes in Net Assets | ||||||
Six months ended | Year ended | |||||
April 30, 2006 | October 31, | |||||
Amounts in thousands | (Unaudited) | 2005 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income | $ 45,802 $ | $ 80,564 | ||||
Net realized gain (loss) | (5,399) | 1,596 | ||||
Change in net unrealized appreciation (depreciation) . | (16,136) | (52,287) | ||||
Net increase (decrease) in net assets resulting from | ||||||
operations | 24,267 | 29,873 | ||||
Distributions to shareholders from net investment income . | (46,139) | (83,034) | ||||
Distributions to shareholders from net realized gain | | (10,450) | ||||
Total distributions | (46,139) | (93,484) | ||||
Share transactions - net increase (decrease) | (179,406) | 288,375 | ||||
Total increase (decrease) in net assets | (201,278) | 224,764 | ||||
Net Assets | ||||||
Beginning of period | 2,141,480 | 1,916,716 | ||||
End of period (including distributions in excess of net | ||||||
investment income of $2,708 and distributions in | ||||||
excess of net investment income of $2,371, | ||||||
respectively) | $ 1,940,202 | $ 2,141,480 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
20 |
Financial Highlights Class A | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .235 | .408 | .365 | .282 | .502H | .630 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.267) | .181 | .112 | .172H | .613 | ||||||||
Total from investment | ||||||||||||||
operations | 107 | .141 | .546 | .394 | .674 | 1.243 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.237) | (.421) | (.366) | (.274) | (.534) | (.653) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.237) | (.481) | (.516) | (.354) | (.534) | (.653) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | .97% | 1.26% | 4.97% | 3.56% | 6.26% | 12.15% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Net investment income | 4.31%A | 3.65% | 3.24% | 2.51% | 4.55%H | 5.86% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 53 | $ 50 | $ 55 | $ 69 | $ 63 | $ 15 | ||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
21 Semiannual Report
Financial Highlights Class T | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .232 | .400 | .353 | .270 | .492H | .622 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.118) | (.268) | .181 | .101 | .171H | .617 | ||||||||
Total from investment | ||||||||||||||
operations | .114 | .132 | .534 | .371 | .663 | 1.239 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.234) | (.412) | (.354) | (.261) | (.523) | (.639) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.234) | (.472) | (.504) | (.341) | (.523) | (.639) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C,D | 1.03% | 1.18% | 4.86% | 3.34% | 6.15% | 12.09% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Net investment income | 4.25%A | 3.57% | 3.14% | 2.39% | 4.45%H | 5.75% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 107 | $ 126 | $ 131 | $ 155 | $ 195 | $ 106 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
22 |
Financial Highlights Class B | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .194 | .323 | .278 | .197 | .421H | .551 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.257) | .172 | .112 | .171H | .611 | ||||||||
Total from investment | ||||||||||||||
operations | .066 | .066 | .450 | .309 | .592 | 1.162 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.196) | (.336) | (.280) | (.189) | (.452) | (.572) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.196) | (.396) | (.430) | (.269) | (.452) | (.572) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | .59% | .58% | 4.08% | 2.78% | 5.48% | 11.32% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of all | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.57% | 1.60% | ||||||||
Net investment income | 3.55%A | 2.89% | 2.48% | 1.75% | 3.82%H | 5.11% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 83 | $ 101 | $ 134 | $ 182 | $ 176 | $ 57 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
23 Semiannual Report
Financial Highlights Class C | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001G | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period . | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | $ 10.89 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeE | .189 | .316 | .273 | .189 | .413I | .112 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.127) | (.257) | .172 | .112 | .173I | .238 | ||||||||||
Total from investment | ||||||||||||||||
operations | 062 | .059 | .445 | .301 | .586 | .350 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.192) | (.329) | (.275) | (.181) | (.436) | (.140) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.192) | (.389) | (.425) | (.261) | (.436) | (1.40) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.85 | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | ||||||||||
Total ReturnB,C,D | .56% | .52% | 4.04% | 2.71% | 5.43% | 3.22% | ||||||||||
Ratios to Average Net AssetsF,H | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Net investment income | 3.48%A | 2.82% | 2.42% | 1.68% | 3.75%I | 4.87%A | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 34 | $ 41 | $ 58 | $ 99 | $ 74 | $ 3 | ||||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the activity of the affiliated central fund. G For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001. 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. 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 expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. I Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
24 |
Financial Highlights Fidelity Mortgage Securities Fund | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeD | .252 | .438 | .390 | .306 | .526G | .654 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.129) | (.257) | .183 | .102 | .170G | .619 | ||||||||
Total from investment | ||||||||||||||
operations | 123 | .181 | .573 | .408 | .696 | 1.273 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.253) | (.451) | (.393) | (.298) | (.556) | (.673) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | |||||||||
Total distributions | (.253) | (.511) | (.543) | (.378) | (.556) | (.673) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C | 1.12% | 1.61% | 5.21% | 3.68% | 6.47% | 12.44% | ||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Net investment income | 4.61%A | 3.91% | 3.48% | 2.72% | 4.76%G | 6.04% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 1,649 | $ 1,807 | $ 1,525 | $ 1,302 | $ 1,208 | $ 430 | ||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
25 Semiannual Report
Financial Highlights Institutional Class | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeD | .247 | .432 | .387 | .302 | .513G | .644 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.117) | (.266) | .182 | .112 | .171G | .610 | ||||||||||
Total from investment | ||||||||||||||||
operations | .130 | .166 | .569 | .414 | .684 | 1.254 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.250) | (.446) | (.389) | (.294) | (.544) | (.664) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.250) | (.506) | (.539) | (.374) | (.544) | (.664) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.86 | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | ||||||||||
Total ReturnB,C | 1.18% | 1.48% | 5.19% | 3.75% | 6.36% | 12.27% | ||||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .76% | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Net investment income | 4.54%A | 3.87% | 3.45% | 2.69% | 4.65%G | 5.95% | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 16 | $ 16 | $ 13 | $ 16 | $ 12 | $ 7 | ||||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
26 |
Notes to Financial Statements
For the period ended April 30, 2006 (Unaudited)
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is regis tered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Mortgage Securities Fund, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. 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), and fixed income Central Investment Portfolios (CIPs), collectively referred to as 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, 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 quotes 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. 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 published prices for the same securities. 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.
27 Semiannual Report
Notes to Financial Statements (Unaudited) continued |
(Amounts in thousands except ratios) |
1. Significant Accounting Policies continued |
Investment Transactions and Income. Security transactions, including the funds 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. 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.
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 funds 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. Distribu tions 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. 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 prior period premium and discount on debt securities, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards, 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 | $ 5,198 | |||
Unrealized depreciation | (49,863) | |||
Net unrealized appreciation (depreciation) | $ (44,665) | |||
Cost for federal income tax purposes | $ 2,381,400 |
Semiannual
Report |
28 |
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 funds 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 underly ing securities or if the counterparty does not perform under the contracts 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 transac tions 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 funds Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses,
29 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
2. Operating Policies continued |
||
Swap Agreements continued |
respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Total return swaps are agreements to exchange the return generated by one instrument or index for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, a fund will receive a payment from the counterparty. To the extent it is less, a fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accom panying Statement of Operations as realized gains or losses, respectively.
Swaps are marked to market daily based on dealer supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a funds custodian in compliance with swap contracts. Risks may exceed amounts recognized on the State ment of Assets and Liabilities. These risks include changes in the returns of the underly ing instruments, failure of the counterparties to perform under the contracts terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the funds Schedule of Investments under the caption Swap Agreements.
Mortgage Dollar Rolls. To earn additional income, the fund may employ trading strate gies 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 differen tial 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 funds right to repurchase or sell securities may be limited.
Semiannual
Report |
30 |
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $15,247 and $50,205, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the funds 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 .32% of the funds average net assets.
Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the
Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |||||||||
Fee | Fee | FDC | by FDC | |||||||||
Class A | 0% | .15% | $ 39 | $ 1 | ||||||||
Class T | 0% | .25% | 145 | 1 | ||||||||
Class B | .65% | .25% | 414 | 300 | ||||||||
Class C | .75% | .25% | 188 | 18 | ||||||||
$ 786 | $ 320 |
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 interme diaries 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,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
31 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) |
4. Fees and Other Transactions with Affiliates continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||||
by FDC | ||||
Class A | $ 6 | |||
Class T | 5 | |||
Class B* | 162 | |||
Class C* | 2 | |||
$ 175 |
* 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 ser vicing agent for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FSC receives an asset based fee of .10% of Fidelity Mortgage Securities Funds average net assets. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. The account fees were eliminated. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
% of | ||||||
Average | ||||||
Amount | Net Assets | |||||
Class A | $ 62 | .24* | ||||
Class T | 119 | .21* | ||||
Class B | 114 | .25* | ||||
Class C | 42 | .22* | ||||
Fidelity Mortgage Securities Fund | 867 | .10* | ||||
Institutional Class | 13 | .16* | ||||
$ 1,217 | ||||||
* Annualized |
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agree ment (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b 1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annualized rate of .03% of average net assets.
Semiannual
Report |
32 |
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 fund may also invest in CIPs managed by FIMM. The Ultra Short Central Fund seeks to obtain a high level of current income consistent with preservation of capital by invest ing in U.S. dollar denominated money market and investment grade debt securities.
The funds Schedule of Investments lists the CIP as an investment of the fund but does not include the underlying holdings of the CIP. Based on its investment objectives, the CIP may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the CIP may also participate in derivatives. 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 CIP and the fund.
A complete unaudited list of holdings for the CIP, as of the funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the CIPs financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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 share holder 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 $2 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. |
Through arrangements with the funds custodian, credits realized as a result of unin vested cash balances were used to reduce the funds expenses. During the period, these credits reduced the funds management fees by $7.
33 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
7. Other. |
The funds 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 funds 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.
8. Distributions to Shareholders. | ||||||||
Distributions to shareholders of each class were as follows: | ||||||||
Six months ended | Year ended | |||||||
April 30, 2006 | October 31, 2005 | |||||||
From net investment income | ||||||||
Class A | $ 1,112 | $ 2,029 | ||||||
Class T | 2,457 | 4,745 | ||||||
Class B | 1,644 | 3,543 | ||||||
Class C | 657 | 1,456 | ||||||
Fidelity Mortgage Securities Fund | 39,894 | 70,651 | ||||||
Institutional Class | 375 | 610 | ||||||
Total | $ 46,139 | $ 83,034 | ||||||
From net realized gain | ||||||||
Class A | $ | $ 287 | ||||||
Class T | | 691 | ||||||
Class B | | 700 | ||||||
Class C | | 301 | ||||||
Fidelity Mortgage Securities Fund | | 8,396 | ||||||
Institutional Class | | 75 | ||||||
Total | $ | $ 10,450 |
Semiannual
Report |
34 |
9. Share Transactions. | ||||||||||||
Transactions for each class of shares were as follows: | ||||||||||||
Shares | Dollars | |||||||||||
Six months ended | Year ended | Six months ended | Year ended | |||||||||
April 30, 2006 | October 31, 2005 | April 30, 2006 | October 31, 2005 | |||||||||
Class A | ||||||||||||
Shares sold | 1,132 | 1,644 | $ 12,460 | $ 18,382 | ||||||||
Reinvestment of | ||||||||||||
distributions | 87 | 179 | 952 | 2,002 | ||||||||
Shares redeemed | (963) | (2,106) | (10,573) | (23,537) | ||||||||
Net increase (decrease) . | 256 | (283) | $ 2,839 | $ (3,153) | ||||||||
Class T | ||||||||||||
Shares sold | 912 | 3,841 | $ 10,025 | $ 43,073 | ||||||||
Reinvestment of | ||||||||||||
distributions | 212 | 458 | 2,330 | 5,128 | ||||||||
Shares redeemed | (2,753) | (4,417) | (30,288) | (49,428) | ||||||||
Net increase (decrease) . | (1,629) | (118) | $ (17,933) | $ (1,227) | ||||||||
Class B | ||||||||||||
Shares sold | 109 | 374 | $ 1,195 | $ 4,184 | ||||||||
Reinvestment of | ||||||||||||
distributions | 120 | 308 | 1,322 | 3,440 | ||||||||
Shares redeemed | (1,817) | (3,340) | (19,958) | (37,334) | ||||||||
Net increase (decrease) . | (1,588) | (2,658) | $ (17,441) | $ (29,710) | ||||||||
Class C | ||||||||||||
Shares sold | 158 | 501 | $ 1,739 | $ 5,615 | ||||||||
Reinvestment of | ||||||||||||
distributions | 47 | 124 | 514 | 1,386 | ||||||||
Shares redeemed | (779) | (2,018) | (8,547) | (22,545) | ||||||||
Net increase (decrease) . | (574) | (1,393) | $ (6,294) | $ (15,544) | ||||||||
Fidelity Mortgage | ||||||||||||
Securities Fund | ||||||||||||
Shares sold | 12,458 | 60,281 | $ 137,177 | $ 676,321 | ||||||||
Reinvestment of | ||||||||||||
distributions | 3,365 | 6,543 | 36,994 | 73,241 | ||||||||
Shares redeemed | (28,561) | (37,075) | (314,291) | (414,945) | ||||||||
Net increase (decrease) . | (12,738) | 29,749 | $ (140,120) | $ 334,617 | ||||||||
Institutional Class | ||||||||||||
Shares sold | 297 | 733 | $ 3,254 | $ 8,212 | ||||||||
Reinvestment of | ||||||||||||
distributions | 26 | 44 | 289 | 496 | ||||||||
Shares redeemed | (366) | (476) | (4,000) | (5,316) | ||||||||
Net increase (decrease) . | (43) | 301 | $ (457) | $ 3,392 |
35 Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Mortgage Securities 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 Manage ment, 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 funds manage ment contract or sub advisory agreements; (ii) the investment process or strategies employed in the management of the funds assets; (iii) the nature or level of services provided under the funds management contract or sub advisory agreements; (iv) the day to day management of the fund or the persons primarily responsible for such man agement; 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 necessi tate prior shareholder approval of the Agreement or result in an assignment and termination of the funds 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 funds portfolio manager would not change, it did not consider the funds investment perfor mance, 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 funds 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 funds 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
Semiannual Report |
36 |
appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the funds Agreement is fair and reasonable, and that the funds Agreement should be approved.
37 Semiannual Report
Investment
Adviser Fidelity Management & Research Company Boston, MA Investment Sub Advisers Fidelity Investments Money Management, Inc. Fidelity Management & Research (U.K.) 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 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 |
AMORI-USAN-0606 1.784899.103 |
Fidelity Mortgage Securities Fund (A Class of Fidelity® Advisor Mortgage Securities Fund) |
Semiannual Report April 30, 2006 |
Contents | ||||
Chairmans Message | 3 | Ned Johnsons message to shareholders. | ||
Shareholder Expense | 4 | An example of shareholder expenses. | ||
Example | ||||
Investment Changes | 6 | A summary of major shifts in the funds | ||
investments over the past six months. | ||||
Investments | 7 | A complete list of the funds investments | ||
with their market values. | ||||
Financial Statements | 17 | Statements of assets and liabilities, | ||
operations, and changes in net assets, as | ||||
well as financial highlights. | ||||
Notes | 27 | Notes to the financial statements. | ||
Board Approval of | 36 | |||
Investment Advisory | ||||
Contracts and | ||||
Management Fees |
To view a funds 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 Commissions (SEC) web site at www.sec.gov. You may also call 1-800-544-8544 to request a free copy of the proxy voting guidelines. Standard & Poors, 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 SECs web site at http://www.sec.gov. A funds Forms N Q may be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information regarding the operation of the SECs Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a funds port folio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelitys web site at http://www.fidelity.com/holdings. NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE Neither the fund nor Fidelity Distributors Corporation is a bank. |
Semiannual
Report |
2 |
Chairmans Message
(photograph of Edward C. Johnson
3d)
Dear Shareholder:
Although many securities markets made
gains in early 2006, there is only one certainty when it comes to investing:
There is no sure thing. There are, however, a number of time tested, fundamental
investment 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 doesnt
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 portfolios 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 wont 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
3 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 (November 1, 2005 to April 30, 2006).
Actual Expenses |
The first line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
Hypothetical Example for Comparison Purposes
The second line of the table below 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 funds annualized expense ratio used to calculate the expense estimate in the table below.
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.
Semiannual Report |
4 |
Expenses Paid | ||||||||||||
Beginning | Ending | During Period* | ||||||||||
Account Value | Account Value | November 1, 2005 | ||||||||||
November 1, 2005 | April 30, 2006 | to April 30, 2006 | ||||||||||
Class A | ||||||||||||
Actual | $ 1,000.00 | $ 1,009.70 | $ 3.74 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,021.08 | $ 3.76 | |||||||||
Class T | ||||||||||||
Actual | $ 1,000.00 | $ 1,010.30 | $ 4.04 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,020.78 | $ 4.06 | |||||||||
Class B | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.90 | $ 7.51 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,017.31 | $ 7.55 | |||||||||
Class C | ||||||||||||
Actual | $ 1,000.00 | $ 1,005.60 | $ 7.91 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,016.91 | $ 7.95 | |||||||||
Fidelity Mortgage Securities Fund | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.20 | $ 2.24 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.56 | $ 2.26 | |||||||||
Institutional Class | ||||||||||||
Actual | $ 1,000.00 | $ 1,011.80 | $ 2.59 | |||||||||
HypotheticalA | $ 1,000.00 | $ 1,022.22 | $ 2.61 | |||||||||
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 funds annualized expense ratio.
Annualized | ||
Expense Ratio | ||
Class A | 75% | |
Class T | 81% | |
Class B | 1.51% | |
Class C | 1.59% | |
Fidelity Mortgage Securities Fund | 45% | |
Institutional Class | 52% |
5 Semiannual Report
Investment Changes | ||||
Coupon Distribution as of April 30, 2006 | ||||
% of funds | % of funds investments | |||
investments | 6 months ago | |||
Less than 4% | 2.2 | 2.0 | ||
4 4.99% | 15.6 | 30.1 | ||
5 5.99% | 60.1 | 36.9 | ||
6 6.99% | 15.2 | 14.2 | ||
7% and over | 3.2 | 3.4 |
Coupon distribution shows the range of stated interest rates on the funds investments, excluding short term investments.
Average Years to Maturity as of April 30, 2006 | ||||
6 months ago | ||||
Years | 5.7 | 4.5 |
Average years to maturity is based on the average time remaining until principal payments are expected from each of the funds bonds, weighted by dollar amount.
Duration as of April 30, 2006 | ||||||
6 months ago | ||||||
Years | 4.0 | 3.3 |
Duration shows how much a bond funds price fluctuates with changes in comparable interest rates. If rates rise 1%, for example, a fund with a five year duration is likely to lose about 5% of its value. Other factors also can influence a bond funds performance and share price. Accordingly, a bond funds actual performance may differ from this example.
(dagger) Net Other Assets are not included in the pie chart.
The information in the above tables is based on the combined investments of the fund and its pro rata share of the investments of Fidelitys fixed income central fund.
For an unaudited list of holdings for each fixed income central fund, visit fidelity.com. and/or advisor.fidelity.com, as applicable.
Semiannual Report 6
Investments April 30, 2006 (Unaudited) | ||||||||
Showing Percentage of Net Assets | ||||||||
U.S. Government Agency Mortgage Securities 85.5% | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae 63.9% | ||||||||
3.734% 1/1/35 (d) | $ 439 | $ 431 | ||||||
3.749% 12/1/34 (d) | 351 | 345 | ||||||
3.752% 10/1/33 (d) | 297 | 290 | ||||||
3.782% 12/1/34 (d) | 67 | 66 | ||||||
3.792% 6/1/34 (d) | 1,386 | 1,340 | ||||||
3.824% 6/1/33 (d) | 228 | 224 | ||||||
3.829% 1/1/35 (d) | 284 | 280 | ||||||
3.847% 1/1/35 (d) | 857 | 842 | ||||||
3.853% 11/1/34 (d) | 1,716 | 1,689 | ||||||
3.854% 10/1/33 (d) | 7,169 | 7,018 | ||||||
3.869% 1/1/35 (d) | 514 | 506 | ||||||
3.879% 6/1/33 (d) | 1,188 | 1,166 | ||||||
3.902% 10/1/34 (d) | 332 | 327 | ||||||
3.913% 5/1/34 (d) | 112 | 112 | ||||||
3.917% 12/1/34 (d) | 267 | 263 | ||||||
3.947% 11/1/34 (d) | 553 | 545 | ||||||
3.957% 1/1/35 (d) | 362 | 356 | ||||||
3.96% 5/1/33 (d) | 107 | 105 | ||||||
3.972% 12/1/34 (d) | 283 | 279 | ||||||
3.978% 12/1/34 (d) | 358 | 353 | ||||||
3.983% 12/1/34 (d) | 1,869 | 1,843 | ||||||
3.988% 1/1/35 (d) | 231 | 228 | ||||||
4% 6/1/18 to 5/1/19 | 20,248 | 18,933 | ||||||
4.003% 12/1/34 (d) | 173 | 171 | ||||||
4.006% 2/1/35 (d) | 247 | 243 | ||||||
4.013% 1/1/35 (d) | 499 | 492 | ||||||
4.021% 2/1/35 (d) | 224 | 221 | ||||||
4.042% 12/1/34 (d) | 516 | 509 | ||||||
4.048% 10/1/18 (d) | 275 | 270 | ||||||
4.05% 1/1/35 (d) | 143 | 141 | ||||||
4.051% 1/1/35 (d) | 232 | 229 | ||||||
4.066% 4/1/33 (d) | 103 | 101 | ||||||
4.067% 1/1/35 (d) | 476 | 470 | ||||||
4.09% 2/1/35 (d) | 191 | 188 | ||||||
4.091% 2/1/35 (d) | 480 | 474 | ||||||
4.092% 2/1/35 (d) | 183 | 180 | ||||||
4.106% 2/1/35 (d) | 903 | 892 | ||||||
4.109% 1/1/35 (d) | 518 | 511 | ||||||
4.113% 11/1/34 (d) | 403 | 398 | ||||||
4.115% 2/1/35 (d) | 582 | 575 | ||||||
4.121% 1/1/35 (d) | 492 | 485 | ||||||
4.122% 1/1/35 (d) | 904 | 893 |
See accompanying notes which are an integral part of the financial statements.
7 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
4.144% 1/1/35 (d) | $ 781 | $ 774 | ||||||
4.153% 2/1/35 (d) | 496 | 489 | ||||||
4.166% 11/1/34 (d) | 123 | 122 | ||||||
4.176% 1/1/35 (d) | 432 | 427 | ||||||
4.178% 1/1/35 (d) | 916 | 906 | ||||||
4.178% 1/1/35 (d) | 634 | 616 | ||||||
4.188% 10/1/34 (d) | 769 | 763 | ||||||
4.22% 3/1/34 (d) | 267 | 261 | ||||||
4.223% 1/1/35 (d) | 281 | 278 | ||||||
4.25% 2/1/35 (d) | 320 | 311 | ||||||
4.267% 2/1/35 (d) | 181 | 179 | ||||||
4.28% 8/1/33 (d) | 615 | 608 | ||||||
4.283% 3/1/35 (d) | 285 | 281 | ||||||
4.287% 7/1/34 (d) | 231 | 230 | ||||||
4.299% 5/1/35 (d) | 414 | 410 | ||||||
4.304% 12/1/34 (d) | 183 | 181 | ||||||
4.316% 3/1/33 (d) | 152 | 148 | ||||||
4.356% 1/1/35 (d) | 316 | 308 | ||||||
4.357% 4/1/35 (d) | 193 | 190 | ||||||
4.362% 2/1/34 (d) | 711 | 699 | ||||||
4.392% 1/1/35 (d) | 362 | 359 | ||||||
4.393% 11/1/34 (d) | 3,823 | 3,790 | ||||||
4.395% 5/1/35 (d) | 911 | 901 | ||||||
4.398% 2/1/35 (d) | 463 | 452 | ||||||
4.434% 10/1/34 (d) | 1,463 | 1,452 | ||||||
4.436% 4/1/34 (d) | 476 | 471 | ||||||
4.438% 3/1/35 (d) | 422 | 412 | ||||||
4.465% 8/1/34 (d) | 924 | 910 | ||||||
4.474% 5/1/35 (d) | 305 | 302 | ||||||
4.481% 1/1/35 (d) | 434 | 430 | ||||||
4.5% 4/1/18 to 4/1/35 | 254,071 | 236,188 | ||||||
4.504% 8/1/34 (d) | 598 | 597 | ||||||
4.54% 2/1/35 (d) | 1,948 | 1,933 | ||||||
4.543% 2/1/35 (d) | 208 | 207 | ||||||
4.545% 7/1/35 (d) | 1,116 | 1,105 | ||||||
4.546% 2/1/35 (d) | 305 | 303 | ||||||
4.704% 3/1/35 (d) | 525 | 515 | ||||||
4.726% 7/1/34 (d) | 871 | 859 | ||||||
4.798% 12/1/32 (d) | 420 | 419 | ||||||
4.798% 12/1/34 (d) | 332 | 328 | ||||||
5% 9/1/16 to 12/1/34 | 98,875 | 96,108 | ||||||
5% 5/1/36 (b) | 78,531 | 74,288 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
8 |
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Fannie Mae continued | ||||||||
5% 5/1/36 (b) | $ 46,000 | $ 43,515 | ||||||
5% 5/1/36 (b) | 102,043 | 96,529 | ||||||
5% 5/1/36 (b) | 14,900 | 14,095 | ||||||
5.104% 5/1/35 (d) | 2,074 | 2,072 | ||||||
5.197% 6/1/35 (d) | 1,474 | 1,474 | ||||||
5.5% 1/1/09 to 2/1/36 | 219,507 | 215,648 | ||||||
5.5% 5/1/36 (b) | 101,791 | 98,862 | ||||||
5.5% 5/11/36 (b) | 40,000 | 38,849 | ||||||
6% 4/1/08 to 6/1/35 | 143,689 | 144,273 | ||||||
6% 5/1/36 (b)(c) | 30,222 | 30,087 | ||||||
6.5% 2/1/20 to 12/1/35 | 61,976 | 63,197 | ||||||
6.5% 5/1/36 (b) | 3,041 | 3,092 | ||||||
7% 3/1/17 to 7/1/33 | 7,048 | 7,262 | ||||||
7.5% 4/1/22 to 9/1/32 | 3,090 | 3,211 | ||||||
8% 9/1/07 to 12/1/29 | 28 | 30 | ||||||
8.5% 1/1/16 to 7/1/31 | 389 | 413 | ||||||
9% 6/1/09 to 10/1/30 | 937 | 1,010 | ||||||
9.5% 5/1/07 to 8/1/22 | 170 | 185 | ||||||
11% 8/1/10 | 95 | 101 | ||||||
12.25% 5/1/13 to 5/1/15 | 36 | 41 | ||||||
12.5% 8/1/15 to 3/1/16 | 47 | 53 | ||||||
12.75% 2/1/15 | 5 | 6 | ||||||
13.5% 9/1/14 to 12/1/14 | 33 | 39 | ||||||
1,239,538 | ||||||||
Freddie Mac 21.1% | ||||||||
4% 4/1/19 | 5,608 | 5,227 | ||||||
4.05% 12/1/34 (d) | 332 | 326 | ||||||
4.106% 12/1/34 (d) | 466 | 459 | ||||||
4.152% 1/1/35 (d) | 422 | 416 | ||||||
4.263% 3/1/35 (d) | 420 | 414 | ||||||
4.294% 5/1/35 (d) | 745 | 735 | ||||||
4.304% 12/1/34 (d) | 439 | 427 | ||||||
4.33% 1/1/35 (d) | 975 | 962 | ||||||
4.353% 2/1/35 (d) | 895 | 883 | ||||||
4.443% 3/1/35 (d) | 436 | 424 | ||||||
4.45% 2/1/34 (d) | 424 | 416 | ||||||
4.462% 6/1/35 (d) | 667 | 657 | ||||||
4.482% 3/1/35 (d) | 487 | 474 | ||||||
4.484% 3/1/35 (d) | 3,036 | 2,985 | ||||||
4.5% 8/1/33 | 4,728 | 4,349 |
See accompanying notes which are an integral part of the financial statements.
9 Semiannual Report
Investments (Unaudited) continued | ||||||||
U.S. Government Agency Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Freddie Mac continued | ||||||||
4.552% 2/1/35 (d) | $ 698 | $ 681 | ||||||
5% 7/1/33 to 9/1/35 | 129,426 | 122,406 | ||||||
5.007% 4/1/35 (d) | 2,325 | 2,314 | ||||||
5.405% 8/1/33 (d) | 193 | 193 | ||||||
5.5% 6/1/09 to 2/1/36 | 233,613 | 227,732 | ||||||
6% 5/1/16 to 10/1/34 | 14,035 | 14,074 | ||||||
6.5% 1/1/24 to 12/1/33 | 11,597 | 11,837 | ||||||
7.5% 2/1/08 to 7/1/32 | 10,024 | 10,391 | ||||||
8% 10/1/07 to 4/1/21 | 71 | 73 | ||||||
8.5% 7/1/09 to 9/1/20 | 169 | 178 | ||||||
9% 9/1/08 to 5/1/21 | 495 | 528 | ||||||
10% 1/1/09 to 5/1/19 | 144 | 154 | ||||||
10.5% 8/1/10 to 2/1/16 | 14 | 15 | ||||||
12.5% 5/1/12 to 12/1/14 | 90 | 100 | ||||||
13% 12/1/13 to 6/1/15 | 135 | 154 | ||||||
409,984 | ||||||||
Government National Mortgage Association 0.5% | ||||||||
6.5% 5/15/28 to 7/15/34 | 2,108 | 2,172 | ||||||
7% 2/15/24 to 7/15/32 | 3,418 | 3,558 | ||||||
7.5% 12/15/06 to 4/15/32 | 1,976 | 2,069 | ||||||
8% 12/15/06 to 12/15/25 | 788 | 828 | ||||||
8.5% 8/15/16 to 10/15/28 | 1,209 | 1,298 | ||||||
9% 11/20/17 | 2 | 2 | ||||||
10.5% 12/20/15 to 2/20/18 | 78 | 88 | ||||||
13% 10/15/13 | 7 | 8 | ||||||
13.5% 7/15/11 | 10 | 11 | ||||||
10,034 | ||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE SECURITIES | ||||||||
(Cost $1,704,239) | 1,659,556 | |||||||
Asset Backed Securities 0.8% | ||||||||
Bayview Financial Securities Co. LLC Series 2006-A Class 2A1, | ||||||||
4.9406% 2/28/41 (d) | 4,008 | 4,009 | ||||||
Fremont NIMS Trust Series 2004-C Class A, 5.25% | ||||||||
8/25/34 (a) | 203 | 203 | ||||||
GSAMP Trust Series 2005-MTR1 Class A1, 5.0994% | ||||||||
10/25/35 (d) | 4,576 | 4,576 | ||||||
Long Beach Mortgage Loan Trust Series 2003-3 Class M1, | ||||||||
5.7094% 7/25/33 (d) | 3,741 | 3,760 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
10 |
Asset Backed Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
Ocala Funding LLC Series 2006-1A Class A, 6.2181% | ||||||||
3/20/11 (a)(d) | $ 2,100 | $ 2,100 | ||||||
Residential Asset Mortgage Products, Inc. Series 2003-RZ2 | ||||||||
Class A1, 3.6% 4/25/33 | 697 | 675 | ||||||
Salomon Brothers Mortgage Securities VII, Inc. Series | ||||||||
2003-UP1 Class A, 3.45% 4/25/32 (a) | 918 | 874 | ||||||
TOTAL ASSET BACKED SECURITIES | ||||||||
(Cost $16,243) | 16,197 | |||||||
Collateralized Mortgage Obligations 8.6% | ||||||||
Private Sponsor 1.0% | ||||||||
Adjustable Rate Mortgage Trust floater Series 2004-4 | ||||||||
Class 5A2, 5.3594% 3/25/35 (d) | 718 | 719 | ||||||
Countrywide Home Loans, Inc. sequential pay Series 2002-25 | ||||||||
Class 2A1, 5.5% 11/27/17 | 1,128 | 1,123 | ||||||
Credit Suisse First Boston Mortgage Acceptance Corp. | ||||||||
sequential pay Series 2003-1 Class 3A8, 6% 1/25/33 | 2,299 | 2,300 | ||||||
CS First Boston Mortgage Securities Corp. Series 2002-15R | ||||||||
Class A1, 3.7763% 1/28/32 (a)(d) | 422 | 371 | ||||||
Gracechurch Mortgage Funding PLC floater Series 1A | ||||||||
Class DB, 5.4981% 10/11/41 (a)(d) | 2,520 | 2,519 | ||||||
Master Alternative Loan Trust Series 2003-2 Class 4A1, 6.5% | ||||||||
4/25/18 | 5,675 | 5,707 | ||||||
Residential Asset Mortgage Products, Inc. sequential pay: | ||||||||
Series 2003-SL1 Class A31, 7.125% 4/25/31 | 1,239 | 1,239 | ||||||
Series 2004-SL2 Class A1, 6.5% 10/25/16 | 316 | 319 | ||||||
WAMU Mortgage pass thru certificates sequential pay | ||||||||
Series 2002-S6 Class A25, 6% 10/25/32 | 780 | 778 | ||||||
Wells Fargo Mortgage Backed Securities Trust | ||||||||
Series 2006-AR8 Class 2A6, 5.24% 4/25/36 (d) | 4,865 | 4,811 | ||||||
TOTAL PRIVATE SPONSOR | 19,886 | |||||||
U.S. Government Agency 7.6% | ||||||||
Fannie Mae: | ||||||||
planned amortization class: | ||||||||
Series 1993-187 Class L, 6.5% 7/25/23 | 2,290 | 2,332 | ||||||
Series 1994-23 Class PX, 6% 8/25/23 | 2,910 | 2,900 | ||||||
Series 1999-1 Class PJ, 6.5% 2/25/29 | 10,049 | 10,271 | ||||||
Series 1999-15 Class PC, 6% 9/25/18 | 2,859 | 2,873 | ||||||
Series 2003-26 Class KI, 5% 12/25/15 (f) | 4,190 | 393 |
See accompanying notes which are an integral part of the financial statements.
11 Semiannual Report
Investments (Unaudited) continued | ||||||||
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Fannie Mae: continued | ||||||||
Series 2003-39 Class IA, 5.5% 10/25/22 (d)(f) | $ 3,015 | $ 527 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates: | ||||||||
planned amortization class: | ||||||||
Series 1999-51 Class LK, 6.5% 8/25/29 | 10,000 | 10,225 | ||||||
Series 2002-11 Class QB, 5.5% 3/25/15 | 837 | 835 | ||||||
Series 2002-49 Class KG, 5.5% 8/25/17 | 4,020 | 3,977 | ||||||
Series 2003-73 Class GA, 3.5% 5/25/31 | 12,329 | 11,425 | ||||||
sequential pay: | ||||||||
Series 2002-9 Class C, 6.5% 6/25/30 | 3,571 | 3,582 | ||||||
Series 2004-65 Class EY, 5.5% 8/25/24 | 7,265 | 6,889 | ||||||
Series 2005-41 Class LA, 5.5% 5/25/35 | 3,477 | 3,411 | ||||||
Series 2005-55 Class LY, 5.5% 7/25/25 | 6,595 | 6,289 | ||||||
Series 2002-50 Class LE, 7% 12/25/29 | 202 | 203 | ||||||
Series 2003-42 Class HS, 2.1406% 12/25/17 (d)(f) | 12,220 | 626 | ||||||
Series 2005-50 Class DZ, 5% 6/25/35 | 1,008 | 1,002 | ||||||
Series 2005-69 Class ZL, 4.5% 8/25/25 | 1,699 | 1,693 | ||||||
Freddie Mac: | ||||||||
floater Series 2344 Class FP, 5.86% 8/15/31 (d) | 1,513 | 1,542 | ||||||
planned amortization class: | ||||||||
Series 2104 Class PG, 6% 12/15/28 | 2,180 | 2,185 | ||||||
Series 2512 Class PG, 5.5% 10/15/22 | 5,100 | 4,886 | ||||||
Series 70 Class C, 9% 9/15/20 | 203 | 202 | ||||||
sequential pay: | ||||||||
Series 2114 Class ZM, 6% 1/15/29 | 1,084 | 1,092 | ||||||
Series 2516 Class AH, 5% 1/15/16 | 1,201 | 1,190 | ||||||
Freddie Mac Manufactured Housing participation certificates | ||||||||
guaranteed planned amortization class Series 2043 | ||||||||
Class CJ, 6.5% 4/15/28 | 1,862 | 1,925 | ||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
floater: | ||||||||
Series 2406: | ||||||||
Class FP, 5.89% 1/15/32 (d) | 2,988 | 3,066 | ||||||
Class PF, 5.89% 12/15/31 (d) | 2,735 | 2,819 | ||||||
Series 2410 Class PF, 5.89% 2/15/32 (d) | 5,993 | 6,173 | ||||||
Series 2412 Class GF, 5.86% 2/15/32 (d) | 1,259 | 1,296 | ||||||
Series 2958 Class TF, 0% 4/15/35 (d) | 836 | 785 | ||||||
planned amortization class: | ||||||||
Series 2568 Class KG, 5.5% 2/15/23 | 8,820 | 8,362 | ||||||
Series 2763 Class PD, 4.5% 12/15/17 | 4,360 | 4,111 | ||||||
Series 2780 Class OC, 4.5% 3/15/17 | 2,175 | 2,094 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
12 |
Collateralized Mortgage Obligations continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
U.S. Government Agency continued | ||||||||
Freddie Mac Multi-class participation certificates guaranteed: | ||||||||
continued | ||||||||
planned amortization class: | ||||||||
Series 2802 Class OB, 6% 5/15/34 | $ 3,375 | $ 3,348 | ||||||
Series 2810 Class PD, 6% 6/15/33 | 2,540 | 2,506 | ||||||
Series 2885 Class PC, 4.5% 3/15/18 | 2,845 | 2,725 | ||||||
Series 3077 Class TO, 4/15/35 (g) | 5,146 | 3,577 | ||||||
sequential pay: | ||||||||
Series 2135 Class JE, 6% 3/15/29 | 3,328 | 3,299 | ||||||
Series 2281 Class ZB, 6% 3/15/30 | 1,439 | 1,445 | ||||||
Series 2608 Class FJ, 5.31% 3/15/17 (d) | 3,995 | 4,014 | ||||||
Series 2638 Class FA, 5.31% 11/15/16 (d) | 3,694 | 3,710 | ||||||
Series 2644 Class EF, 5.26% 2/15/18 (d) | 4,166 | 4,184 | ||||||
Series 2750 Class ZT, 5% 2/15/34 | 2,418 | 2,041 | ||||||
Series 3097 Class IA, 5.5% 3/15/33 (f) | 5,461 | 1,132 | ||||||
Series 1658 Class GZ, 7% 1/15/24 | 3,561 | 3,672 | ||||||
TOTAL U.S. GOVERNMENT AGENCY | 146,834 | |||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||
(Cost $168,700) | 166,720 | |||||||
Commercial Mortgage Securities 3.0% | ||||||||
Asset Securitization Corp. Series 1997-D5 Class PS1, 1.107% | ||||||||
2/14/43 (d)(f) | 38,930 | 1,632 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc. | ||||||||
Series 2004 ESA: | ||||||||
Class B, 4.888% 5/14/16 (a) | 560 | 552 | ||||||
Class C, 4.937% 5/14/16 (a) | 1,165 | 1,150 | ||||||
Class D, 4.986% 5/14/16 (a) | 425 | 420 | ||||||
Class E, 5.064% 5/14/16 (a) | 1,315 | 1,305 | ||||||
Class F, 5.182% 5/14/16 (a) | 315 | 313 | ||||||
CDC Commercial Mortgage Trust Series 2002-FX1 Class XCL, | ||||||||
0.6989% 5/15/35 (a)(d)(f) | 31,753 | 1,740 | ||||||
Chase Commercial Mortgage Securities Corp. Series 1999-2: | ||||||||
Class E, 7.734% 1/15/32 | 1,110 | 1,190 | ||||||
Class F, 7.734% 1/15/32 | 600 | 642 | ||||||
COMM floater Series 2001-FL5A Class E, 6.4013% | ||||||||
11/15/13 (a)(d) | 2,823 | 2,822 |
See accompanying notes which are an integral part of the financial statements.
13 Semiannual Report
Investments (Unaudited) continued | ||||||||
Commercial Mortgage Securities continued | ||||||||
Principal | Value (Note 1) | |||||||
Amount (000s) | (000s) | |||||||
CS First Boston Mortgage Securities Corp.: | ||||||||
sequential pay Series 1999-C1 Class A2, 7.29% 9/15/41 | $ 6,079 | $ 6,367 | ||||||
Series 1997-C2 Class D, 7.27% 1/17/35 | 5,175 | 5,390 | ||||||
Series 1998-C1 Class D, 7.17% 5/17/40 | 3,360 | 3,585 | ||||||
Deutsche Mortgage & Asset Receiving Corp. sequential pay | ||||||||
Series 1998-C1 Class D, 7.231% 6/15/31 | 1,390 | 1,442 | ||||||
Fannie Mae sequential pay Series 2000-7 Class MB, 7.5313% | ||||||||
2/17/24 (d) | 4,606 | 4,793 | ||||||
Fannie Mae guaranteed REMIC pass thru certificates | ||||||||
Series 1998-49 Class MI, 0.826% 6/17/38 (d)(f) | 86,766 | 3,242 | ||||||
Greenwich Capital Commercial Funding Corp. Series 2002-C1 | ||||||||
Class SWDB, 5.857% 11/11/19 (a) | 2,600 | 2,560 | ||||||
GS Mortgage Securities Corp. II Series 1998-GLII Class E, | ||||||||
6.9671% 4/13/31 (d) | 390 | 401 | ||||||
Host Marriott Pool Trust sequential pay Series 1999-HMTA | ||||||||
Class B, 7.3% 8/3/15 (a) | 785 | 828 | ||||||
LB-UBS Commercial Mortgage Trust sequential pay | ||||||||
Series 2000-C3 Class A2, 7.95% 1/15/10 | 2,790 | 3,014 | ||||||
Leafs CMBS I Ltd. Series 2002-1A Class D, 4.13% | ||||||||
11/20/37 (a) | 10,815 | 8,849 | ||||||
Morgan Stanley Capital I, Inc. Series 1997-RR Class C, | ||||||||
7.3486% 4/30/39 (a)(d) | 1,550 | 1,550 | ||||||
Trizechahn Office Properties Trust Series 2001-TZHA Class E3, | ||||||||
7.253% 3/15/13 (a) | 4,276 | 4,389 | ||||||
TOTAL COMMERCIAL MORTGAGE SECURITIES | ||||||||
(Cost $62,062) | 58,176 | |||||||
Fixed Income Funds 21.8% | ||||||||
Shares | ||||||||
Fidelity Ultra-Short Central Fund (e) | ||||||||
(Cost $421,431) | 4,247,691 | 422,603 | ||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||
Semiannual Report | 14 |
Cash Equivalents 0.7% | ||||||||||
Maturity | Value (Note 1) | |||||||||
Amount (000s) | (000s) | |||||||||
Investments in repurchase agreements (Collateralized by U.S. | ||||||||||
Government Obligations, in a joint trading account at | ||||||||||
4.78%, dated 4/28/06 due 5/1/06) | ||||||||||
(Cost $13,483) | $ 13,488 | $ 13,483 | ||||||||
TOTAL INVESTMENT PORTFOLIO 120.4% | ||||||||||
(Cost $2,386,158) | 2,336,735 | |||||||||
NET OTHER ASSETS (20.4)% | (396,533) | |||||||||
NET ASSETS 100% | $ 1,940,202 | |||||||||
Swap Agreements | ||||||||||
Expiration | Notional | Value | ||||||||
Date | Amount (000s) | (000s) | ||||||||
Interest Rate Swaps | ||||||||||
Receive quarterly a floating rate based on | ||||||||||
3-month LIBOR and pay semi-annually a | ||||||||||
fixed rate equal to 5.234% with Lehman | ||||||||||
Brothers, Inc. | March 2036 | $ 9,000 | $ 620 | |||||||
Receive semi-annually a fixed rate equal to | ||||||||||
5.132% and pay quarterly a floating rate | ||||||||||
based on 3-month LIBOR with Lehman | ||||||||||
Brothers, Inc. | March 2009 | 50,000 | (217) | |||||||
TOTAL INTEREST RATE SWAPS | 59,000 | 403 | ||||||||
Total Return Swaps | ||||||||||
Receive monthly a return equal to Lehman | ||||||||||
Brothers CMBS U.S. Aggregate Index and | ||||||||||
pay monthly a floating rate based on | ||||||||||
1-month LIBOR minus 20 basis points with | ||||||||||
Citibank | May 2006 | 20,000 | (70) | |||||||
TOTAL TOTAL RETURN SWAPS | 20,000 | (70) | ||||||||
$ 79,000 | $ 333 | |||||||||
See accompanying notes which are an integral part of the financial statements. | ||||||||||
15 | Semiannual Report |
Investments (Unaudited) continued
Legend (a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $32,545,000 or 1.7% of net assets. (b) Security or a portion of the security purchased on a delayed delivery or when-issued basis. (c) A portion of the security is subject to a forward commitment to sell. (d) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. |
(e) 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 funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the fixed-income central funds financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request. (f) Security represents right to receive monthly interest payments on an underlying pool of mortgages. Principal shown is the par amount of the mortgage pool. (g) Principal Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. |
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 Ultra Short Central Fund | $ 10,299 |
Additional information regarding the funds fiscal year to date purchases and sales, including the ownership percentage, of the following fixed income Central Funds is as follows:
Value, | Purchases | Sales | Value, end of | % ownership, | ||||||||||
Fund | beginning of | Proceeds | period | end of period | ||||||||||
(Amounts in thousands) | period | |||||||||||||
Fidelity Ultra Short | ||||||||||||||
Central Fund | $ 447,428 | $ | $ 24,997 | $ 422,603 | 5.9% |
Income Tax Information
At October 31, 2005, the fund had a capital loss carryforward of approximately $2,479,000 all of which will expire on October 31, 2013.
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 16
Financial Statements | ||||||
Statement of Assets and Liabilities | ||||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||||
Assets | ||||||
Investment in securities, at value (including repurchase | ||||||
agreements of $13,483) | ||||||
See accompanying schedule: | ||||||
Unaffiliated issuers (cost $1,964,727) | $ 1,914,132 | |||||
Affiliated Central Funds (cost $421,431) | 422,603 | |||||
Total Investments (cost $2,386,158) | $ 2,336,735 | |||||
Commitment to sell securities on a delayed delivery basis | (3,484) | |||||
Receivable for securities sold on a delayed delivery basis | 3,483 | (1) | ||||
Receivable for investments sold, regular delivery | 1,605 | |||||
Cash | 434 | |||||
Receivable for fund shares sold | 1,184 | |||||
Interest receivable | 9,016 | |||||
Swap agreements, at value | 333 | |||||
Total assets | 2,349,306 | |||||
Liabilities | ||||||
Payable for investments purchased | ||||||
Regular delivery | $ 4,764 | |||||
Delayed delivery | 400,122 | |||||
Payable for fund shares redeemed | 2,674 | |||||
Distributions payable | 600 | |||||
Accrued management fee | 522 | |||||
Distribution fees payable | 121 | |||||
Other affiliated payables | 244 | |||||
Other payables and accrued expenses | 57 | |||||
Total liabilities | 409,104 | |||||
Net Assets | $ 1,940,202 | |||||
Net Assets consist of: | ||||||
Paid in capital | $ 1,994,428 | |||||
Distributions in excess of net investment income | (2,708) | |||||
Accumulated undistributed net realized gain (loss) on | ||||||
investments | (2,427) | |||||
Net unrealized appreciation (depreciation) on | ||||||
investments | (49,091) | |||||
Net Assets | $ 1,940,202 |
See accompanying notes which are an integral part of the financial statements.
17 Semiannual Report
Financial Statements continued | ||||
Statement of Assets and Liabilities continued | ||||
Amounts in thousands (except per share amounts) | April 30, 2006 (Unaudited) | |||
Calculation of Maximum Offering Price | ||||
Class A: | ||||
Net Asset Value and redemption price per share | ||||
($52,667 ÷ 4,847.4 shares) | $ 10.86 | |||
Maximum offering price per share (100/95.25 of $10.86) | $ 11.40 | |||
Class T: | ||||
Net Asset Value and redemption price per share | ||||
($106,514 ÷ 9,790 shares) | $ 10.88 | |||
Maximum offering price per share (100/96.50 of $10.88) | $ 11.27 | |||
Class B: | ||||
Net Asset Value and offering price per share | ||||
($82,685 ÷ 7,611 shares)A | $ 10.86 | |||
Class C: | ||||
Net Asset Value and offering price per share | ||||
($34,311 ÷ 3,161 shares)A | $ 10.85 | |||
Fidelity Mortgage Securities Fund: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($1,648,518 ÷ 151,454 shares) | $ 10.88 | |||
Institutional Class: | ||||
Net Asset Value, offering price and redemption price per | ||||
share ($15,507 ÷ 1,428 shares) | $ 10.86 | |||
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See accompanying notes which are an integral part of the financial statements.
Semiannual Report 18
Statement of Operations | ||||||
Amounts in thousands | Six months ended April 30, 2006 (Unaudited) | |||||
Investment Income | ||||||
Interest | $ 41,081 | |||||
Income from affiliated Central Funds | 10,299 | |||||
Total income | 51,380 | |||||
Expenses | ||||||
Management fee | $ 3,287 | |||||
Transfer agent fees | 1,217 | |||||
Distribution fees | 786 | |||||
Fund wide operations fee | 289 | |||||
Independent trustees compensation | 4 | |||||
Miscellaneous | 2 | |||||
Total expenses before reductions | 5,585 | |||||
Expense reductions | (7) | 5,578 | ||||
Net investment income | 45,802 | |||||
Realized and Unrealized Gain (Loss) | ||||||
Net realized gain (loss) on: | ||||||
Investment securities: | ||||||
Unaffiliated issuers | (4,646) | |||||
Affiliated Central Funds | (13) | |||||
Swap agreements | (740) | |||||
Total net realized gain (loss) | (5,399) | |||||
Change in net unrealized appreciation (depreciation) on: | ||||||
Investment securities | (16,594) | |||||
Swap agreements | 459 | |||||
Delayed delivery commitments | (1) | |||||
Total change in net unrealized appreciation | ||||||
(depreciation) | (16,136) | |||||
Net gain (loss) | (21,535) | |||||
Net increase (decrease) in net assets resulting from | ||||||
operations | $ 24,267 |
See accompanying notes which are an integral part of the financial statements.
19 Semiannual Report
Financial Statements continued | ||||||
Statement of Changes in Net Assets | ||||||
Six months ended | Year ended | |||||
April 30, 2006 | October 31, | |||||
Amounts in thousands | (Unaudited) | 2005 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income | $ 45,802 | $ 80,564 | ||||
Net realized gain (loss) | (5,399) | 1,596 | ||||
Change in net unrealized appreciation (depreciation) . | (16,136) | (52,287) | ||||
Net increase (decrease) in net assets resulting from | ||||||
operations | 24,267 | 29,873 | ||||
Distributions to shareholders from net investment income . | (46,139) | (83,034) | ||||
Distributions to shareholders from net realized gain | | (10,450) | ||||
Total distributions | (46,139) | (93,484) | ||||
Share transactions - net increase (decrease) | (179,406) | 288,375 | ||||
Total increase (decrease) in net assets | (201,278) | 224,764 | ||||
Net Assets | ||||||
Beginning of period | 2,141,480 | 1,916,716 | ||||
End of period (including distributions in excess of net | ||||||
investment income of $2,708 and distributions in | ||||||
excess of net investment income of $2,371, | ||||||
respectively) | $ 1,940,202 | $ 2,141,480 |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
20 |
Financial Highlights Class A | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .235 | .408 | .365 | .282 | .502H | .630 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.267) | .181 | .112 | .172H | .613 | ||||||||
Total from investment | ||||||||||||||
operations | .107 | .141 | .546 | .394 | .674 | 1.243 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.237) | (.421) | (.366) | (.274) | (.534) | (.653) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.237) | (.481) | (.516) | (.354) | (.534) | (.653) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.33 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | .97% | 1.26% | 4.97% | 3.56% | 6.26% | 12.15% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .74%A | .82% | .86% | .81% | .84% | .85% | ||||||||
Net investment income | 4.31%A | 3.65% | 3.24% | 2.51% | 4.55%H | 5.86% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 53 | $ 50 | $ 55 | $ 69 | $ 63 | $ 15 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
21 Semiannual Report
Financial Highlights Class T | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .232 | .400 | .353 | .270 | .492H | .622 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.118) | (.268) | .181 | .101 | .171H | .617 | ||||||||
Total from investment | ||||||||||||||
operations | .114 | .132 | .534 | .371 | .663 | 1.239 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.234) | (.412) | (.354) | (.261) | (.523) | (.639) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.234) | (.472) | (.504) | (.341) | (.523) | (.639) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.00 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C,D | 1.03% | 1.18% | 4.86% | 3.34% | 6.15% | 12.09% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .81%A | .89% | .96% | .93% | .94% | .96% | ||||||||
Net investment income | 4.25%A | 3.57% | 3.14% | 2.39% | 4.45%H | 5.75% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 107 | $ 126 | $ 131 | $ 155 | $ 195 | $ 106 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the 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 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
22 |
Financial Highlights Class B | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | $ 10.53 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeE | .194 | .323 | .278 | .197 | .421H | .551 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.128) | (.257) | .172 | .112 | .171H | .611 | ||||||||
Total from investment | ||||||||||||||
operations | .066 | .066 | .450 | .309 | .592 | 1.162 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.196) | (.336) | (.280) | (.189) | (.452) | (.572) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.196) | (.396) | (.430) | (.269) | (.452) | (.572) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.86 | $ 10.99 | $ 11.32 | $ 11.30 | $ 11.26 | $ 11.12 | ||||||||
Total ReturnB,C,D | .59% | .58% | 4.08% | 2.78% | 5.48% | 11.32% | ||||||||
Ratios to Average Net AssetsF,G | ||||||||||||||
Expenses before | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | 1.50%A | 1.58% | 1.63% | 1.57% | 1.58% | 1.60% | ||||||||
Expenses net of all | ||||||||||||||
reductions | 1.50%A | 1.58% | 1.63% | 1.57% | 1.57% | 1.60% | ||||||||
Net investment income | 3.55%A | 2.89% | 2.48% | 1.75% | 3.82%H | 5.11% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 83 | $ 101 | $ 134 | $ 182 | $ 176 | $ 57 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the 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. H Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
23 Semiannual Report
Financial Highlights Class C | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001G | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period . | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | $ 10.89 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeE | .189 | .316 | .273 | .189 | .413I | .112 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.127) | (.257) | .172 | .112 | .173I | .238 | ||||||||||
Total from investment | ||||||||||||||||
operations | .062 | .059 | .445 | .301 | .586 | .350 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.192) | (.329) | (.275) | (.181) | (.436) | (.140) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.192) | (.389) | (.425) | (.261) | (.436) | (1.40) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.85 | $ 10.98 | $ 11.31 | $ 11.29 | $ 11.25 | $ 11.10 | ||||||||||
Total ReturnB,C,D | .56% | .52% | 4.04% | 2.71% | 5.43% | 3.22% | ||||||||||
Ratios to Average Net AssetsF,H | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | 1.57%A | 1.64% | 1.68% | 1.64% | 1.64% | 1.60%A | ||||||||||
Net investment income | 3.48%A | 2.82% | 2.42% | 1.68% | 3.75%I | 4.87%A | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 34 | $ 41 | $ 58 | $ 99 | $ 74 | $ 3 | ||||||||||
Portfolio turnover rate | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Total returns do not include the effect of the contingent deferred sales charge. E Calculated based on average shares outstanding during the period. F Amounts do not include the activity of the affiliated central fund. G For the period August 16, 2001 (commencement of sale of shares) to October 31, 2001. 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. 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 expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. I Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
24 |
Financial Highlights Fidelity Mortgage Securities Fund | ||||||||||||||
Six months ended | ||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||
Selected Per Share Data | ||||||||||||||
Net asset value, | ||||||||||||||
beginning of period | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | $ 10.54 | ||||||||
Income from Investment | ||||||||||||||
Operations | ||||||||||||||
Net investment | ||||||||||||||
incomeD | .252 | .438 | .390 | .306 | .526G | .654 | ||||||||
Net realized and unre | ||||||||||||||
alized gain (loss) | (.129) | (.257) | .183 | .102 | .170G | .619 | ||||||||
Total from investment | ||||||||||||||
operations | .123 | .181 | .573 | .408 | .696 | 1.273 | ||||||||
Distributions from net | ||||||||||||||
investment income | (.253) | (.451) | (.393) | (.298) | (.556) | (.673) | ||||||||
Distributions from net | ||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||
Total distributions | (.253) | (.511) | (.543) | (.378) | (.556) | (.673) | ||||||||
Net asset value, | ||||||||||||||
end of period | $ 10.88 | $ 11.01 | $ 11.34 | $ 11.31 | $ 11.28 | $ 11.14 | ||||||||
Total ReturnB,C | 1.12% | 1.61% | 5.21% | 3.68% | 6.47% | 12.44% | ||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||
Expenses before | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of fee | ||||||||||||||
waivers, if any | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Expenses net of all | ||||||||||||||
reductions | .45%A | .55% | .62% | .60% | .63% | .66% | ||||||||
Net investment income | 4.61%A | 3.91% | 3.48% | 2.72% | 4.76%G | 6.04% | ||||||||
Supplemental Data | ||||||||||||||
Net assets, | ||||||||||||||
end of period | ||||||||||||||
(in millions) | $ 1,649 | $ 1,807 | $ 1,525 | $ 1,302 | $ 1,208 | $ 430 | ||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
25 Semiannual Report
Financial Highlights Institutional Class | ||||||||||||||||
Six months ended | ||||||||||||||||
April 30, 2006 | Years ended October 31, | |||||||||||||||
(Unaudited) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Selected Per Share Data | ||||||||||||||||
Net asset value, | ||||||||||||||||
beginning of period | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | $ 10.52 | ||||||||||
Income from Investment | ||||||||||||||||
Operations | ||||||||||||||||
Net investment | ||||||||||||||||
incomeD | .247 | .432 | .387 | .302 | .513G | .644 | ||||||||||
Net realized and unre | ||||||||||||||||
alized gain (loss) | (.117) | (.266) | .182 | .112 | .171G | .610 | ||||||||||
Total from investment | ||||||||||||||||
operations | .130 | .166 | .569 | .414 | .684 | 1.254 | ||||||||||
Distributions from net | ||||||||||||||||
investment income | (.250) | (.446) | (.389) | (.294) | (.544) | (.664) | ||||||||||
Distributions from net | ||||||||||||||||
realized gain | | (.060) | (.150) | (.080) | | | ||||||||||
Total distributions | (.250) | (.506) | (.539) | (.374) | (.544) | (.664) | ||||||||||
Net asset value, | ||||||||||||||||
end of period | $ 10.86 | $ 10.98 | $ 11.32 | $ 11.29 | $ 11.25 | $ 11.11 | ||||||||||
Total ReturnB,C | 1.18% | 1.48% | 5.19% | 3.75% | 6.36% | 12.27% | ||||||||||
Ratios to Average Net AssetsE,F | ||||||||||||||||
Expenses before | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .76% | ||||||||||
Expenses net of fee | ||||||||||||||||
waivers, if any | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Expenses net of all | ||||||||||||||||
reductions | .51%A | .60% | .66% | .63% | .75% | .75% | ||||||||||
Net investment income | 4.54%A | 3.87% | 3.45% | 2.69% | 4.65%G | 5.95% | ||||||||||
Supplemental Data | ||||||||||||||||
Net assets, | ||||||||||||||||
end of period | ||||||||||||||||
(in millions) | $ 16 | $ 16 | $ 13 | $ 16 | $ 12 | $ 7 | ||||||||||
Portfolio turnover rate . | 149%A | 183% | 204% | 356% | 231% | 194% |
A Annualized B Total returns for periods of less than one year are not annualized. C Total returns would have been lower had certain expenses not been reduced during the periods shown. D Calculated based on average shares outstanding during the period. E Amounts do not include the activity of the affiliated central fund. F 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. G Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and discount on all debt securities. Per share data and ratios for periods prior to adoption have not been restated to reflect this change. |
See accompanying notes which are an integral part of the financial statements.
Semiannual
Report |
26 |
Notes to Financial Statements
For the period ended April 30, 2006 (Unaudited)
(Amounts in thousands except ratios)
1. Significant Accounting Policies.
Fidelity Advisor Mortgage Securities Fund (the fund) is a fund of Fidelity Advisor Series II (the trust) and is authorized to issue an unlimited number of shares. The trust is regis tered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open end management investment company organized as a Massachusetts business trust.
The fund offers Class A, Class T, Class B, Class C, Fidelity Mortgage Securities Fund, and Institutional Class shares, each of which has equal rights as to assets and voting privi leges. 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), and fixed income Central Investment Portfolios (CIPs), collectively referred to as 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, 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 quotes 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. 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 published prices for the same securities. 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.
27 Semiannual Report
Notes to Financial Statements (Unaudited) continued |
(Amounts in thousands except ratios) |
1. Significant Accounting Policies continued |
Investment Transactions and Income. Security transactions, including the funds 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. 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.
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 funds 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. Distribu tions 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. 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 prior period premium and discount on debt securities, market discount, deferred trustees compensation, financing transactions, capital loss carryforwards, 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 | $ 5,198 | |||
Unrealized depreciation | (49,863) | |||
Net unrealized appreciation (depreciation) | $ (44,665) | |||
Cost for federal income tax purposes | $ 2,381,400 |
Semiannual
Report |
28 |
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 funds 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 underly ing securities or if the counterparty does not perform under the contracts 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 transac tions 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 funds Schedule of Investments.
Swap Agreements. The fund may invest in swaps for the purpose of managing its exposure to interest rate, credit or market risk.
Interest rate swaps are agreements to exchange cash flows periodically based on a notional principal amount, for example, the exchange of fixed rate interest payments for floating rate interest payments. Periodic payments received or made by the fund are recorded in the accompanying Statement of Operations as realized gains or losses,
29 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
2. Operating Policies continued |
||
Swap Agreements continued |
respectively. The primary risk associated with interest rate swaps is that unfavorable changes in the fluctuation of interest rates could adversely impact a fund.
Total return swaps are agreements to exchange the return generated by one instrument or index for the return generated by another instrument, for example, the agreement to pay interest in exchange for a market linked return based on a notional amount. To the extent the total return of the index exceeds the offsetting interest obligation, a fund will receive a payment from the counterparty. To the extent it is less, a fund will make a payment to the counterparty. Periodic payments received or made by the fund are recorded in the accom panying Statement of Operations as realized gains or losses, respectively.
Swaps are marked to market daily based on dealer supplied valuations and changes in value are recorded as unrealized appreciation (depreciation). Gains or losses are realized upon early termination of the swap agreement. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with a funds custodian in compliance with swap contracts. Risks may exceed amounts recognized on the State ment of Assets and Liabilities. These risks include changes in the returns of the underly ing instruments, failure of the counterparties to perform under the contracts terms and the possible lack of liquidity with respect to the swap agreements. Details of swap agreements open at period end are included in the funds Schedule of Investments under the caption Swap Agreements.
Mortgage Dollar Rolls. To earn additional income, the fund may employ trading strate gies 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 differen tial 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 funds right to repurchase or sell securities may be limited.
Semiannual
Report |
30 |
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short term securities and U.S. government securities, aggregated $15,247 and $50,205, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the fund with investment manage ment related services for which the fund pays a monthly management fee. The manage ment fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the funds 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 .32% of the funds average net assets.
Distribution and Service Plan. In accordance with Rule 12b 1 of the 1940 Act, the fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class average net assets. In addition, FDC may pay financial intermediaries for selling shares of the fund and providing shareholder support services. For the period, the
Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |||||||||
Fee | Fee | FDC | by FDC | |||||||||
Class A | 0% | .15% | $ 39 | $ 1 | ||||||||
Class T | 0% | .25% | 145 | 1 | ||||||||
Class B | .65% | .25% | 414 | 300 | ||||||||
Class C | .75% | .25% | 188 | 18 | ||||||||
$ 786 | $ 320 |
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 interme diaries 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,.75% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
31 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) |
4. Fees and Other Transactions with Affiliates continued
Sales Load - continued
For the period, sales charge amounts retained by FDC were as follows:
Retained | ||||
by FDC | ||||
Class A | $ 6 | |||
Class T | 5 | |||
Class B* | 162 | |||
Class C* | 2 | |||
$ 175 |
* | 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 ser vicing agent for each class of the fund, except for Fidelity Mortgage Securities Fund. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, is the transfer agent for Fidelity Mortgage Securities Fund shares. FIIOC receive account fees and asset based fees that vary according to the account size and type of account of the shareholders of the respective classes of the fund. FSC receives an asset based fee of .10% of Fidelity Mortgage Securities Funds average net assets. FIIOC and FSC pay for typesetting, printing and mailing of shareholder reports, except proxy statements. The account fees were eliminated. For the period the total transfer agent fees paid by each class to FIIOC or FSC, were as follows:
% of | ||||||
Average | ||||||
Amount | Net Assets | |||||
Class A | $ 62 | .24* | ||||
Class T | 119 | .21* | ||||
Class B | 114 | .25* | ||||
Class C | 42 | .22* | ||||
Fidelity Mortgage Securities Fund | 867 | .10* | ||||
Institutional Class | 13 | .16* | ||||
$ 1,217 | ||||||
* Annualized |
Fundwide Operations Fee. Pursuant to the Fundwide Operations and Expense Agree ment (FWOE), FMR has agreed to provide for fund level expenses (which do not include transfer agent, Rule 12b 1 fees, compensation of the independent trustees, interest (including commitment fees), taxes or extraordinary expenses, if any) in return for a FWOE fee equal to .35% less the total amount of the management fee. The FWOE paid by the fund is reduced by an amount equal to the fees and expenses paid to the independent trustees. For the period, the FWOE fee was equivalent to an annualized rate of .03% of average net assets.
Semiannual
Report |
32 |
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 fund may also invest in CIPs managed by FIMM. The Ultra Short Central Fund seeks to obtain a high level of current income consistent with preservation of capital by invest ing in U.S. dollar denominated money market and investment grade debt securities.
The funds Schedule of Investments lists the CIP as an investment of the fund but does not include the underlying holdings of the CIP. Based on its investment objectives, the CIP may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. In addition, the CIP may also participate in derivatives. 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 CIP and the fund.
A complete unaudited list of holdings for the CIP, as of the funds report date, is available upon request or at fidelity.com and/or advisor.fidelity.com, as applicable. The reports are located just after the funds financial statements and quarterly reports but are not part of the financial statements or quarterly reports. In addition, the CIPs financial statements are available on the EDGAR Database on the SECs web site, www.sec.gov, or upon request.
The Central Funds do not pay a management fee.
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 share holder 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 $2 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. |
Through arrangements with the funds custodian, credits realized as a result of unin vested cash balances were used to reduce the funds expenses. During the period, these credits reduced the funds management fees by $7.
33 Semiannual Report
Notes to Financial Statements (Unaudited) continued | ||
(Amounts in thousands except ratios) | ||
7. Other. |
The funds 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 funds 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.
8. Distributions to Shareholders. | ||||||||
Distributions to shareholders of each class were as follows: | ||||||||
Six months ended | Year ended | |||||||
April 30, 2006 | October 31, 2005 | |||||||
From net investment income | ||||||||
Class A | $ 1,112 | $ 2,029 | ||||||
Class T | 2,457 | 4,745 | ||||||
Class B | 1,644 | 3,543 | ||||||
Class C | 657 | 1,456 | ||||||
Fidelity Mortgage Securities Fund | 39,894 | 70,651 | ||||||
Institutional Class | 375 | 610 | ||||||
Total | $ 46,139 | $ 83,034 | ||||||
From net realized gain | ||||||||
Class A | $ | $ 287 | ||||||
Class T | | 691 | ||||||
Class B | | 700 | ||||||
Class C | | 301 | ||||||
Fidelity Mortgage Securities Fund | | 8,396 | ||||||
Institutional Class | | 75 | ||||||
Total | $ | $ 10,450 |
Semiannual
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34 |
9. Share Transactions. | ||||||||||||
Transactions for each class of shares were as follows: | ||||||||||||
Shares | Dollars | |||||||||||
Six months ended | Year ended | Six months ended | Year ended | |||||||||
April 30, 2006 | October 31, 2005 | April 30, 2006 | October 31, 2005 | |||||||||
Class A | ||||||||||||
Shares sold | 1,132 | 1,644 | $ 12,460 | $ 18,382 | ||||||||
Reinvestment of | ||||||||||||
distributions | 87 | 179 | 952 | 2,002 | ||||||||
Shares redeemed | (963) | (2,106) | (10,573) | (23,537) | ||||||||
Net increase (decrease) | 256 | (283) | $ 2,839 | $ (3,153) | ||||||||
Class T | ||||||||||||
Shares sold | 912 | 3,841 | $ 10,025 | $ 43,073 | ||||||||
Reinvestment of | ||||||||||||
distributions | 212 | 458 | 2,330 | 5,128 | ||||||||
Shares redeemed | (2,753) | (4,417) | (30,288) | (49,428) | ||||||||
Net increase (decrease) | (1,629) | (118) | $ (17,933) | $ (1,227) | ||||||||
Class B | ||||||||||||
Shares sold | 109 | 374 | $ 1,195 | $ 4,184 | ||||||||
Reinvestment of | ||||||||||||
distributions | 120 | 308 | 1,322 | 3,440 | ||||||||
Shares redeemed | (1,817) | (3,340) | (19,958) | (37,334) | ||||||||
Net increase (decrease) | (1,588) | (2,658) | $ (17,441) | $ (29,710) | ||||||||
Class C | ||||||||||||
Shares sold | 158 | 501 | $ 1,739 | $ 5,615 | ||||||||
Reinvestment of | ||||||||||||
distributions | 47 | 124 | 514 | 1,386 | ||||||||
Shares redeemed | (779) | (2,018) | (8,547) | (22,545) | ||||||||
Net increase (decrease) | (574) | (1,393) | $ (6,294) | $ (15,544) | ||||||||
Fidelity Mortgage | ||||||||||||
Securities Fund | ||||||||||||
Shares sold | 12,458 | 60,281 | $ 137,177 | $ 676,321 | ||||||||
Reinvestment of | ||||||||||||
distributions | 3,365 | 6,543 | 36,994 | 73,241 | ||||||||
Shares redeemed | (28,561) | (37,075) | (314,291) | (414,945) | ||||||||
Net increase (decrease) | (12,738) | 29,749 | $ (140,120) | $ 334,617 | ||||||||
Institutional Class | ||||||||||||
Shares sold | 297 | 733 | $ 3,254 | $ 8,212 | ||||||||
Reinvestment of | ||||||||||||
distributions | 26 | 44 | 289 | 496 | ||||||||
Shares redeemed | (366) | (476) | (4,000) | (5,316) | ||||||||
Net increase (decrease) | (43) | 301 | $ (457) | $ 3,392 |
35 Semiannual Report
Board Approval of Investment Advisory Contracts and Management Fees
Fidelity Mortgage Securities 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 Manage ment, 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 funds manage ment contract or sub advisory agreements; (ii) the investment process or strategies employed in the management of the funds assets; (iii) the nature or level of services provided under the funds management contract or sub advisory agreements; (iv) the day to day management of the fund or the persons primarily responsible for such man agement; 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 necessi tate prior shareholder approval of the Agreement or result in an assignment and termination of the funds 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 funds portfolio manager would not change, it did not consider the funds investment perfor mance, 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 funds 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 funds 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
Semiannual Report |
36 |
appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the funds Agreement is fair and reasonable, and that the funds Agreement should be approved.
37 Semiannual Report
Investment
Adviser Fidelity Management & Research Company Boston, MA Investment Sub Advisers Fidelity Investments Money Management, Inc. Fidelity Management & Research (U.K.) 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 General Distributor Fidelity Distributors Corporation Boston, MA Transfer and Service Agent Fidelity Service Company, Inc. Boston, MA Custodian The Bank of New York New York, NY |
The Fidelity Telephone Connection | ||
Mutual Fund 24-Hour Service | ||
Exchanges/Redemptions | ||
and Account Assistance | 1-800-544-6666 | |
Product Information | 1-800-544-6666 | |
Retirement Accounts | 1-800-544-4774 | |
(8 a.m. - 9 p.m.) | ||
TDD Service | 1-800-544-0118 | |
for the deaf and hearing impaired | ||
(9 a.m. - 9 p.m. Eastern time) | ||
Fidelity Automated Service | ||
Telephone (FAST®)(automated phone logo) | 1-800-544-5555 | |
(automated phone logo) Automated line for quickest service |
MOR-USAN-0606 1.784900.103 |
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: Fidelity Advisor Mortgage Securities Fund'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: Fidelity Advisor Mortgage Securities Fund's (the "Fund") 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 Fund 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 Fund'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 Fund'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: |
June 16, 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: |
June 16, 2006 |
By: |
/s/Paul M. Murphy |
|
Paul M. Murphy |
|
Chief Financial Officer |
|
|
Date: |
June 16, 2006 |
Exhibit EX-99.CERT
I, Christine Reynolds, certify that:
1. I have reviewed this report on Form N-CSR of Fidelity Advisor Series II: Fidelity Advisor Mortgage Securities Fund;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based upon such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting 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 registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 16, 2006
/s/Christine Reynolds |
Christine Reynolds |
President and Treasurer |
I, Paul M. Murphy, certify that:
1. I have reviewed this report on Form N-CSR of Fidelity Advisor Series II: Fidelity Advisor Mortgage Securities Fund;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based upon such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting 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 registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 16, 2006
/s/Paul M. Murphy |
Paul M. Murphy |
Chief Financial Officer |
Exhibit EX-99.906CERT
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code)
In connection with the attached Report of Fidelity Advisor Series II: Fidelity Advisor Mortgage Securities Fund (the "Fund") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Fund does hereby certify that, to the best of such officer's knowledge:
1. The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund as of, and for, the periods presented in the Report.
Dated: June 16, 2006
/s/Christine Reynolds |
Christine Reynolds |
President and Treasurer |
Dated: June 16, 2006
/s/Paul M. Murphy |
Paul M. Murphy |
Chief Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request.
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