(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
LIMITED TERM BOND
FUND - CLASS A
SEMIANNUAL REPORT
MAY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 8 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 23 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February through May. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important
to remember, however, that this loss in principal is only "on paper" until
you choose to sell your shares. That's why your investing time horizon is
key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund
investment into short-term investments.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's 10 years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Limited Term Bond - Class A -3.12% 2.01% 53.04% 180.67%
Advisor Limited Term Bond - Class A
(including 4.75% sales charge) -7.72% -2.83% 45.77% 167.34%
Lehman Brothers Intermediate
Government- -2.18% 1.30% 52.35% 172.01%
Corporate Bond Index
Average Intermediate Investment Grade
Bond Fund -3.30% 0.46% 49.69% 175.87%
Consumer Price Index 1.17% 2.29% 19.14% 42.65%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or ten
years. You can compare the fund's returns to the Lehman Brothers
Intermediate Government-Corporate Bond Index - a broad measure of the
performance of intermediate (one- to ten-year) bonds. To measure how the
fund stacked up against its peers, you can also look at the average
intermediate investment grade bond fund, which reflects the performance of
124 funds tracked by Lipper Analytical Services. These benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the Consumer Price Index helps show how your fund did
compared to inflation.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class A 2.01% 8.88% 10.87%
Advisor Limited Term Bond - Class A
(including a 4.75% sales charge) -2.83% 7.83% 10.33%
Lehman Brothers Intermediate
Government-Corporate Bond Index 1.30% 8.78% 10.52%
Average Intermediate Investment
Grade Bond Fund 0.46% 8.39% 10.66%
Consumer Price Index 2.29% 3.57% 3.62%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER 10 YEARS
FA Ltd Term Bond Retail (287)LB Gov't/Corp Bond Index, Interme
05/31/84 9525.00 10000.00
06/30/84 9610.53 10098.00
07/31/84 9979.89 10420.13
08/31/84 10175.57 10560.80
09/30/84 10393.29 10761.45
10/31/84 10740.04 11126.27
11/30/84 10935.97 11336.55
12/31/84 10980.03 11499.80
01/31/85 11289.13 11699.90
02/28/85 11020.13 11572.37
03/31/85 11175.58 11764.47
04/30/85 11445.94 11990.35
05/31/85 12084.26 12448.38
06/30/85 12231.29 12574.11
07/31/85 12110.34 12572.85
08/31/85 12354.12 12755.15
09/30/85 12384.86 12850.82
10/31/85 12562.65 13044.87
11/30/85 12838.41 13270.54
12/31/85 13202.52 13578.42
01/31/86 13299.30 13665.32
02/28/86 13755.56 13986.46
03/31/86 14179.06 14354.30
04/30/86 14262.89 14450.47
05/31/86 14042.34 14282.85
06/30/86 14380.59 14614.21
07/31/86 14501.23 14761.81
08/31/86 14817.54 15093.95
09/30/86 14650.74 14970.18
10/31/86 14837.87 15164.80
11/30/86 15025.47 15308.86
12/31/86 15094.13 15360.91
01/31/87 15284.35 15516.06
02/28/87 15376.35 15595.19
03/31/87 15304.71 15562.44
04/30/87 14909.82 15277.65
05/31/87 14853.00 15242.51
06/30/87 15051.49 15426.94
07/31/87 15051.05 15462.42
08/31/87 14977.90 15422.22
09/30/87 14730.87 15221.73
10/31/87 15098.07 15657.07
11/30/87 15292.29 15757.28
12/31/87 15444.47 15922.73
01/31/88 15913.40 16330.35
02/29/88 16151.64 16511.62
03/31/88 16026.30 16448.88
04/30/88 15992.44 16420.91
05/31/88 15898.67 16348.66
06/30/88 16192.87 16608.60
07/31/88 16175.93 16573.73
08/31/88 16221.71 16598.59
09/30/88 16521.31 16887.40
10/31/88 16742.71 17117.07
11/30/88 16639.33 16971.58
12/31/88 16654.64 16986.85
01/31/89 16835.85 17165.21
02/28/89 16795.98 17094.83
03/31/89 16862.35 17168.34
04/30/89 17146.00 17511.71
05/31/89 17468.46 17858.44
06/30/89 17894.08 18308.47
07/31/89 18272.63 18683.80
08/31/89 18025.86 18442.78
09/30/89 18110.95 18529.46
10/31/89 18488.84 18922.28
11/30/89 18640.92 19102.04
12/31/89 18671.65 19155.53
01/31/90 18485.94 19032.93
02/28/90 18546.74 19103.36
03/31/90 18520.81 19128.19
04/30/90 18401.07 19061.24
05/31/90 18838.12 19480.59
06/30/90 19089.98 19741.63
07/31/90 19344.85 20016.04
08/31/90 19183.36 19933.97
09/30/90 19325.16 20087.46
10/31/90 19507.29 20320.48
11/30/90 19844.95 20629.35
12/31/90 20149.03 20911.97
01/31/91 20298.81 21125.27
02/28/91 20461.61 21294.28
03/31/91 20591.24 21439.08
04/30/91 20820.91 21672.76
05/31/91 20931.97 21804.97
06/30/91 20938.27 21820.23
07/31/91 21173.75 22064.62
08/31/91 21618.27 22486.05
09/30/91 22019.80 22872.81
10/31/91 22280.36 23133.56
11/30/91 22493.53 23399.60
12/31/91 23203.13 23970.55
01/31/92 22906.22 23752.41
02/29/92 22965.64 23845.05
03/31/92 22882.98 23752.05
04/30/92 23011.56 23961.07
05/31/92 23432.11 24332.47
06/30/92 23762.53 24692.59
07/31/92 24321.82 25183.97
08/31/92 24546.69 25435.81
09/30/92 24832.38 25781.74
10/31/92 24465.89 25446.58
11/30/92 24528.35 25349.88
12/31/92 24857.01 25689.57
01/31/93 25352.45 26187.94
02/28/93 25858.29 26601.71
03/31/93 26028.13 26708.12
04/30/93 26187.95 26921.79
05/31/93 26206.35 26862.56
06/30/93 26725.91 27284.30
07/31/93 26932.91 27349.78
08/31/93 27525.37 27784.64
09/30/93 27604.22 27898.56
10/31/93 27752.84 27973.89
11/30/93 27593.94 27817.23
12/31/93 27713.88 27945.19
01/31/94 28006.57 28255.38
02/28/94 27465.26 27837.20
03/31/94 26933.25 27377.89
04/30/94 26826.17 27191.72
05/31/94 26733.60 27201.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Advisor
Limited Term Bond Fund - Class A on May 31, 1984, and paid the maximum
4.75% sales charge. As the chart shows, by May 31, 1994, the value of your
investment would have grown to $26,734 - a 167.34% increase on your initial
investment. For comparison, look at how the Lehman Brothers Intermediate
Government-Corporate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment would have grown to $27,201 - a
172.01% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
On September 10, 1992, the fund began offering Class A shares. All
performance information for Class A prior to September 10, 1992 does not
reflect Class A's 12b-1 fee and revised transfer agent fee arrangements,
which if included, would lower Class A's performance.
For the period ended May 31, 1994, Fidelity Advisor Limited Term Bond Fund
- - Institutional Class shares' cumulative total returns were -2.93%, 2.65%,
54.48%, and 183.32% for six months, one year, five years, and ten years,
respectively. Institutional Class shares' average annual returns were
2.65%, 9.09%, and 10.98% for one year, five years and ten years,
respectively.
Cumulative total returns for the Institutional Class shares for the one
year period ended November 30, 1993, 1992, 1991, 1990 and 1989 were 13.17%,
9.21%, 13.35%, 6.46%, and 12.03%, respectively.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1994 1993 1992 1991 1990 1989
Dividend return 2.81% 7.80% 8.19% 9.30% 9.05% 9.77%
Capital appreciation -5.93% 4.70% 0.86% 4.05% -2.59% 2.26%
return
Total return -3.12% 12.50% 9.05% 13.35% 6.46% 12.03%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 4.36(cents) 31.94(cents) 69.51(cents)
Annualized dividend rate 4.88% 5.89% 6.30%
30-day annualized yield 4.24% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.51 over
the past month, $10.87 over the past six months and $11.03 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. Institutional Class shares' 30-day annualized yield was
5.44%.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Michael Gray, Portfolio Manager of Fidelity
Advisor Limited Term Bond Fund
Q. MICHAEL, HOW DID THE FUND PERFORM?
A. On a relative basis, pretty well. Fidelity Advisor Limited Term Bond
Fund - Class A had total returns of -3.12% for the six months and 2.01% for
the year ended May 31, 1994. These results beat the average intermediate
investment grade bond fund, which had returns of -3.30% and 0.46% over the
same periods, according to Lipper Analytical Services.
Q. WHAT SPECIFIC THINGS DID YOU DO TO ACHIEVE THE GOOD RELATIVE
PERFORMANCE?
A. Two main things. Number one, I think I did a pretty good job of managing
the fund's duration - its sensitivity to interest rate changes - during
this period. I started shortening the duration last October, prior to the
first down leg in the market. With a longer duration, a fund's share price
will appreciate rapidly in a declining interest rate environment. So this
worked extremely well during most of 1993. But in October, when rates began
rising, a long duration would have had the opposite effect, causing the
fund's share price to deteriorate quickly. The shorter duration thus
enabled the fund to beat the market in the fourth quarter of 1993. I made a
mistake in January. The market sort of gave a head fake. It looked like it
was going to rally, so I lengthened duration to take advantage of the rise.
Then on February 4, the Federal Reserve raised the federal funds rate - the
interest rate on overnight interbank loans - by a quarter percentage point.
That hurt, but I recognized the mistake and shortened duration
dramatically. By the end of March, I had it shortened to about 3 years,
which helped in April as the market continued to fall. I maintained this
defensive posture through May, bringing duration down to 2.63 years.
Basically this means that if interest rates were to rise by another
percentage point, the fund's share price would decline by only about 2 and
one-half percent.
Q. WHAT ELSE DID YOU DO?
A. Due to the fund's higher quality charter, our weighting in emerging
market debt was quite small. During the period, I made limited commitments
in Mexico, buying Mexican cetes - short-term, high-yielding, government
securities. These investments performed exceptionally well in 1993, but in
February and March of 1994 they were torpedoed along with all other bonds.
Q. WHAT WERE THE BIGGEST FACTORS BEHIND THE SELL-OFF IN FIXED-INCOME
MARKETS WORLDWIDE?
A. To begin with, the market was
surprised by the first Fed tightening on February 4. Many expected that the
Fed would begin to raise rates sometime in 1994, given the strengthening
economy, but few thought it would be THAT soon. Consequently, it sent bonds
into a tailspin. Simultaneously, a lot of highly leveraged investments -
that is, made with borrowed money - began to unwind. Many investors had
been playing the steep yield curve - the wide spread between short- and
long-term interest rates. Wall Street dealers, hedge funds - aggressively
managed private partnerships - and other investors were buying long-term
securities and financing their purchases at much lower short-term rates.
This was a great strategy while rates were declining. But when the Fed
began tightening, these investors realized that rates weren't going to go
down anymore. All bets were off and they started selling. This flooded the
market with securities that, in a bearish environment, no investor wanted
to own. One final factor was worldwide political uncertainty. The
Whitewater affair, the assassination in Mexico, trade tensions with Japan
and so on, all added to the bearish sentiment in the market.
Q. THERE'S BEEN A LOT OF TALK LATELY ABOUT DERIVATIVES. DO YOU USE THEM IN
THE FUND?
A. The fund has the flexibility to use derivative instruments. Currently,
there are two kinds in the fund. The first is a short position in Treasury
Bond futures contracts. We own these to hedge the fund's long-term
government bonds. They help reduce the volatility of the fund in response
to interest rate changes. The second is currency forward contracts. We use
these to hedge the fund's non-dollar bonds against adverse movements in
currency exchange rates. They allow the fund to have exposure to foreign
bond markets while eliminating the currency risk for the portion that's
hedged.
Q. DO YOU THINK THE FED IS TOO FAR AHEAD OF THE CURVE IN RAISING INTEREST
RATES?
A. I don't think it is. The best analogy that I've heard is that the Fed,
instead of stepping on the brakes to slow down the economy, has taken its
foot off the gas. A 3% federal funds rate for the past year and a half,
with inflation at around 2.5%, was really putting the pedal to the metal. A
4.25% fed funds rate is less stimulative than 3%, but it's not slamming on
the brakes.
Q. WHAT IS YOUR OUTLOOK GOING FORWARD?
A. You might call it a "bunker mentality." We're taking shelter until the
market stabilizes. I have the fund positioned defensively, with a short
duration relative to its benchmark. I'm also increasing the fund's cash
level. This is the first bearish market we've had in several years and the
challenge is to determine when it's safe to re-enter the market and resume
buying. I can't see getting bullish until the Fed stops tightening, and it
may not be done yet.
FUND FACTS
GOAL: high current income
by investing in bonds rated
BBB/Baa or better, with an
average maturity of three to
10 years
START DATE: February 2, 1984
SIZE: As of May 31, 1994,
more than $277 million
MANAGER: Michael Gray,
since September 1987;
joined Fidelity in 1986
(checkmark)
MICHAEL GRAY ON MANAGING
BONDS IN A BEARISH MARKET:
"The primary goal in a bearish
environment is to try to
preserve the shareholder's
value as much as possible.
This means shifting from an
offensive strategy of buying
aggressively and lengthening
duration in a rising market to a
defensive posture of
shortening duration, moving
out of the market and
increasing the cash portion of
the portfolio. By shortening
duration, I reduce the interest
rate risk in the fund, or the risk
of sustained share price
deterioration should rates
continue to rise. I raise cash
for two reasons. Number one
is it helps to mitigate losses
when interest rates are rising
and bond prices are falling.
Second, a cash reserve
allows me to selectively buy
bonds at attractive prices,
once prices have fallen and
the market has stabilized."
(bullet) As of May 31, the fund's
average duration was 2.63
years. That is down from 5.10
years at the end of January. A
duration of 2.63 years means
that if interest rates rose 1
percentage point, the fund's
share price would decline by
about 2.63%. But if rates were
to fall by 1 percentage point,
the fund's share price would
rise by about 2.63%.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa 33.3 33.5
Aa 16.0 11.9
A 18.9 24.1
Baa 0.7 2.1
Ba - -
B - -
Not rated - -
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1994
6 MONTHS AGO
Years 7.4 8.1
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1994
6 MONTHS AGO
Years 2.63 3.47
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF MAY 31, 1994* AS OF NOVEMBER 30, 1993**
Row: 1, Col: 1, Value: 31.1
Row: 1, Col: 2, Value: 11.2
Row: 1, Col: 3, Value: 29.7
Row: 1, Col: 4, Value: 28.0
Row: 1, Col: 1, Value: 22.7
Row: 1, Col: 2, Value: 13.6
Row: 1, Col: 3, Value: 29.2
Row: 1, Col: 4, Value: 34.5
Corporate bonds 28.0%
U.S. government
and agency
obligations 29.7%
Foreign government
obligations 11.2%
Short-term
investments 31.1%
Corporate bonds 34.5%
U.S. government
and agency
obligations 29.2%
Foreign government
obligations 13.6%
Short-term
investments 22.7%
* TOTAL FOREIGN
ISSUES 22.0%
** TOTAL FOREIGN
ISSUES 26.7%
INVESTMENTS MAY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 26.2%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
ENERGY - 3.3%
ENERGY SERVICES - 1.4%
Petroliam Nasional Berhad yankee
6 7/8%, 7/1/03 (b) $ 4,100,000 $ 3,815,583
OIL & GAS - 1.9%
B.P. America, Inc.:
9 3/8%, 6/1/97 100,000 100,410
7 7/8%, 5/15/02 100,000 101,431
Societe Nationale Elf Aquitaine 8%, 10/15/01 5,000,000 5,116,550
5,318,391
TOTAL ENERGY 9,133,974
FINANCE - 17.7%
BANKS - 4.7%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 153,375
7 3/4%, 7/15/02 100,000 98,710
7 1/5%, 9/15/02 100,000 95,110
Chemical Bank New York Trust Co. 7 1/4%,
9/15/02 3,000,000 2,879,700
First Hawaiian Bank secured 6.93%,
12/1/03 (b) 2,000,000 1,840,800
Korea Development Bank, 7%, 7/15/99 5,000,000 4,851,700
National City Corp. 8 3/8%, 3/15/96 200,000 205,906
NationsBank Corp. 8 1/8%, 6/15/02 3,000,000 3,043,440
13,168,741
CREDIT & OTHER FINANCE - 8.6%
American General Financial Corporation
12 3/4%, 12/1/94 1,000,000 1,035,390
Beneficial Corp. 12%, 11/1/94 2,000,000 2,053,660
Deere (John) Capital Corp. 9 5/8%, 1/1/98 2,500,000 2,700,475
Ford Capital BV yankee bonds 9 3/8%, 1/1/98 100,000 106,522
Ford Motor Credit Co.:
8%, 6/15/02 100,000 100,509
7 3/4%, 11/15/02 100,000 99,359
Grand Metropolitan Investment Corp. 8 1/8%,
8/15/96 3,000,000 3,088,380
PNC Funding Corp. 6 7/8%, 2/1/03 1,000,000 935,200
SCFC Recreational Vehicle Loan Trust 7 1/4%,
9/15/06 951,477 957,424
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Secured Finance, Inc. Kroger gtd. secured 9.05%,
12/15/04 $ 4,000,000 $ 4,280,400
Society Corporation 8 7/8%, 5/15/96 3,600,000 3,735,072
Standard Credit Card Master Trust, Part. Cert.
5 1/2%, 9/7/98 5,000,000 4,755,750
23,848,141
FEDERAL SPONSORED CREDIT - 0.1%
Federal Home Loan Banks, consolidated 8.60%,
2/27/95 200,000 204,750
Federal National Mortgage Association 8 1/4%,
3/10/98 200,000 209,688
414,438
INSURANCE - 2.6%
Metropolitan Life Insurance Co. 6 3/10%,
11/1/03 (b) 5,000,000 4,451,000
NYLIFE Funding, Inc. gtd. 9 1/4%, 5/15/95 700,000 720,888
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,115,580
7,287,468
SAVINGS & LOANS - 1.6%
Household Bank FSB Newport Beach, Calif.
6 1/2%, 7/15/03 5,000,000 4,531,250
SECURITIES INDUSTRY - 0.1%
TNE Funding Corp. gtd. 9%, 5/1/95 200,000 204,056
TOTAL FINANCE 49,454,094
NONDURABLES - 0.1%
TOBACCO - 0.1%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 106,417
9.45%, 11/19/97 100,000 106,530
212,947
TECHNOLOGY - 1.7%
COMPUTER SERVICES & SOFTWARE - 1.7%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,594,800
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.6%
Southwest Airlines Co. 8 3/4%, 10/15/03 $ 1,500,000 $ 1,586,310
UTILITIES - 2.8%
ELECTRIC UTILITY - 2.8%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 6,000,000 7,501,740
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 148,105
TOTAL Utilities 7,649,845
TOTAL NONCONVERTIBLE BONDS
(Cost $75,508,340) 72,631,970
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 18.8%
U.S. TREASURY OBLIGATIONS - 15.1%
8 5/8%, 1/15/95 (c) 5,000,000 5,106,250
9 3/8%, 4/15/96 4,900,000 5,190,178
8 7/8%, 2/15/99 3,000,000 3,255,930
8 7/8%, 8/15/17 4,000,000 4,543,760
8 1/8%, 8/15/19 12,400,000 13,101,344
7 1/8%, 2/15/23 3,000,000 2,859,840
6 1/4%, 8/15/23 1,000,000 859,370
stripped principal payment 2/15/19 45,200,000 6,792,656
41,709,328
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.7%
Financing Corporation:
10.70%, 10/6/17 4,500,000 5,868,281
9.80%, 4/6/18 3,500,000 4,233,906
10,102,187
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $54,915,504) 51,811,515
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 10.9%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.1%
12 1/2%, 2/1/11 to 7/1/15 $ 288,572 $ 328,978
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.8%
8%, 6/15/23 4,323,794 4,296,771
8 1/2%, 4/15/17 to 6/15/21 1,208,068 1,228,369
9%, 12/15/08 to10/15/18 6,853,874 7,112,562
9 1/2%, 8/15/19 to 7/15/22 16,313,539 17,201,758
29,839,460
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $30,424,332) 30,168,438
FOREIGN GOVERNMENT OBLIGATIONS - 11.2%
Danish Government Bullet 7%, 12/15/04 DKK 90,000,000 12,852,369
French Government OAT 8 1/2%, 4/25/03 FRF 20,000,000 3,827,122
Ontario Province
15 1/8%, 5/1/11 5,000,000 5,979,500
17%, 11/5/11 1,000,000 1,278,270
Quebec Province 9 1/8%, 3/1/00 6,500,000 7,005,180
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $33,158,455) 30,942,441
SUPRANATIONAL OBLIGATIONS - 1.8%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880 ) 4,500,000 4,855,185
SHORT-TERM OBLIGATIONS - 31.1%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 4.26%
dated 5/31/94 due 6/1/94 $ 86,074,184 86,064,000
TOTAL INVESTMENT IN SECURITIES - 100.0%
(Cost $284,447,511) $ 276,473,549
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SELL
470 U.S. Treasury Bond Contracts June 1994 $ 49,144,986 $ 3,484,536
THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 17.8%
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT
DATE(S) VALUE
CONTRACTS TO SELL
87,504,611 DKK 6/29/94 $ 13,524,779 $ (581,267)
23,560,600 FRF 7/20/94 4,179,412 (178,495)
TOTAL CONTRACTS TO SELL
(Receivable amount $16,944,429) $ 17,704,191 $ (759,762)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.4%
CURRENCY ABBREVIATIONS
DKK - Danish krona
FRF - French franc
LEGEND
1. Principal amount is stated in United States dollars unless otherwise
noted.
2. 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 $10,107,383 or 3.6% of net
assets.
3. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,021,961.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.2% AAA, AA, A 68.8%
Baa 0.7% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 78.0% Canada 7.9
Denmark 4.8
France 3.2
Korea 1.8
Supranational 1.8
Malaysia 1.4
United Kingdom 1.1
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31,1994, the aggregate cost of investment securities for income tax
purposes was $284,447,511. Net unrealized depreciation aggregated
$7,973,962, of which $3,277,817 related to appreciated investment
securities and $11,251,779 related to depreciated investment securities.
At November 30, 1993, the fund had a capital loss carryforward of
approximately $6,707,000 of which $5,673,000 and $1,034,000 will expire on
November 30, 1998, and 1999, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 276,473,549
agreements of $86,064,000) (cost $284,447,511)
(Notes 1 and 2) - See accompanying schedule
Short foreign currency contracts (Note 2) $ (17,704,191)
Contracts held, at value
Receivable for contracts held 16,944,429 (759,762)
Interest receivable 3,288,206
Receivable for daily variation on futures contracts 221,219
TOTAL ASSETS 279,223,212
LIABILITIES
Net payable for closed foreign currency contracts 55,580
Payable for fund shares redeemed 477,730
Dividends payable 756,222
Accrued management fee 95,375
Distribution fees payable (Note 5) 19,016
Other payables and accrued expenses 124,667
TOTAL LIABILITIES 1,528,590
NET ASSETS $ 277,694,622
Net Assets consist of (Note 1):
Paid in capital $ 294,679,626
Distributions in excess of net investment income (16,797)
Accumulated undistributed net realized gain (loss) on (11,719,019)
investments
Net unrealized appreciation (depreciation) on:
Investment securities (7,973,962)
Foreign currency contracts (759,762)
Futures contracts 3,484,536
NET ASSETS $ 277,694,622
CALCULATION OF MAXIMUM OFFERING PRICE $10.48
CLASS A:
NET ASSET VALUE, and redemption price per share
($98,958,791 (divided by) 9,440,380 shares)
Maximum offering price per share (100/95.25 of $10.48) $11.00
INSTITUTIONAL CLASS: $10.49
NET ASSET VALUE, offering price and redemption price per share
($178,735,831 (divided by) 17,038,960 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 9,865,181
Interest
EXPENSES
Management fee (Note 5) $ 559,511
Transfer agent fees (Note 5) 145,686
Class A
Institutional Class 102,372
Distribution fees - Class A (Note 5) 104,203
Accounting fees and expenses (Note 5) 55,348
Non-interested trustees' compensation 832
Custodian fees and expenses 46,131
Registration fees 29,116
Class A
Institutional Class 16,670
Audit 15,876
Legal 11,981
Miscellaneous 1,442
TOTAL EXPENSES 1,089,168
NET INVESTMENT INCOME 8,776,013
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 2)
Net realized gain (loss) on:
Investment securities (4,409,826)
Foreign currency contracts (135,330)
Futures contracts 724,490 (3,820,666)
Change in net unrealized appreciation (depreciation) on:
Investment securities (15,247,445)
Foreign currency contracts (900,707)
Futures contracts 2,361,816 (13,786,336)
NET GAIN (LOSS) (17,607,002)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (8,830,989)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1994 1993
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 8,776,013 $ 14,447,662
Net investment income
Net realized gain (loss) on investments (3,820,666) 4,656,282
Change in net unrealized appreciation (depreciation) (13,786,336) 3,826,967
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,830,989) 22,930,911
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (2,438,182) (1,503,763)
Institutional Class (6,026,317) (13,259,775)
Share transactions - net increase (decrease) (Note 6) 52,015,639 72,068,562
TOTAL INCREASE (DECREASE) IN NET ASSETS 34,720,151 80,235,935
NET ASSETS
Beginning of period 242,974,471 162,738,536
End of period (including distributions in excess of net $ 277,694,622 $ 242,974,471
investment income of $(16,797) and $517,821,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1994 NOVEMBER NOVEMBER 30,
30,
(UNAUDITED) 1993 1992**
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.140 $ 10.640 $ 10.960
Income from Investment Operations
Net investment income .333 .785 .170
Net realized and unrealized gain (loss) on (.674) .511 (.320)(double dagger)
investments
Total from investment operations (.341) 1.296 (.150)
Less Distributions
From net investment income (.319) (.796) (.170)
Net asset value, end of period $ 10.480 $ 11.140 $ 10.640
TOTAL RETURN (dagger) (3.12)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 98,959 $ 59,184 $ 2,583
Ratio of expenses to average net assets 1.18%* 1.23% .82%*
Ratio of net investment income to average 6.11%* 6.81% 7.67%*
net assets
Portfolio turnover 89%* 59% 7%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(double dagger) THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT
CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED
DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
** FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
FINANCIAL HIGHLIGHTS INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1994
(UNAUDITED) 1993 1992 1991 1990 1989
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410 $ 10.180
beginning of period
Income from
Investment
Operations
Net investment .365 .832 .840 .884 .901 .937
income
Net realized and (.686) .531 .102 .411 (.270) .230
unrealized gain
(loss) on
investments
Total from (.321) 1.363 .942 1.295 .631 1.167
investment
operations
Less Distributions
From net (.349) (.843) (.852) (.885) (.901) (.937)
investment
income
Net asset value, end $ 10.490 $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410
of period
TOTAL RETURN (dagger) (2.93)% 13.17% 9.21% 13.35% 6.46% 12.03%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 178,736 $ 183,790 $ 160,156 $ 327,756 $ 356,564 $ 426,832
period (000
omitted)
Ratio of expenses to .64%* .64% .57% .57% .58% .54%
average net assets
Ratio of net 6.64%* 7.41% 7.96% 8.59% 8.90% 9.16%
investment income
to average net
assets
Portfolio turnover 89%* 59% 7% 60% 59% 87%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
Advisor Series IV (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers two classes of shares, each of which has equal rights as to
earnings, assets and voting privileges except that each class bears
different distribution and transfer agent expenses and certain registration
fees. Each class has exclusive voting rights with respect to its
distribution plans.
On February 17, 1994, creation of an additional class of Retail shares
(Class B) was approved by the Board of Trustees. Offering of the new class
commences on June 30, 1994. Class B shares are subject to an annual
distribution fee of .75% of average net assets, an annual service fee of
.25% of average net assets, and a contingent deferred sales charge upon
redemption within five years of purchase which decreases from a maximum of
4% to 0%. At the end of six years, Class B shares of a fund automatically
convert to Class A shares of the same fund.
The following summarizes the significant accounting policies of the fund:
ALLOCATED EARNINGS AND EXPENSES. Investment income, expenses (other than
expenses incurred under each class's Distribution and Service Plans,
Transfer Agent Agreements and certain registration fees) and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon their relative net assets.
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities including restricted securities for which market quotations are
not readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
It is not practicable to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
pay down gains/losses on certain securities, foreign currency transactions,
market discount and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of November 30, 1993 have been reclassified to
reflect an increase in paid in capital of $16,863, an increase in
undistributed net investment income of $189,510 and an increase in
accumulated net realized loss on investments of $206,373.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars reflects the total exposure the
fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
registered investment companies having management contracts with FMR, may
transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures contracts and
write options. These investments involve to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statement
of Assets and Liabilities. The face or contract amounts reflect the extent
of the involvement the fund has in the particular classes of instruments.
Risks may be caused by an imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counterparties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint
3. JOINT TRADING ACCOUNT -
CONTINUED
trading account. These repurchase agreements were with entities whose
creditworthiness has been reviewed and found satisfactory by FMR. The
repurchase agreements were dated May 31, 1994 and due June 1, 1994. The
maturity values of the joint trading account investments were $86,074,184
at 4.26%. The investments in repurchase agreements through the joint
trading account are summarized as follows:
SUMMARY OF JOINT TRADING ACCOUNT
MAXIMUM
AMOUNT AGGREGATE AGGREGATE AGGREGATE
NO. OF WITH ONE PRINCIPAL MATURITY MARKET COUPON MATURITY
DEALERS DEALER AMOUNT OF AMOUNT OF VALUE OF RATES OF DATES OF
OR BANKS OR BANK AGREEMENTS AGREEMENTS COLLATERAL COLLATERAL COLLATERAL
3% - 6/2/94 -
26 13% $15,332,130,000 $15,333,944,181 $15,650,461,423 15 3/4% 8/15/23
4. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $15,461,948 and $15,464,096, respectively, of which U.S.
government and government agency obligations aggregated $107,805,291 and
$72,961,485, respectively.
The market value of futures contracts opened and closed amounted to
$69,522,267 and $49,148,688, respectively.
5. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates ranging from
.15% to .37% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .25%.
For the period, the management fee was equivalent to an annualized rate of
.41% of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from.1325% to .3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, Class A
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee that is based on an annual rate of .25% of its
average net assets.
FEES AND OTHER
TRANSACTIONS WITH AFFILIATES -
CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, Class A paid FDC $104,203 all of which was paid to
securities dealers, banks and other financial institutions for selling
shares of Class A and providing shareholder support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $8,726 for the
period.
SALES LOAD. FDC received sales charges for selling shares of Class A. The
sales charge rates ranged from 2.00% to 4.75% based on purchase amounts of
less than $1,000,000. Purchase amounts of $1,000,000 or more are not
charged a sales load. For the period, FDC received $1,007,493 of which
$860,780 was paid to securities dealers, banks and other financial
institutions.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, and State Street Bank and Trust Company
(State Street) are the transfer, dividend disbursing and shareholder
servicing agents for Institutional Class and Class A, respectively. Under
revised fee schedules which became effective January 1, 1993, FIIOC and
State Street receive fees based on the type, size, number of accounts and
the number of transactions made by shareholders. FIIOC, on behalf of State
Street, also collects fees from the fund and pays State Street for its
services. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
6. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1994 1993 1994 1993
CLASS A
Shares sold 7,354,701 5,818,646 $ 80,412,745 $ 64,747,544
Reinvestment of distributions 192,107 103,874 2,073,598 1,150,638
Shares redeemed (3,417,545) (854,187) (37,092,798) (9,510,209)
Net increase (decrease) 4,129,263 5,068,333 $ 45,393,545 $ 56,387,973
INSTITUTIONAL CLASS
Shares sold 3,937,247 7,097,429 $ 43,192,844 $ 78,489,883
Reinvestment of distributions 123,536 298,266 1,339,785 3,295,101
Shares redeemed (3,496,358) (5,977,104) (37,910,535) (66,104,395)
Net increase (decrease) 564,425 1,418,591 $ 6,622,094 $ 15,680,589
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
EQUITY FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
LIMITED TERM BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on bond market
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 8 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 11 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 12 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 18 Statements of assets and liabilities,
operations, and changes in net
assets, as well as financial
highlights.
NOTES 23 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
The past few months have been an unsettling time for bond investors. The
bond market declined after the Federal Reserve Board raised short-term
interest rates in February through May. These rate hikes caused bond yields
to rise and bond prices to fall. While nobody knows whether rates will
continue to go up, this may be a good time to review the effect rising
rates have on your bond fund investment, and consider how well your current
bond fund holdings match your original investment goals.
Most investors choose bond funds to generate income and to help diversify
their investment portfolios. Despite the recent market downturn, bond
mutual funds still satisfy these needs. Where investors have felt the
negative effect of rising rates is in the market value of their investment,
which has eroded as bond prices have fallen. It's important
to remember, however, that this loss in principal is only "on paper" until
you choose to sell your shares. That's why your investing time horizon is
key.
If your time horizon is short - one year or less - you may want to consider
shifting all or part of your bond fund
investment into short-term investments.
If you don't need your money within the next year, staying in your bond
fund may be the appropriate strategy for you. The longer your investing
time frame, the better your chances of retaining your principal investment
through periods of rising AND falling rates. For example, if you plan to
use your money in one to two years, a short-term bond fund may be the right
choice. If your time frame is two to four years, a fund with an
intermediate length average maturity may be best. If you have a longer-term
goal - say a child's college education that's 10 years away - you may be
willing to ride out the bond market's peaks and valleys in exchange for the
higher potential returns of a longer-term fund.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $100,000 investment. Each figure
includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Limited Term Bond -
Institutional -2.93% 2.65% 54.48% 183.32%
Class
Lehman Brothers Intermediate
Government-Corporate Bond Index -2.18% 1.30% 52.35% 172.01%
Average Intermediate Investment
Grade Bond Fund -3.30% 0.46% 49.69% 175.87%
Consumer Price Index 1.17% 2.29% 19.14% 42.65%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or ten
years. You can compare the fund's returns to the Lehman Brothers
Intermediate Government-Corporate Bond Index - a broad measure of the
performance of intermediate (one- to ten-year) bonds. To measure how the
fund stacked up against its peers, you can also look at the average
intermediate investment grade bond fund, which reflects the performance of
124 funds tracked by Lipper Analytical Services. These benchmarks include
reinvested dividends and capital gains, if any. Comparing the fund's
performance to the Consumer Price Index helps show how your fund did
compared to inflation.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - 2.65% 9.09% 10.98%
Institutional
Class
Lehman Brothers Intermediate
Government-Corporate Bond Index 1.30% 8.78% 10.52%
Average Intermediate Investment
Grade Bond Fund 0.46% 8.39% 10.66%
Consumer Price Index 2.29% 3.57% 3.62%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$100,000 OVER 10 YEARS
FA Ltd Term Bond Inst'l (087)LB Gov't/Corp Bond Index, Inter.
05/31/84 100000.00 100000.00
06/30/84 100897.98 100980.00
07/31/84 104775.80 104201.26
08/31/84 106830.20 105607.98
09/30/84 109115.96 107614.53
10/31/84 112756.42 111262.66
11/30/84 114813.41 113365.53
12/31/84 115275.99 114997.99
01/31/85 118521.17 116998.96
02/28/85 115697.01 115723.67
03/31/85 117329.07 117644.68
04/30/85 120167.47 119903.46
05/31/85 126869.02 124483.77
06/30/85 128412.66 125741.06
07/31/85 127142.87 125728.48
08/31/85 129702.19 127551.55
09/30/85 130024.95 128508.18
10/31/85 131891.49 130448.66
11/30/85 134786.56 132705.42
12/31/85 138609.25 135784.18
01/31/86 139625.28 136653.20
02/28/86 144415.48 139864.55
03/31/86 148861.66 143542.99
04/30/86 149741.61 144504.73
05/31/86 147426.24 142828.47
06/30/86 150977.32 146142.09
07/31/86 152243.94 147618.13
08/31/86 155564.81 150939.54
09/30/86 153813.66 149701.83
10/31/86 155778.23 151647.96
11/30/86 157747.86 153088.61
12/31/86 158468.63 153609.11
01/31/87 160465.71 155160.57
02/28/87 161431.54 155951.88
03/31/87 160679.45 155624.38
04/30/87 156533.61 152776.46
05/31/87 155937.02 152425.07
06/30/87 158020.98 154269.42
07/31/87 158016.28 154624.24
08/31/87 157248.32 154222.21
09/30/87 154654.87 152217.32
10/31/87 158509.97 156570.74
11/30/87 160549.06 157572.79
12/31/87 162146.73 159227.31
01/31/88 167069.96 163303.53
02/29/88 169571.20 165116.19
03/31/88 168255.35 164488.75
04/30/88 167899.85 164209.12
05/31/88 166915.32 163486.60
06/30/88 170004.09 166086.04
07/31/88 169826.16 165737.26
08/31/88 170306.87 165985.86
09/30/88 173452.28 168874.02
10/31/88 175776.76 171170.71
11/30/88 174691.40 169715.75
12/31/88 174852.07 169868.50
01/31/89 176754.51 171652.12
02/28/89 176335.91 170948.34
03/31/89 177032.74 171683.42
04/30/89 180010.62 175117.09
05/31/89 183396.02 178584.41
06/30/89 187864.42 183084.74
07/31/89 191838.82 186837.97
08/31/89 189247.97 184427.76
09/30/89 190141.37 185294.57
10/31/89 194108.69 189222.82
11/30/89 195705.25 191020.44
12/31/89 196027.91 191555.29
01/31/90 194078.22 190329.34
02/28/90 194716.58 191033.56
03/31/90 194444.27 191281.90
04/30/90 193187.17 190612.41
05/31/90 197775.63 194805.89
06/30/90 200419.86 197416.29
07/31/90 203095.66 200160.37
08/31/90 201400.24 199339.71
09/30/90 202889.01 200874.63
10/31/90 204801.06 203204.78
11/30/90 208346.13 206293.49
12/31/90 211538.52 209119.71
01/31/91 213111.07 211252.73
02/28/91 214820.19 212942.75
03/31/91 216181.18 214390.76
04/30/91 218592.38 216727.62
05/31/91 219758.42 218049.66
06/30/91 219824.56 218202.30
07/31/91 222296.84 220646.16
08/31/91 226963.76 224860.50
09/30/91 231179.33 228728.10
10/31/91 233914.82 231335.60
11/30/91 236152.85 233995.96
12/31/91 243602.74 239705.47
01/31/92 240485.57 237524.15
02/29/92 241109.39 238450.49
03/31/92 240241.54 237520.53
04/30/92 241591.52 239610.71
05/31/92 246006.71 243324.68
06/30/92 249475.64 246925.88
07/31/92 255347.44 251839.71
08/31/92 257708.31 254358.11
09/30/92 260991.21 257817.38
10/31/92 257200.58 254465.75
11/30/92 257913.20 253498.78
12/31/92 261423.85 256895.67
01/31/93 266934.54 261879.44
02/28/93 272067.85 266017.14
03/31/93 273913.37 267081.20
04/30/93 275686.95 269217.85
05/31/93 276013.82 268625.58
06/30/93 281586.98 272843.00
07/31/93 284180.12 273497.82
08/31/93 290575.88 277846.44
09/30/93 291517.91 278985.61
10/31/93 293188.54 279738.87
11/30/93 291884.07 278172.33
12/31/93 293010.50 279451.92
01/31/94 296213.10 282553.84
02/28/94 290295.05 278372.04
03/31/94 284768.50 273778.90
04/30/94 284062.57 271917.21
05/31/94 283318.84 272010.00
$100,000 OVER 10 YEARS: Let's say you invested $100,000 in Fidelity
Advisor Limited Term Bond Fund - Institutional Class on May 31, 1984. As
the chart shows, by May 31, 1994, the value of your investment would have
grown to $283,319 - a 183.32% increase on your initial investment. For
comparison, look at how the Lehman Brothers Intermediate
Government-Corporate Bond Index did over the same period. With dividends
reinvested, the same $100,000 investment would have grown to $272,010 - a
172.01% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
On September 10, 1992, the fund began offering Class A shares. All
performance information for Class A prior to September 10, 1992 does not
reflect Class A's 12b-1 fee and revised transfer agent fee arrangements,
which if included, would lower Class A's performance.
For the period ended May 31, 1994, Fidelity Advisor Limited Term Bond Fund
- - Class A shares' cumulative total returns (which includes the effect of
the 4.75% sales charge) were -7.72%, -2.83%, 45.77%, and 167.34% for six
months, one year, five years, and ten years, respectively. Class A shares'
average annual returns (which includes the effect of the 4.75% sales
charge) were -2.83%, 7.83%, and 10.33% for one year, five years, and ten
years, respectively.
Cumulative total returns for the Class A's shares for the one year period
ended November 30, 1993, 1992, 1991, 1990 and 1989 were 12.50%, 9.05%,
13.35%, 6.46%, and 12.03%, respectively.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1994 1993 1992 1991 1990 1989
Dividend return 3.07% 8.28% 8.36% 9.30% 9.05% 9.77%
Capital appreciation -6.00% 4.89% 0.85% 4.05% -2.59% 2.26%
return
Total return -2.93% 13.17% 9.21% 13.35% 6.46% 12.03%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.23(cents) 34.91(cents) 75.35(cents)
Annualized dividend rate 5.85% 6.43% 6.83%
30-day annualized yield 5.44% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average share price of $10.52 over
the past month, $10.88 over the past six months and $11.03 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. It also helps you compare funds from different companies
on an equal basis. Class A shares' 30-day annualized yield was 4.24%.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Michael Gray, Portfolio Manager of Fidelity
Advisor Limited Term Bond Fund
Q. MICHAEL, HOW DID THE FUND PERFORM?
A. On a relative basis, pretty well. Fidelity Advisor Limited Term Bond
Fund -
Institutional Class had total returns of -2.93% for the six months and
2.65% for the year ended May 31, 1994. These results beat the average
intermediate investment grade bond fund, which had returns of -3.30% and
0.46% over the same periods, according to Lipper Analytical Services.
Q. WHAT SPECIFIC THINGS DID YOU DO TO ACHIEVE THE GOOD RELATIVE
PERFORMANCE?
A. Two main things. Number one, I think I did a pretty good job of managing
the fund's duration - its sensitivity to interest rate changes - during
this period. I started shortening the duration last October, prior to the
first down leg in the market. With a longer duration, a fund's share price
will appreciate rapidly in a declining interest rate environment. So this
worked extremely well during most of 1993. But in October, when rates began
rising, a long duration would have had the opposite effect, causing the
fund's share price to deteriorate quickly. The shorter duration thus
enabled the fund to beat the market in the fourth quarter of 1993. I made a
mistake in January. The market sort of gave a head fake. It looked like it
was going to rally, so I lengthened duration to take advantage of the rise.
Then on February 4, the Federal Reserve raised the federal funds rate - the
interest rate on overnight interbank loans - by a quarter percentage point.
That hurt, but I recognized the mistake and shortened duration
dramatically. By the end of March, I had it shortened to about 3 years,
which helped in April as the market continued to fall. I maintained this
defensive posture through May, bringing duration down to 2.63 years.
Basically this means that if interest rates were to rise by another
percentage point, the fund's share price would decline by only about 2 and
one-half percent.
Q. WHAT ELSE DID YOU DO?
A. Due to the fund's higher quality charter, our weighting in emerging
market debt was quite small. During the period, I made limited commitments
in Mexico, buying Mexican cetes - short-term, high-yielding, government
securities. These investments performed exceptionally well in 1993, but in
February and March of 1994 they were torpedoed along with all other bonds.
Q. WHAT WERE THE BIGGEST FACTORS BEHIND THE SELL-OFF IN FIXED-INCOME
MARKETS WORLDWIDE?
A. To begin with, the market was surprised by the first Fed tightening on
February 4. Many expected that the Fed would begin to raise rates sometime
in 1994, given the strengthening economy, but few thought it would be THAT
soon. Consequently, it sent bonds into a tailspin. Simultaneously, a lot of
highly leveraged investments - that is, made with borrowed money - began to
unwind. Many investors had been playing the steep yield curve - the wide
spread between short- and long-term interest rates. Wall Street dealers,
hedge funds - aggressively managed private partnerships - and other
investors were buying long-term securities and financing their purchases at
much lower short-term rates. This was a great strategy while rates were
declining. But when the Fed began tightening, these investors realized that
rates weren't going to go down anymore. All bets were off and they started
selling. This flooded the market with securities that, in a bearish
environment, no investor wanted to own. One final factor was worldwide
political uncertainty. The Whitewater affair, the assassination in Mexico,
trade tensions with Japan and so on, all added to the bearish sentiment in
the market.
Q. THERE'S BEEN A LOT OF TALK LATELY ABOUT DERIVATIVES. DO YOU USE THEM IN
THE FUND?
A. The fund has the flexibility to use derivative instruments. Currently,
there are two kinds in the fund. The first is a short position in Treasury
Bond futures contracts. We own these to hedge the fund's long-term
government bonds. They help reduce the volatility of the fund in response
to interest rate changes. The second is currency forward contracts. We use
these to hedge the fund's non-dollar bonds against adverse movements in
currency exchange rates. They allow the fund to have exposure to foreign
bond markets while eliminating the currency risk for the portion that's
hedged.
Q. DO YOU THINK THE FED IS TOO FAR AHEAD OF THE CURVE IN RAISING INTEREST
RATES?
A. I don't think it is. The best analogy that I've heard is that the Fed,
instead of stepping on the brakes to slow down the economy, has taken its
foot off the gas. A 3% federal funds rate for the past year and a half,
with inflation at around 2.5%, was really putting the pedal to the metal. A
4.25% fed funds rate is less stimulative than 3%, but it's not slamming on
the brakes.
Q. WHAT IS YOUR OUTLOOK GOING FORWARD?
A. You might call it a "bunker mentality." We're taking shelter until the
market stabilizes. I have the fund positioned defensively, with a short
duration relative to its benchmark. I'm also increasing the fund's cash
level. This is the first bearish market we've had in several years and the
challenge is to determine when it's safe to re-enter the market and resume
buying. I can't see getting bullish until the Fed stops tightening, and it
may not be done yet.
FUND FACTS
GOAL: high current income
by investing in bonds rated
BBB/Baa or better, with an
average maturity of three to
10 years
START DATE: February 2, 1984
SIZE: As of May 31, 1994,
more than $277 million
MANAGER: Michael Gray,
since September 1987;
joined Fidelity in 1986
(checkmark)
MICHAEL GRAY ON MANAGING
BONDS IN A BEARISH MARKET:
"The primary goal in a bearish
environment is to try to
preserve the shareholder's
value as much as possible.
This means shifting from an
offensive strategy of buying
aggressively and lengthening
duration in a rising market to a
defensive posture of
shortening duration, moving
out of the market and
increasing the cash portion of
the portfolio. By shortening
duration, I reduce the interest
rate risk in the fund, or the risk
of sustained share price
deterioration should rates
continue to rise. I raise cash
for two reasons. Number one
is it helps to mitigate losses
when interest rates are rising
and bond prices are falling.
Second, a cash reserve
allows me to selectively buy
bonds at attractive prices,
once prices have fallen and
the market has stabilized."
(bullet) As of May 31, the fund's
average duration was 2.63
years. That is down from 5.10
years at the end of January. A
duration of 2.63 years means
that if interest rates rose 1
percentage point, the fund's
share price would decline by
about 2.63%. But if rates were
to fall by 1 percentage point,
the fund's share price would
rise by about 2.63%.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1994
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa 33.3 33.5
Aa 16.0 11.9
A 18.9 24.1
Baa 0.7 2.1
Ba - -
B - -
Not rated - -
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" BY MOODY'S
WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED RATING AGENCIES
OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF ACQUISITION BY
FIDELITY.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1994
6 MONTHS AGO
Years 7.4 8.1
AVERAGE YEARS TO MATURITY SHOWS THE AVERAGE TIME UNTIL THE PRINCIPAL ON THE
FUND'S BONDS IS EXPECTED TO BE REPAID, WEIGHTED BY DOLLAR AMOUNT.
DURATION AS OF MAY 31, 1994
6 MONTHS AGO
Years 2.63 3.47
DURATION SHOWS HOW MUCH A BOND'S PRICE FLUCTUATES WITH CHANGES IN INTEREST
RATES. IF RATES RISE 1%, FOR EXAMPLE, A BOND WITH A FIVE-YEAR DURATION WILL
LOSE ABOUT 5% OF ITS VALUE.
ASSET ALLOCATION
AS OF MAY 31, 1994* AS OF NOVEMBER 30, 1993**
Row: 1, Col: 1, Value: 31.1
Row: 1, Col: 2, Value: 11.2
Row: 1, Col: 3, Value: 29.7
Row: 1, Col: 4, Value: 28.0
Row: 1, Col: 1, Value: 22.7
Row: 1, Col: 2, Value: 13.6
Row: 1, Col: 3, Value: 29.2
Row: 1, Col: 4, Value: 34.5
Corporate bonds 28.0%
U.S. government
and agency
obligations 29.7%
Foreign government
obligations 11.2%
Short-term
investments 31.1%
Corporate bonds 34.5%
U.S. government
and agency
obligations 29.2%
Foreign government
obligations 13.6%
Short-term
investments 22.7%
* TOTAL FOREIGN
ISSUES 22.0%
** TOTAL FOREIGN
ISSUES 26.7%
INVESTMENTS MAY 31, 1994 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 26.2%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
ENERGY - 3.3%
ENERGY SERVICES - 1.4%
Petroliam Nasional Berhad yankee
6 7/8%, 7/1/03 (b) $ 4,100,000 $ 3,815,583
OIL & GAS - 1.9%
B.P. America, Inc.:
9 3/8%, 6/1/97 100,000 100,410
7 7/8%, 5/15/02 100,000 101,431
Societe Nationale Elf Aquitaine 8%, 10/15/01 5,000,000 5,116,550
5,318,391
TOTAL ENERGY 9,133,974
FINANCE - 17.7%
BANKS - 4.7%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 153,375
7 3/4%, 7/15/02 100,000 98,710
7 1/5%, 9/15/02 100,000 95,110
Chemical Bank New York Trust Co. 7 1/4%,
9/15/02 3,000,000 2,879,700
First Hawaiian Bank secured 6.93%,
12/1/03 (b) 2,000,000 1,840,800
Korea Development Bank, 7%, 7/15/99 5,000,000 4,851,700
National City Corp. 8 3/8%, 3/15/96 200,000 205,906
NationsBank Corp. 8 1/8%, 6/15/02 3,000,000 3,043,440
13,168,741
CREDIT & OTHER FINANCE - 8.6%
American General Financial Corporation
12 3/4%, 12/1/94 1,000,000 1,035,390
Beneficial Corp. 12%, 11/1/94 2,000,000 2,053,660
Deere (John) Capital Corp. 9 5/8%, 1/1/98 2,500,000 2,700,475
Ford Capital BV yankee bonds 9 3/8%, 1/1/98 100,000 106,522
Ford Motor Credit Co.:
8%, 6/15/02 100,000 100,509
7 3/4%, 11/15/02 100,000 99,359
Grand Metropolitan Investment Corp. 8 1/8%,
8/15/96 3,000,000 3,088,380
PNC Funding Corp. 6 7/8%, 2/1/03 1,000,000 935,200
SCFC Recreational Vehicle Loan Trust 7 1/4%,
9/15/06 951,477 957,424
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Secured Finance, Inc. Kroger gtd. secured 9.05%,
12/15/04 $ 4,000,000 $ 4,280,400
Society Corporation 8 7/8%, 5/15/96 3,600,000 3,735,072
Standard Credit Card Master Trust, Part. Cert.
5 1/2%, 9/7/98 5,000,000 4,755,750
23,848,141
FEDERAL SPONSORED CREDIT - 0.1%
Federal Home Loan Banks, consolidated 8.60%,
2/27/95 200,000 204,750
Federal National Mortgage Association 8 1/4%,
3/10/98 200,000 209,688
414,438
INSURANCE - 2.6%
Metropolitan Life Insurance Co. 6 3/10%,
11/1/03 (b) 5,000,000 4,451,000
NYLIFE Funding, Inc. gtd. 9 1/4%, 5/15/95 700,000 720,888
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,115,580
7,287,468
SAVINGS & LOANS - 1.6%
Household Bank FSB Newport Beach, Calif.
6 1/2%, 7/15/03 5,000,000 4,531,250
SECURITIES INDUSTRY - 0.1%
TNE Funding Corp. gtd. 9%, 5/1/95 200,000 204,056
TOTAL FINANCE 49,454,094
NONDURABLES - 0.1%
TOBACCO - 0.1%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 106,417
9.45%, 11/19/97 100,000 106,530
212,947
TECHNOLOGY - 1.7%
COMPUTER SERVICES & SOFTWARE - 1.7%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,594,800
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.6%
Southwest Airlines Co. 8 3/4%, 10/15/03 $ 1,500,000 $ 1,586,310
UTILITIES - 2.8%
ELECTRIC UTILITY - 2.8%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 6,000,000 7,501,740
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 148,105
TOTAL Utilities 7,649,845
TOTAL NONCONVERTIBLE BONDS
(Cost $75,508,340) 72,631,970
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 18.8%
U.S. TREASURY OBLIGATIONS - 15.1%
8 5/8%, 1/15/95 (c) 5,000,000 5,106,250
9 3/8%, 4/15/96 4,900,000 5,190,178
8 7/8%, 2/15/99 3,000,000 3,255,930
8 7/8%, 8/15/17 4,000,000 4,543,760
8 1/8%, 8/15/19 12,400,000 13,101,344
7 1/8%, 2/15/23 3,000,000 2,859,840
6 1/4%, 8/15/23 1,000,000 859,370
stripped principal payment 2/15/19 45,200,000 6,792,656
41,709,328
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.7%
Financing Corporation:
10.70%, 10/6/17 4,500,000 5,868,281
9.80%, 4/6/18 3,500,000 4,233,906
10,102,187
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $54,915,504) 51,811,515
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 10.9%
PRINCIPAL VALUE (NOTE 1)
AMOUNT (A)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.1%
12 1/2%, 2/1/11 to 7/1/15 $ 288,572 $ 328,978
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.8%
8%, 6/15/23 4,323,794 4,296,771
8 1/2%, 4/15/17 to 6/15/21 1,208,068 1,228,369
9%, 12/15/08 to10/15/18 6,853,874 7,112,562
9 1/2%, 8/15/19 to 7/15/22 16,313,539 17,201,758
29,839,460
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $30,424,332) 30,168,438
FOREIGN GOVERNMENT OBLIGATIONS - 11.2%
Danish Government Bullet 7%, 12/15/04 DKK 90,000,000 12,852,369
French Government OAT 8 1/2%, 4/25/03 FRF 20,000,000 3,827,122
Ontario Province
15 1/8%, 5/1/11 5,000,000 5,979,500
17%, 11/5/11 1,000,000 1,278,270
Quebec Province 9 1/8%, 3/1/00 6,500,000 7,005,180
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $33,158,455) 30,942,441
SUPRANATIONAL OBLIGATIONS - 1.8%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880 ) 4,500,000 4,855,185
SHORT-TERM OBLIGATIONS - 31.1%
MATURITY
AMOUNT
Investments in repurchase agreements,
(U.S. Treasury obligations), in a
joint trading account at 4.26%
dated 5/31/94 due 6/1/94 $ 86,074,184 86,064,000
TOTAL INVESTMENT IN SECURITIES - 100.0%
(Cost $284,447,511) $ 276,473,549
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SELL
470 U.S. Treasury Bond Contracts June 1994 $ 49,144,986 $ 3,484,536
THE VALUE OF FUTURES CONTRACTS SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 17.8%
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT
DATE(S) VALUE
CONTRACTS TO SELL
87,504,611 DKK 6/29/94 $ 13,524,779 $ (581,267)
23,560,600 FRF 7/20/94 4,179,412 (178,495)
TOTAL CONTRACTS TO SELL
(Receivable amount $16,944,429) $ 17,704,191 $ (759,762)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.4%
CURRENCY ABBREVIATIONS
DKK - Danish krona
FRF - French franc
LEGEND
1. Principal amount is stated in United States dollars unless otherwise
noted.
2. 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 $10,107,383 or 3.6% of net
assets.
3. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,021,961.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 68.2% AAA, AA, A 68.8%
Baa 0.7% BBB 0.0%
Ba 0.0% BB 0.0%
B 0.0% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 78.0% Canada 7.9
Denmark 4.8
France 3.2
Korea 1.8
Supranational 1.8
Malaysia 1.4
United Kingdom 1.1
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31,1994, the aggregate cost of investment securities for income tax
purposes was $284,447,511. Net unrealized depreciation aggregated
$7,973,962, of which $3,277,817 related to appreciated investment
securities and $11,251,779 related to depreciated investment securities.
At November 30, 1993, the fund had a capital loss carryforward of
approximately $6,707,000 of which $5,673,000 and $1,034,000 will expire on
November 30, 1998, and 1999, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1994 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 276,473,549
agreements of $86,064,000) (cost $284,447,511)
(Notes 1 and 2) - See accompanying schedule
Short foreign currency contracts (Note 2) $ (17,704,191)
Contracts held, at value
Receivable for contracts held 16,944,429 (759,762)
Interest receivable 3,288,206
Receivable for daily variation on futures contracts 221,219
TOTAL ASSETS 279,223,212
LIABILITIES
Net payable for closed foreign currency contracts 55,580
Payable for fund shares redeemed 477,730
Dividends payable 756,222
Accrued management fee 95,375
Distribution fees payable (Note 5) 19,016
Other payables and accrued expenses 124,667
TOTAL LIABILITIES 1,528,590
NET ASSETS $ 277,694,622
Net Assets consist of (Note 1):
Paid in capital $ 294,679,626
Distributions in excess of net investment income (16,797)
Accumulated undistributed net realized gain (loss) on (11,719,019)
investments
Net unrealized appreciation (depreciation) on:
Investment securities (7,973,962)
Foreign currency contracts (759,762)
Futures contracts 3,484,536
NET ASSETS $ 277,694,622
CALCULATION OF MAXIMUM OFFERING PRICE $10.48
CLASS A:
NET ASSET VALUE, and redemption price per share
($98,958,791 (divided by) 9,440,380 shares)
Maximum offering price per share (100/95.25 of $10.48) $11.00
INSTITUTIONAL CLASS: $10.49
NET ASSET VALUE, offering price and redemption price per share
($178,735,831 (divided by) 17,038,960 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1994 (UNAUDITED)
INVESTMENT INCOME $ 9,865,181
Interest
EXPENSES
Management fee (Note 5) $ 559,511
Transfer agent fees (Note 5) 145,686
Class A
Institutional Class 102,372
Distribution fees - Class A (Note 5) 104,203
Accounting fees and expenses (Note 5) 55,348
Non-interested trustees' compensation 832
Custodian fees and expenses 46,131
Registration fees 29,116
Class A
Institutional Class 16,670
Audit 15,876
Legal 11,981
Miscellaneous 1,442
TOTAL EXPENSES 1,089,168
NET INVESTMENT INCOME 8,776,013
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(NOTES 1 AND 2)
Net realized gain (loss) on:
Investment securities (4,409,826)
Foreign currency contracts (135,330)
Futures contracts 724,490 (3,820,666)
Change in net unrealized appreciation (depreciation) on:
Investment securities (15,247,445)
Foreign currency contracts (900,707)
Futures contracts 2,361,816 (13,786,336)
NET GAIN (LOSS) (17,607,002)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM $ (8,830,989)
OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1994 1993
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 8,776,013 $ 14,447,662
Net investment income
Net realized gain (loss) on investments (3,820,666) 4,656,282
Change in net unrealized appreciation (depreciation) (13,786,336) 3,826,967
on
investments
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (8,830,989) 22,930,911
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (2,438,182) (1,503,763)
Institutional Class (6,026,317) (13,259,775)
Share transactions - net increase (decrease) (Note 6) 52,015,639 72,068,562
TOTAL INCREASE (DECREASE) IN NET ASSETS 34,720,151 80,235,935
NET ASSETS
Beginning of period 242,974,471 162,738,536
End of period (including distributions in excess of net $ 277,694,622 $ 242,974,471
investment income of $(16,797) and $517,821,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS CLASS A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
MAY 31, 1994 NOVEMBER NOVEMBER 30,
30,
(UNAUDITED) 1993 1992**
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.140 $ 10.640 $ 10.960
Income from Investment Operations
Net investment income .333 .785 .170
Net realized and unrealized gain (loss) on (.674) .511 (.320)(double dagger)
investments
Total from investment operations (.341) 1.296 (.150)
Less Distributions
From net investment income (.319) (.796) (.170)
Net asset value, end of period $ 10.480 $ 11.140 $ 10.640
TOTAL RETURN (dagger) (3.12)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 98,959 $ 59,184 $ 2,583
Ratio of expenses to average net assets 1.18%* 1.23% .82%*
Ratio of net investment income to average 6.11%* 6.81% 7.67%*
net assets
Portfolio turnover 89%* 59% 7%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR
PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
(double dagger) THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT
CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED
DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
** FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
FINANCIAL HIGHLIGHTS INSTITUTIONAL CLASS
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1994
(UNAUDITED) 1993 1992 1991 1990 1989
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410 $ 10.180
beginning of period
Income from
Investment
Operations
Net investment .365 .832 .840 .884 .901 .937
income
Net realized and (.686) .531 .102 .411 (.270) .230
unrealized gain
(loss) on
investments
Total from (.321) 1.363 .942 1.295 .631 1.167
investment
operations
Less Distributions
From net (.349) (.843) (.852) (.885) (.901) (.937)
investment
income
Net asset value, end $ 10.490 $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410
of period
TOTAL RETURN (dagger) (2.93)% 13.17% 9.21% 13.35% 6.46% 12.03%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 178,736 $ 183,790 $ 160,156 $ 327,756 $ 356,564 $ 426,832
period (000
omitted)
Ratio of expenses to .64%* .64% .57% .57% .58% .54%
average net assets
Ratio of net 6.64%* 7.41% 7.96% 8.59% 8.90% 9.16%
investment income
to average net
assets
Portfolio turnover 89%* 59% 7% 60% 59% 87%
</TABLE>
* ANNUALIZED
(dagger) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1994 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
Advisor Series IV (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers two classes of shares, each of which has equal rights as to
earnings, assets and voting privileges except that each class bears
different distribution and transfer agent expenses and certain registration
fees. Each class has exclusive voting rights with respect to its
distribution plans.
On February 17, 1994, creation of an additional class of Retail shares
(Class B) was approved by the Board of Trustees. Offering of the new class
commences on June 30, 1994. Class B shares are subject to an annual
distribution fee of .75% of average net assets, an annual service fee of
.25% of average net assets, and a contingent deferred sales charge upon
redemption within five years of purchase which decreases from a maximum of
4% to 0%. At the end of six years, Class B shares of a fund automatically
convert to Class A shares of the same fund.
The following summarizes the significant accounting policies of the fund:
ALLOCATED EARNINGS AND EXPENSES. Investment income, expenses (other than
expenses incurred under each class's Distribution and Service Plans,
Transfer Agent Agreements and certain registration fees) and realized and
unrealized gains or losses on investments are allocated to each class of
shares based upon their relative net assets.
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities including restricted securities for which market quotations are
not readily available are valued at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at
the exchange rate on the dates of the transactions.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
It is not practicable to identify the portion of each amount shown in the
fund's Statement of Operations under the caption "Realized and Unrealized
Gain (Loss) on Investments" that arises from changes in foreign currency
exchange rates. Investment income includes net realized and unrealized
currency gains and losses recognized between accrual and payment dates.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
pay down gains/losses on certain securities, foreign currency transactions,
market discount and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of November 30, 1993 have been reclassified to
reflect an increase in paid in capital of $16,863, an increase in
undistributed net investment income of $189,510 and an increase in
accumulated net realized loss on investments of $206,373.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars reflects the total exposure the
fund has in that particular currency contract. The U.S. dollar value of
forward foreign currency contracts is determined using forward currency
exchange rates supplied by a quotation service. Losses may arise due to
changes in the value of the foreign currency or if the counterparty does
not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and presented net on the Statement of
Assets and Liabilities. Gain (loss) on the purchase or sale of forward
foreign currency contracts having the same settlement date and broker is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
registered investment companies having management contracts with FMR, may
transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures contracts and
write options. These investments involve to varying degrees, elements of
market risk and risks in excess of the amount recognized in the Statement
of Assets and Liabilities. The face or contract amounts reflect the extent
of the involvement the fund has in the particular classes of instruments.
Risks may be caused by an imperfect correlation between movements in the
price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary
market for the instruments, or due to the inability of counterparties to
perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint
3. JOINT TRADING ACCOUNT -
CONTINUED
trading account. These repurchase agreements were with entities whose
creditworthiness has been reviewed and found satisfactory by FMR. The
repurchase agreements were dated May 31, 1994 and due June 1, 1994. The
maturity values of the joint trading account investments were $86,074,184
at 4.26%. The investments in repurchase agreements through the joint
trading account are summarized as follows:
SUMMARY OF JOINT TRADING ACCOUNT
MAXIMUM
AMOUNT AGGREGATE AGGREGATE AGGREGATE
NO. OF WITH ONE PRINCIPAL MATURITY MARKET COUPON MATURITY
DEALERS DEALER AMOUNT OF AMOUNT OF VALUE OF RATES OF DATES OF
OR BANKS OR BANK AGREEMENTS AGREEMENTS COLLATERAL COLLATERAL COLLATERAL
3% - 6/2/94 -
26 13% $15,332,130,000 $15,333,944,181 $15,650,461,423 15 3/4% 8/15/23
4. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $15,461,948 and $15,464,096, respectively, of which U.S.
government and government agency obligations aggregated $107,805,291 and
$72,961,485, respectively.
The market value of futures contracts opened and closed amounted to
$69,522,267 and $49,148,688, respectively.
5. FEES AND OTHER
TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates ranging from
.15% to .37% and is based on the monthly average net assets of all the
mutual funds advised by FMR. The annual individual fund fee rate is .25%.
For the period, the management fee was equivalent to an annualized rate of
.41% of average net assets.
The Board of Trustees approved a new group fee rate schedule with rates
ranging from.1325% to .3700%. Effective November 1, 1993, FMR has
voluntarily agreed to implement this new group fee rate schedule as it
results in the same or a lower management fee.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, Class A
pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee that is based on an annual rate of .25% of its
average net assets.
FEES AND OTHER
TRANSACTIONS WITH AFFILIATES -
CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
For the period, Class A paid FDC $104,203 all of which was paid to
securities dealers, banks and other financial institutions for selling
shares of Class A and providing shareholder support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. FMR or FDC has informed the fund that
payments made to third parties under the Plan amounted to $8,726 for the
period.
SALES LOAD. FDC received sales charges for selling shares of Class A. The
sales charge rates ranged from 2.00% to 4.75% based on purchase amounts of
less than $1,000,000. Purchase amounts of $1,000,000 or more are not
charged a sales load. For the period, FDC received $1,007,493 of which
$860,780 was paid to securities dealers, banks and other financial
institutions.
TRANSFER AGENT FEE. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, and State Street Bank and Trust Company
(State Street) are the transfer, dividend disbursing and shareholder
servicing agents for Institutional Class and Class A, respectively. Under
revised fee schedules which became effective January 1, 1993, FIIOC and
State Street receive fees based on the type, size, number of accounts and
the number of transactions made by shareholders. FIIOC, on behalf of State
Street, also collects fees from the fund and pays State Street for its
services. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEE. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
6. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1994 1993 1994 1993
CLASS A
Shares sold 7,354,701 5,818,646 $ 80,412,745 $ 64,747,544
Reinvestment of distributions 192,107 103,874 2,073,598 1,150,638
Shares redeemed (3,417,545) (854,187) (37,092,798) (9,510,209)
Net increase (decrease) 4,129,263 5,068,333 $ 45,393,545 $ 56,387,973
INSTITUTIONAL CLASS
Shares sold 3,937,247 7,097,429 $ 43,192,844 $ 78,489,883
Reinvestment of distributions 123,536 298,266 1,339,785 3,295,101
Shares redeemed (3,496,358) (5,977,104) (37,910,535) (66,104,395)
Net increase (decrease) 564,425 1,418,591 $ 6,622,094 $ 15,680,589
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
EQUITY FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Global Resources Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Portfolio Income
Fidelity Advisor Income & Growth Fund
FIXED-INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
