(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
LIMITED TERM BOND
FUND - CLASS A & CLASS B
SEMIANNUAL REPORT
MAY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 11 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 14 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 15 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and
liabilities, operations, and
changes in net assets, as well as
financial highlights.
NOTES 27 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.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR LIMITED TERM BOND FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Total return includes
changes in share price, plus reinvestment of any dividends (or income) and
capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at income to measure performance.
Initial offering of Class A shares took place on September 10, 1992. If
Fidelity had not reimbursed certain Class A expenses during the periods
shown, the total returns and dividends would have been lower. See page 6
for additional information about Class A's performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Limited Term Bond - Class A 6.84% 7.59% 52.69% 138.02%
Advisor Limited Term Bond - Class A
(incl. max. 4.75% sales charge) 1.77% 2.48% 45.43% 126.72%
Lehman Brothers Intermediate Government
- - 9.26% 9.65% 53.16% 139.63%
Corporate Bond Index
Average Intermediate Investment Grade
Bond Fund 9.96% 9.92% 52.46% 140.37%
Consumer Price Index 1.53% 3.19% 17.80% 41.85%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Class A's returns to those of the Lehman Brothers
Intermediate Government - Corporate Bond Index - a broad gauge of the
intermediate (one- to-ten-year) bond market. To measure how Class A's
performance stacked up against its peers, you can compare it to the average
intermediate investment grade bond fund, which reflects the performance of
153 funds with similar objectives tracked by Lipper Analytical Services
over the past six months. These benchmarks include reinvested dividends and
capital gains, if any, and exclude the effects of sales charges. Comparing
Class A's performance to the consumer price index (CPI) helps show how the
class did compared to inflation. (The CPI returns begin on the month end
closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class A 7.59% 8.83% 9.06%
Advisor Limited Term Bond - Class A
(incl. max. 4.75% sales charge) 2.48% 7.78% 8.53%
Lehman Brothers Intermediate Government -
Corporate Bond Index 9.65% 8.90% 9.13%
Average Intermediate Investment Grade Bond 9.92% 8.79% 9.15%
Fund
Consumer Price Index 3.19% 3.33% 3.56%
AVERAGE ANNUAL TOTAL RETURNS take Class A shares' actual (or cumulative)
return and show you what would have happened if Class A shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
Fidelity AdvisorGovernment/Corpor
05/31/85 9525.00 10000.00
06/30/85 9640.89 10101.00
07/31/85 9545.56 10099.99
08/31/85 9737.71 10246.44
09/30/85 9761.94 10323.29
10/31/85 9902.07 10479.17
11/30/85 10119.43 10660.46
12/31/85 10406.43 10907.78
01/31/86 10482.71 10977.59
02/28/86 10842.34 11235.57
03/31/86 11176.15 11531.06
04/30/86 11242.21 11608.32
05/31/86 11068.38 11473.66
06/30/86 11334.99 11739.85
07/31/86 11430.08 11858.42
08/31/86 11679.41 12125.24
09/30/86 11547.93 12025.81
10/31/86 11695.43 12182.15
11/30/86 11843.30 12297.88
12/31/86 11897.42 12339.69
01/31/87 12047.35 12464.32
02/28/87 12119.87 12527.89
03/31/87 12063.40 12501.58
04/30/87 11752.14 12272.80
05/31/87 11707.35 12244.57
06/30/87 11863.81 12392.73
07/31/87 11863.46 12421.24
08/31/87 11805.80 12388.94
09/30/87 11611.09 12227.89
10/31/87 11900.52 12577.60
11/30/87 12053.61 12658.10
12/31/87 12173.56 12791.01
01/31/88 12543.18 13118.46
02/29/88 12730.97 13264.07
03/31/88 12632.18 13213.67
04/30/88 12605.49 13191.21
05/31/88 12531.57 13133.17
06/30/88 12763.47 13341.98
07/31/88 12750.11 13313.97
08/31/88 12786.20 13333.94
09/30/88 13022.35 13565.95
10/31/88 13196.87 13750.44
11/30/88 13115.38 13633.56
12/31/88 13127.44 13645.83
01/31/89 13270.27 13789.12
02/28/89 13238.85 13732.58
03/31/89 13291.16 13791.63
04/30/89 13514.74 14067.46
05/31/89 13768.90 14346.00
06/30/89 14104.38 14707.52
07/31/89 14402.77 15009.02
08/31/89 14208.25 14815.41
09/30/89 14275.33 14885.04
10/31/89 14573.18 15200.60
11/30/89 14693.05 15345.01
12/31/89 14717.27 15387.97
01/31/90 14570.89 15289.49
02/28/90 14618.82 15346.06
03/31/90 14598.38 15366.01
04/30/90 14504.00 15312.23
05/31/90 14848.49 15649.10
06/30/90 15047.01 15858.80
07/31/90 15247.90 16079.23
08/31/90 15120.61 16013.31
09/30/90 15232.39 16136.61
10/31/90 15375.94 16323.80
11/30/90 15642.09 16571.92
12/31/90 15881.77 16798.95
01/31/91 15999.83 16970.30
02/28/91 16128.15 17106.07
03/31/91 16230.33 17222.39
04/30/91 16411.36 17410.11
05/31/91 16498.90 17516.31
06/30/91 16503.86 17528.57
07/31/91 16689.48 17724.89
08/31/91 17039.86 18063.44
09/30/91 17356.35 18374.13
10/31/91 17561.72 18583.60
11/30/91 17729.75 18797.31
12/31/91 18289.07 19255.96
01/31/92 18055.04 19080.73
02/29/92 18101.88 19155.15
03/31/92 18036.72 19080.44
04/30/92 18138.07 19248.35
05/31/92 18469.55 19546.70
06/30/92 18729.99 19835.99
07/31/92 19170.83 20230.73
08/31/92 19348.08 20433.03
09/30/92 19573.26 20710.92
10/31/92 19284.40 20441.68
11/30/92 19333.62 20364.00
12/31/92 19592.68 20636.88
01/31/93 19983.19 21037.24
02/28/93 20381.91 21369.62
03/31/93 20515.78 21455.10
04/30/93 20641.76 21626.74
05/31/93 20656.26 21579.16
06/30/93 21065.79 21917.96
07/31/93 21228.95 21970.56
08/31/93 21695.93 22319.89
09/30/93 21758.08 22411.40
10/31/93 21875.23 22471.91
11/30/93 21749.97 22346.07
12/31/93 21844.52 22448.86
01/31/94 22075.22 22698.05
02/28/94 21648.55 22362.12
03/31/94 21229.21 21993.14
04/30/94 21144.81 21843.59
05/31/94 21071.84 21858.88
06/30/94 21066.00 21861.06
07/31/94 21265.91 22175.86
08/31/94 21263.38 22244.61
09/30/94 21157.84 22039.96
10/31/94 21159.13 22037.75
11/30/94 21219.79 21938.58
12/31/94 21305.72 22015.37
01/31/95 21537.31 22385.23
02/28/95 21803.58 22848.60
03/31/95 21915.00 22978.84
04/30/95 22131.05 23263.78
05/31/95 22671.65 23966.34
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Advisor
Limited Term Bond Fund - Class A on May 31, 1985, and paid the maximum
4.75% sales charge. As the chart shows, by May 31, 1995, the value of your
investment would have grown to $22,672 - a 126.72% 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 $23,963 - a
139.63% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
Class A shares bear a .25% 12b-1 fee that is not reflected in returns prior
to September 10, 1992. Returns prior to that date are those of
Institutional Class, the original class of the fund. Had Class A's 12b-1
fee been reflected, prior returns would have been lower.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1995 1994 1993 1992 1991 1990
Dividend return 3.14% 5.46% A 7.80% 8.19% 9.30% 9.05%
Capital appreciation 3.70% -7.90% 4.70% 0.86% 4.05% -2.59%
return
Total return 6.84% -2.44% 12.50% 9.05% 13.35% 6.46%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.50(cents) 31.10(cents) 60.41(cents)
Annualized dividend rate 6.13% 6.01% 5.82%
30-day annualized yield 5.49% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.56 over the past month, $10.38
over the past six months and $10.38 over the past year, you can compare the
class' income over these three periods. The 30-day annualized YIELD is a
standard formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you to compare funds from different companies on an equal basis. The
offering share price used in the calculation of the yield includes the
effect of Class A's maximum 4.75% sales charge. If Fidelity had not
reimbursed certain Class A expenses during the period shown, the yield
would have been 5.39%.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 5.8(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
ADVISOR LIMITED TERM BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Total return includes
changes in share price, plus reinvestment of any dividends (or income) and
capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at income to measure performance.
Initial offering of Class B shares took place on June 30, 1994. Class B
shares bear a 1.00% 12b-1/shareholder service fee. This fee is not
reflected in returns prior to that date. Returns between September 10, 1992
and June 30, 1994 are those of Class A, and reflect Class A's .25% 12b-1
fee. Returns prior to September 10, 1992 are those of Institutional Class,
the original class of the fund. Had Class B's 12b-1 fee been reflected,
prior returns would have been lower. If Fidelity had not reimbursed certain
Class B expenses during the periods shown, the total returns and dividends
would have been lower. Class B's contingent deferred sales charge included
in the past six months, past one year, past five years and past 10 years
total return figures are 4%, 4%, 1% and 0%, respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED MAY 31, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Limited Term Bond - Class 6.44% 6.67% 51.37% 135.97%
B
Advisor Limited Term Bond - Class B
(incl. contingent deferred sales 2.44% 2.67% 50.37% 135.97%
charge)
Lehman Brothers Intermediate
Government - Corporate Bond Index 9.26% 9.65% 53.16% 139.63%
Average Intermediate Investment Grade
Bond Fund 9.96% 9.92% 52.46% 140.37%
Consumer Price Index 1.53% 3.19% 17.80% 41.85%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year, five years, or 10
years. For example, if you had invested $1,000 in a fund that had a 5%
return over the past year, the value of your investment would be $1,050.
You can compare Class B's returns to those of the Lehman Brothers
Intermediate Government - Corporate Bond Index - a broad gauge of the
intermediate (one-to-ten-year) bond market. To measure how Class B's
performance stacked up against its peers, you can compare it to the average
intermediate investment grade bond fund, which reflects the performance of
153 intermediate investment grade bond funds with similar objectives
tracked by Lipper Analytical Services over the past six months. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges. Comparing Class B's performance to
the consumer price index (CPI) helps show how the class did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class B 6.67% 8.64% 8.96%
Advisor Limited Term Bond - Class B
(incl. contingent deferred sales charge) 2.67% 8.50% 8.96%
Lehman Brothers Intermediate Government -
Corporate Bond Index 9.65% 8.90% 9.13%
Average Intermediate Investment Grade Bond 9.92% 8.79% 9.15%
Fund
Consumer Price Index 3.19% 3.33% 3.56%
AVERAGE ANNUAL TOTAL RETURNS take Class B shares' actual (or cumulative)
return and show you what would have happened if Class B shares had
performed at a constant rate each year.
$10,000 OVER 10 YEARS
Fidelity Advisor LGovernment/Corpora
05/31/85 10000.00 10000.00
06/30/85 10121.67 10101.00
07/31/85 10021.58 10099.99
08/31/85 10223.31 10246.44
09/30/85 10248.75 10323.29
10/31/85 10395.88 10479.17
11/30/85 10624.07 10660.46
12/31/85 10925.38 10907.78
01/31/86 11005.47 10977.59
02/28/86 11383.04 11235.57
03/31/86 11733.49 11531.06
04/30/86 11802.85 11608.32
05/31/86 11620.35 11473.66
06/30/86 11900.25 11739.85
07/31/86 12000.09 11858.42
08/31/86 12261.84 12125.24
09/30/86 12123.82 12025.81
10/31/86 12278.67 12182.15
11/30/86 12433.92 12297.88
12/31/86 12490.73 12339.69
01/31/87 12648.14 12464.32
02/28/87 12724.27 12527.89
03/31/87 12664.99 12501.58
04/30/87 12338.21 12272.80
05/31/87 12291.18 12244.57
06/30/87 12455.44 12392.73
07/31/87 12455.07 12421.24
08/31/87 12394.54 12388.94
09/30/87 12190.12 12227.89
10/31/87 12493.99 12577.60
11/30/87 12654.71 12658.10
12/31/87 12780.64 12791.01
01/31/88 13168.70 13118.46
02/29/88 13365.85 13264.07
03/31/88 13262.13 13213.67
04/30/88 13234.11 13191.21
05/31/88 13156.51 13133.17
06/30/88 13399.97 13341.98
07/31/88 13385.94 13313.97
08/31/88 13423.83 13333.94
09/30/88 13671.76 13565.95
10/31/88 13854.98 13750.44
11/30/88 13769.43 13633.56
12/31/88 13782.09 13645.83
01/31/89 13932.05 13789.12
02/28/89 13899.05 13732.58
03/31/89 13953.98 13791.63
04/30/89 14188.70 14067.46
05/31/89 14455.54 14346.00
06/30/89 14807.75 14707.52
07/31/89 15121.01 15009.02
08/31/89 14916.80 14815.41
09/30/89 14987.22 14885.04
10/31/89 15299.93 15200.60
11/30/89 15425.77 15345.01
12/31/89 15451.20 15387.97
01/31/90 15297.53 15289.49
02/28/90 15347.84 15346.06
03/31/90 15326.38 15366.01
04/30/90 15227.29 15312.23
05/31/90 15588.96 15649.10
06/30/90 15797.38 15858.80
07/31/90 16008.30 16079.23
08/31/90 15874.66 16013.31
09/30/90 15992.01 16136.61
10/31/90 16142.72 16323.80
11/30/90 16422.15 16571.92
12/31/90 16673.77 16798.95
01/31/91 16797.72 16970.30
02/28/91 16932.44 17106.07
03/31/91 17039.71 17222.39
04/30/91 17229.77 17410.11
05/31/91 17321.68 17516.31
06/30/91 17326.89 17528.57
07/31/91 17521.76 17724.89
08/31/91 17889.61 18063.44
09/30/91 18221.89 18374.13
10/31/91 18437.51 18583.60
11/30/91 18613.91 18797.31
12/31/91 19201.12 19255.96
01/31/92 18955.42 19080.73
02/29/92 19004.59 19155.15
03/31/92 18936.19 19080.44
04/30/92 19042.59 19248.35
05/31/92 19390.61 19546.70
06/30/92 19664.03 19835.99
07/31/92 20126.86 20230.73
08/31/92 20312.94 20433.03
09/30/92 20549.36 20710.92
10/31/92 20246.08 20441.68
11/30/92 20297.77 20364.00
12/31/92 20569.74 20636.88
01/31/93 20979.73 21037.24
02/28/93 21398.33 21369.62
03/31/93 21538.88 21455.10
04/30/93 21671.14 21626.74
05/31/93 21686.36 21579.16
06/30/93 22116.31 21917.96
07/31/93 22287.61 21970.56
08/31/93 22777.88 22319.89
09/30/93 22843.13 22411.40
10/31/93 22966.12 22471.91
11/30/93 22834.62 22346.07
12/31/93 22933.87 22448.86
01/31/94 23176.08 22698.05
02/28/94 22728.14 22362.12
03/31/94 22287.89 21993.14
04/30/94 22199.27 21843.59
05/31/94 22122.67 21858.88
06/30/94 22116.53 21861.06
07/31/94 22302.39 22175.86
08/31/94 22283.38 22244.61
09/30/94 22157.56 22039.96
10/31/94 22121.53 22037.75
11/30/94 22170.35 21938.58
12/31/94 22222.54 22015.37
01/31/95 22449.60 22385.23
02/28/95 22714.68 22848.60
03/31/95 22837.62 22978.84
04/30/95 23026.55 23263.78
05/31/95 23597.18 23966.34
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Advisor
Limited Term Bond Fund - Class B on May 31, 1985. As the chart shows, by
May 31, 1995, the value of your investment would have grown to $23,597 - a
135.97% 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 $23,963 - a 139.63% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1995 1994 1993 1992 1991 1990
Dividend return 2.73% 5.08% A 7.80% 8.19% 9.30% 9.05%
Capital appreciation 3.71% -7.99% 4.70% 0.86% 4.05% -2.59%
return
Total return 6.44% -2.91% 12.50% 9.05% 13.35% 6.46%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or gains are
reinvested, if any, and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1995 PAST PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 4.82(cents) 27.04(cents) 47.61(cents)
Annualized dividend rate 5.38% 5.23% 4.99%
30-day annualized yield 5.01% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.54 over the past month, $10.36
over the past six months, and $10.36 over the life of Class, you can
compare the Class' income over these three periods. The 30-day annualized
YIELD is a standard formula for all bond funds based on the yields of the
bonds in the fund, averaged over the past 30 days. This figure shows you
the yield characteristics of the fund's investments at the end of the
period. It also helps you compare funds from different companies on an
equal basis. The offering share price used in the calculation of the yield
excludes the effect of Class B's contingent deferred sales charge. If
Fidelity had not reimbursed certain Class B expenses during the period
shown, the yield would have been 4.44%.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 1.9(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Michael Gray, Portfolio Manager of Fidelity Advisor
Limited Term Bond Fund
Q. MICHAEL, HOW HAS THE FUND PERFORMED?
A. Not as well as I would have liked. For the six months ended May 31,
1995, Fidelity Advisor Limited Term Bond Fund - Class A and Class B had
total returns of 6.84% and 6.44%, respectively. According to Lipper
Analytical Services, the average intermediate investment grade bond fund
returned 9.96% during the same period. For the 12 months ended May 31,
Class A and Class B had returns of 7.59% and 6.67%, respectively, while the
average investment grade bond fund tracked by Lipper returned 9.92%. The
Lehman Brothers Intermediate Government-Corporate Bond Index was up 9.26%
and 9.65% for the six- and 12-month periods, respectively.
Q. WHY DID THE FUND TRAIL ITS PEERS?
A. Most of the underperformance occurred in the past six months. There were
two reasons for it. First, I believed that there was potential for a new
round of short-term interest rate increases by the Federal Reserve Board. I
felt that if those increases occurred, bonds with short or intermediate
maturities would suffer the most. To protect against this, I used a barbell
strategy - targeting the fund's investments in cash and other short-term
investments on one end of the maturity spectrum, and in longer-term bonds
on the other end. Unfortunately, despite a Fed rate increase in February,
short- and intermediate-term bonds actually rallied. In turn, the fund lost
out on some performance there.
Q. WHAT WAS THE SECOND REASON?
A. The second reason was that the fund had a shorter duration than many of
the funds in the Lipper category. Duration is a measure of a fund's
sensitivity to interest rate changes. When interest rates went down during
the period, the fund didn't perform as well as other funds. Let me add that
currently and going forward, I'll be measuring the fund's performance more
closely against the Lehman Brothers Intermediate Government-Corporate Bond
Index. My goal will be to generate returns that are better than the
intermediate market as a whole, while attempting to limit volatility
relative to the benchmark. As a result, I've positioned the fund so that
its sensitivity to interest rates is more in line with the index.
Q. HOW HAVE YOU FOCUSED THE FUND'S INVESTMENTS?
A. I've been reducing the fund's weighting in corporate bonds and
increasing the fund's exposure to government securities, mainly Treasuries.
Over the past six months, corporate yield spreads - or the difference
between the yield offered by corporates and Treasury issues with the same
maturity - have been relatively tight, meaning that corporates have been
priced relatively high in light of historical levels and haven't offered
enough added yield to offset their lower credit quality, relative to
Treasuries. In addition, given where we are in the economic cycle - where
growth peaked in the fourth quarter - corporate earnings may suffer going
forward. As a result, corporate credit quality probably will deteriorate on
the margin. Furthermore, the supply of corporate issues has increased
recently. New issues have come to market as corporations have tried to take
advantage of lower interest rates. The existing tight yield spread, a
possible drop in corporate earnings, and added supply are all negatives for
the corporate bond market. By reducing the fund's corporate exposure, I'm
trying to lock in the outperformance of the fund's corporate investments
and avoid holding on to them as the spread widens.
Q. HAVE YOU FOCUSED YOUR CORPORATE BOND INVESTMENTS IN ANY PARTICULAR
SECTOR?
A. The one area I've overweighted - relative to the index - during the
period has been bonds issued by banks. The credit fundamentals of the bank
positions have been strong. That means banks' earnings have been strong;
the difference between the rates at which banks lend and the rates they pay
has remained wide; there has been tremendous loan demand; and loan quality
remains high. In addition, the limited supply of and strong demand for bank
issues caused them to perform well.
Q. YOU'VE ALSO SLIGHTLY INCREASED THE FUND'S WEIGHTING IN MORTGAGE-BACKED
SECURITIES . . .
A. Yes, because they have improved in valuation relative to other corporate
opportunities. Because the Treasury market has rallied - meaning Treasury
yields have fallen and prices have risen - mortgage yield spreads have
widened, making the mortgage securities more attractive purchase
candidates. Spreads have widened because prepayment risk - the risk that
mortgage holders will pay off their loans early - increases significantly
when interest rates in the Treasury market fall. As a result, sellers of
mortgage-backed securities have to offer higher yields - and lower prices -
to make the bonds attractive enough to offset the increased prepayment
risk. I've increased the mortgage-backed securities position, but I
probably won't add significantly more to the current stake.
Q. WHY HAVE YOU REDUCED THE FUND'S OVERSEAS INVESTMENTS?
A. I believe the current environment for foreign bonds doesn't look
attractive, so I've cut back on investments there and likely won't invest
in non dollar-denominated securities in the near future given my shift in
emphasis to outperforming the market while also limiting volatility. One of
the areas I have maintained a small position in is Yankee bonds, which are
U.S. dollar-denominated foreign bonds issued in the U.S. market. The fund's
Yankee holdings are mostly Canadian provincial securities that have done
quite well.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Even though there was some weakness in the economy at the end of the
period, it could, I believe, strengthen in the second half of the year.
That re-
acceleration of growth could cause inflation to be a little higher than
last year. Some of the indications that this could happen are strength in
industrial prices and firm commodity prices. In addition, the dollar
remains weak, increasing the possibility that higher-priced imported goods
could fuel inflation. If, in fact, this pick-up occurs, the Fed might
re-think its policies.
FUND FACTS
GOAL: to provide a high rate
of income through
investment primarily in
investment-grade
fixed-income securities
START DATE: February 2, 1984
SIZE: as of May 31, 1995,
more than $391 million
MANAGER: Michael Gray,
since 1987; joined Fidelity in
1982
(checkmark)
MICHAEL GRAY ON HIS
INVESTING STRATEGY:
"Recently, I've altered the
fund's strategy somewhat. I've
begun to manage the fund
relative to its benchmark index
- - the Lehman Brothers
Intermediate
Government-Corporate Bond
Index. I'm implementing this
approach to keep the volatility
of the fund's returns in line
with the volatility of the index's
returns. My strategy is
designed to help the fund
exceed the performance of
the index by utilizing
research-driven investment
ideas that I believe have a high
probability of success. I'll use
an active bottom-up
investment approach, which
means that I'll make
investment decisions based
on the merits of individual
securities. So while operating
within defined parameters
relative to the benchmark to
limit volatility, I'll look to add
value to the fund beyond the
benchmark."
(solid bullet) Two key factors have
fueled the resurgence in the
corporate bond market over
the past six months. First,
overall credit quality has
improved; economic growth
and corporate cost cutting
have helped companies post
strong earnings. In addition, a
limited supply of new
corporate issues has helped
boost corporate bond prices.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1995
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 48.4 32.4
Aa 10.0 16.1
A 10.9 13.8
Baa 0.1 0.8
Ba 0.0 0.0
B 0.0 0.0
Not rated 0.3 0.5
TABLE EXCLUDES SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1995
6 MONTHS AGO
Years 7.0 6.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MAY 31, 1995
6 MONTHS AGO
Years 3.0 2.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MAY 31, 1995* AS OF NOVEMBER 30, 1994**
Corporate bonds 18.9%
U.S. government
and agency
obligations 45.7%
Foreign government
obligations 3.4%
Other 1.7%
Short-term
investments 30.3%
FOREIGN
INVESTMENTS 11.1%
Corporate bonds 22.4%
U.S. government
and agency
obligations 28.8%
Foreign government
obligations 9.5%
Other 2.9%
Short-term
investments 36.4%
FOREIGN
INVESTMENTS 18.5%
Row: 1, Col: 1, Value: 30.3
Row: 1, Col: 2, Value: 2.7
Row: 1, Col: 3, Value: 3.4
Row: 1, Col: 4, Value: 45.7
Row: 1, Col: 5, Value: 18.9
Row: 1, Col: 1, Value: 36.4
Row: 1, Col: 2, Value: 2.9
Row: 1, Col: 3, Value: 9.5
Row: 1, Col: 4, Value: 28.8
Row: 1, Col: 5, Value: 22.4
*
**
INVESTMENTS MAY 31, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 18.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ENERGY - 2.2%
ENERGY SERVICES - 0.8%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (a) $ 3,160,000 $ 3,142,999
OIL & GAS - 1.4%
B.P. America, Inc. 7 7/8%, 5/15/02 100,000 107,308
Elf Aquitaine yankee 8%, 10/15/01 5,000,000 5,349,000
5,456,308
TOTAL ENERGY 8,599,307
FINANCE - 13.2%
ASSET-BACKED SECURITIES - 3.3%
Chase Manhattan Credit Card Master Trust
8 3/4%, 8/15/99 1,200,000 1,228,872
Discover Card Trust 7 7/8%, 4/16/98 270,000 273,205
Premier Auto Trust 6.65%, 3/4/97 3,000,000 3,011,484
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 695,109 699,015
Standard Credit Card Master Trust I:
8%, 10/7/97 830,000 846,857
participation certificate, 5 1/2%, 9/7/98 5,000,000 4,907,800
7.65%, 2/15/00 1,200,000 1,236,372
United Federal Savings Bank Grantor Trust:
1994-B 6.975%, 7/10/00 256,045 255,341
1994-C 7.275%, 11/10/00 275,662 276,958
12,735,904
BANKS - 3.9%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 161,016
7 3/4%, 7/15/02 100,000 104,269
7.20%, 9/15/02 100,000 100,963
Chemical Bank New York Trust Co. 7 1/4%, 9/15/02 3,000,000 3,049,230
First Hawaiian Bank secured 6.93%, 12/1/03 (a) 2,000,000 1,924,400
Korea Development Bank 8.09%, 10/6/04 6,000,000 6,397,500
National City Corp. 8 3/8%, 3/15/96 200,000 202,796
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,199,710
15,139,884
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 3.8%
Deere (John) Capital Corp. 9 5/8%, 11/1/98 $ 2,500,000 $ 2,732,325
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 106,836
Ford Motor Credit Co.:
8%, 6/15/02 100,000 106,342
7 3/4%, 11/15/02 100,000 104,435
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,061,080
Household Finance Corp. 6 3/4%, 6/1/00 530,000 532,544
Secured Finance, Inc. Kroger gtd. secured 9.05%, 12/15/04 4,000,000
4,536,800
Society Corp. 8 7/8%, 5/15/96 3,600,000 3,670,920
14,851,282
INSURANCE - 2.2%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (a) 5,000,000 4,728,500
Nationwide Mutual Insurance Co. 6 1/2%, 2/15/04 (a) 1,000,000 957,080
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,051,040
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,022,840
8,759,460
TOTAL FINANCE 51,486,530
NONDURABLES - 0.4%
TOBACCO - 0.4%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 105,739
9.45%, 11/19/97 100,000 106,453
9.80%, 12/15/98 1,340,000 1,364,120
1,576,312
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE - 1.2%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,873,700
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTILITIES - 1.9%
ELECTRIC UTILITY - 1.9%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 $ 6,000,000 $ 7,108,560
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 155,543
7,264,103
TOTAL NONCONVERTIBLE BONDS
(Cost $73,741,132) 73,799,952
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 39.6%
U.S. TREASURY OBLIGATIONS - 37.5%
9 3/8%, 4/15/96 4,900,000 5,040,875
6 1/2%, 5/15/97 15,000,000 15,173,400
5 1/8%, 3/31/98 28,535,000 27,937,477
8 7/8%, 2/15/99 3,000,000 3,282,660
6 3/4%, 6/30/99 17,010,000 17,440,523
7 1/8%, 9/30/99 3,260,000 3,391,932
6 7/8%, 3/31/00 3,000,000 3,098,430
6 1/4%, 2/15/03 5,000,000 4,992,950
10 3/4%, 5/15/03 60,000 76,622
11 7/8%, 11/15/03 590,000 802,123
11 5/8%, 11/15/04 4,410,000 6,043,067
9%, 11/15/18 12,310,000 15,466,407
8 7/8%, 2/15/19 22,820,000 28,339,473
8 1/8%, 8/15/19 (b) 3,000,000 3,465,930
12%, 8/15/23 8,300,000 12,203,573
146,755,442
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
Federal National Mortgage Association 8 1/4%, 3/10/98 $ 200,000 $ 210,438
Financing Corp. principal strips 0%, 3/7/19 44,755,000 8,152,571
8,363,009
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $149,148,428) 155,118,451
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 6.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.6%
6%, 6/1/01 2,000,000 1,963,512
12 1/2%, 2/1/11 to 7/1/15 170,456 188,888
2,152,400
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.5%
8%, 6/15/23 4,041,739 4,141,489
8 1/2%, 4/15/17 to 8/15/24 996,243 1,035,370
9%, 6/15/16 to 3/15/25 15,600,108 16,392,325
21,569,184
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $23,171,439) 23,721,584
COMMERCIAL MORTGAGE SECURITIES - 0.4%
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 137,987 137,814
Resolution Trust Corp. commercial:
Series 1994-N2 Class 2, 6 1/2%, 12/15/04 (a)(c) 600,000 600,188
Series 1994-C2 Class A-2, 7 3/4%, 4/25/25 288,067 290,948
Series 1994-C2 Class A-4, 7 1/2%, 4/25/25 408,159 411,221
Series 1994-C1 Class A-4, 7 1/4%, 6/25/26 364,966 364,054
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $1,788,236) 1,804,225
FOREIGN GOVERNMENT OBLIGATIONS - 3.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Ontario Province yankee:
7 3/4%, 6/4/02 $ 6,000,000 $ 6,350,280
15 1/8%, 5/1/11 5,000,000 5,647,150
17%, 11/5/11 1,000,000 1,202,210
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $14,608,910) 13,199,640
SUPRANATIONAL OBLIGATIONS - 1.3%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 5,001,030
REPURCHASE AGREEMENTS - 30.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.13% dated
5/31/95 due 6/1/95 (Note 3) $ 118,844,233 118,824,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $385,659,025) $ 391,468,882
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
285 U.S. Treasury Bond Futures Contracts June 1995 $ 32,213,906 $
(2,630,085)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 8.2%
LEGEND
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $11,353,167 or 2.9% of net
assets.
(b) 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 $1,155,310.
(c) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
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 69.3% AAA, AA, A 69.5%
Baa 0.1% BBB 0.2%
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%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.0%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 88.9%
Canada 5.2
Korea 1.6
France 1.4
Supranational 1.3
Others (individually less than 1%) 1.6
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1995, the aggregate cost of investment securities for income tax
purposes was $385,659,025. Net unrealized appreciation aggregated
$5,809,857, of which $10,227,602 related to appreciated investment
securities and $4,417,745 related to depreciated investment securities.
At November 30, 1994, the fund had a capital loss carryforward of
approximately $6,852,000 of which $5,673,000, $1,034,000 and $145,000 will
expire on November 30, 1998, 1999 and 2002, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 391,468,882
agreements of $118,824,000) (cost $385,659,025) -
See accompanying schedule
Cash 364
Receivable for investments sold 19,014
Receivable for fund shares sold 1,657,086
Interest receivable 3,887,479
TOTAL ASSETS 397,032,825
LIABILITIES
Payable for investments purchased $ 4,090,442
Distributions payable 758,369
Accrued management fee 144,158
Distribution fees payable 46,309
Payable for daily variation on futures contracts 26,719
Other payables and accrued expenses 99,776
TOTAL LIABILITIES 5,165,773
NET ASSETS $ 391,867,052
Net Assets consist of:
Paid in capital $ 400,588,041
Distributions in excess of net investment income (1,377,599)
Accumulated undistributed net realized gain (loss) on (10,523,897)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 3,180,507
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 391,867,052
CALCULATION OF MAXIMUM OFFERING PRICE $10.64
CLASS A:
NET ASSET VALUE, and redemption price per share
($197,183,320 (divided by) 18,527,724 shares)
Maximum offering price per share (100/95.25 of $10.64) $11.17
CLASS B: $10.63
NET ASSET VALUE, and offering price per share
($8,477,089 (divided by) 797,160 shares) A
INSTITUTIONAL CLASS: $10.65
NET ASSET VALUE, offering price and redemption price per
share ($186,206,643 (divided by) 17,481,356 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
INVESTMENT INCOME $ 12,236,871
Interest
EXPENSES
Management fee $ 768,145
Transfer agent fees 175,674
Class A
Class B 8,258
Institutional Class 133,911
Distribution fees 203,958
Class A
Class B 28,931
Accounting fees and expenses 68,130
Non-interested trustees' compensation 820
Custodian fees and expenses 5,435
Registration fees 19,739
Class A
Class B 12,295
Institutional Class 12,535
Audit 19,098
Reports to shareholders 11,690
Total expenses before reductions 1,468,619
Expense reductions (118,397) 1,350,222
NET INVESTMENT INCOME 10,886,649
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (388,829)
Foreign currency transactions (1,384,563)
Futures contracts (1,173,264) (2,946,656)
Change in net unrealized appreciation (depreciation) on:
Investment securities 19,407,595
Assets and liabilities in foreign currencies (293,305)
Futures contracts (3,285,233) 15,829,057
NET GAIN (LOSS) 12,882,401
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 23,769,050
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 10,886,649 $ 18,192,377
Net investment income
Net realized gain (loss) (2,946,656) (3,565,582)
Change in net unrealized appreciation (depreciation) 15,829,057 (21,185,698)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 23,769,050 (6,558,903)
FROM OPERATIONS
Distributions to shareholders (4,902,462) (5,494,879)
From net investment income
Class A
Class B (149,206) (29,216)
Institutional Class (5,461,399) (10,193,519)
Return of capital (Note 1) - (571,345)
Class A
Class B - (3,038)
Institutional Class - (1,059,899)
TOTAL DISTRIBUTIONS (10,513,067) (17,351,896)
Share transactions - net increase (decrease) 61,467,181 98,080,216
TOTAL INCREASE (DECREASE) IN NET ASSETS 74,723,164 74,169,417
NET ASSETS
Beginning of period 317,143,888 242,974,471
End of period (including distributions in excess of net $ 391,867,052 $ 317,143,888
investment income of $1,377,599 and $1,751,181,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1995
(UNAUDITED) 1994 D 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.260 $ 11.140 $ 10.640 $ 10.960
Income from Investment Operations
Net investment income .334 .609 .785 .170
Net realized and unrealized gain (loss) .357 (.876) .511 (.320)
on investments
Total from investment operations .691 (.267) 1.296 (.150)
Less Distributions
From net investment income (.311) (.555) (.796) (.170)
From return of capital - (.058) - -
Total distributions (.311) (.613) (.796) (.170)
Net asset value, end of period $ 10.640 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN A, B 6.84% (2.44)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 197,183 $ 141,866 $ 59,184 $ 2,583
Ratio of expenses to average net assets .90% 1.02% 1.23% .82%
C C
Ratio of expenses to average net assets 1.00% 1.09% 1.23% .82%
before expense reductions C C
Ratio of net investment income to average 6.24% 6.04% 6.81% 7.67%
net assets C C
Portfolio turnover 119% 68% 59% 7%
C
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C ANNUALIZED
D 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS PERIOD ENDED
ENDED NOVEMBER 30,
MAY 31, 1995
(UNAUDITED) 1994 D
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .305 .204
Net realized and unrealized gain (loss) on investments .345 (.178)
Total from investment operations .650 .026
Less Distributions
From net investment income (.270) (.187)
From return of capital - (.019)
Total distributions (.270) (.206)
Net asset value, end of period $ 10.630 $ 10.250
TOTAL RETURN A, B 6.44% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 8,477 $ 3,156
Ratio of expenses to average net assets 1.65% C 1.65%
C
Ratio of expenses to average net assets before expense 2.22% C 2.41%
reductions C
Ratio of net investment income to average net assets 5.48% C 5.42%
C
Portfolio turnover 119% C 68%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C ANNUALIZED
D FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1995
(UNAUDITED) 1994 B 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410
beginning of period
Income from
Investment
Operations
Net investment .337 .602 .832 .840 .884 .901
income
Net realized and .367 (.833) .531 .102 .411 (.270)
unrealized gain
(loss) on
investments
Total from .704 (.231) 1.363 .942 1.295 .631
investment
operations
Less Distributions
From net investment (.324) (.597) (.843) (.852) (.885) (.901)
income
From return of - (.062) - - - -
capital
Total distributions (.324) (.659) (.843) (.852) (.885) (.901)
Net asset value, end of $ 10.650 $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140
period
TOTAL RETURN A 6.97% (2.10) 13.17 9.21 13.35 6.46
% % % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 186,207 $ 172,122 $ 183,790 $ 160,156 $ 327,756 $ 356,564
period (000 omitted)
Ratio of expenses to .65% .61% .64 .57 .57 .58
average net assets C % % % %
Ratio of expenses to .68% .61% .64 .57 .57 .58
average net assets C % % % %
before expense
reductions
Ratio of net investment 6.48% 6.45% 7.41 7.96 8.59 8.90
income to average C % % % %
net assets
Portfolio turnover 119% 68% 59 7 60 59
C % % % %
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
C ANNUALIZED
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
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 Class A, Class B and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the fund are allocated on a prorata basis to each class based
on the relative net assets of each class to the total net assets of the
fund. Each class of shares differs in its respective distribution, transfer
agent, registration, and certain other class-specific fees and expenses.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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 prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES - CONTINUED
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. Income dividends are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a prorata basis based on the
number of shares held by each class 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures and options transactions,
foreign currency transactions, market discount and capital loss
carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended November 30, 1994, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains resulting in
a return of capital. This was due to certain foreign currency losses which
decreased taxable income available for distribution after certain
distributions had been made.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
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. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates and currency values.
Buying futures, writing puts, and buying calls tend to increase the fund's
exposure to the underlying instrument. Selling futures, buying puts, and
writing calls tend to decrease the fund's exposure to the underlying
instrument, or hedge other fund investments. Futures contracts and written
options involve, to varying degrees, risk of loss in excess of the futures
variation margin or the option value reflected in the Statement of Assets
and Liabilities. The underlying face amount at value is shown in the
schedule of investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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, 1995 and due June 1, 1995. The
maturity values of the joint trading account investments were $118,844,233
at 6.13%. The investments in repurchase agreements through the joint
trading account are summarized as follows:
SUMMARY OF JOINT TRADING
Number of dealers or banks 23
Maximum amount with one dealer or bank 12.1%
Aggregate principal amount of agreements $15,683,611,000
Aggregate maturity amount of agreements $15,686,280,644
Aggregate market value of collateral $16,024,168,994
Coupon rates of collateral 0% to 15 3/4%
Maturity dates of collateral 6/1/95 to 2/15/25
4. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $186,948,887 and $132,594,713, respectively, of which U.S.
government and government agency obligations aggregated $171,295,148 and
$115,774,160, respectively.
The market value of futures contracts opened and closed during the period
amounted to $47,917,257 and $52,765,535, respectively.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1200% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. On
December 14, 1994, shareholders of the fund approved an increase in the
individual fund fee rate from the previous rate of .25% to .30%, which
became effective February 24, 1995. For the period, the management fee was
equivalent to an annualized rate of .45% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
distribution plans with respect to the fund's Class A shares ("Class A
Plan") and Class B shares ("Class B Plan"), pursuant to which the fund pays
Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. This fee is based on annual rates of .25% and
1.00% (of which .75% represents a distribution fee and .25% represents a
shareholder service fee) of the average net assets of the Class A and Class
B shares, respectively. For the period, the fund paid FDC $203,958 and
$28,931 under the Class A Plan and Class B Plan, respectively, of which
$203,958 and $7,207 were paid to securities dealers, banks and other
financial institutions for the distribution of Class A and Class B shares,
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 Plans also authorize payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made under the Plans during
the period.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares of the fund. For the period, FDC received sales
charges of $622,881 on sales of Class A shares of the fund, of which
$527,572 was paid to securities dealers, banks, and other financial
institutions. FDC also receives the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within five years of
purchase. The charge is based on declining rates which range from 4% to 1%
of the lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested dividends
and capital gains. For the period, FDC received contingent deferred sales
charges of $10,994 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. During the period December 1, 1994
to December 31, 1994, the Transfer Agents received fees based on the type,
size, number of accounts and the number of transactions made by
shareholders of the respective classes of the fund. Effective January 1,
1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the Transfer Agents receive account fees and asset-based
fees that
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES - CONTINUED
vary according to the account size and type of account of the shareholders
of the respective classes of the fund. With respect to the Class A shares,
State Street has delegated certain transfer, dividend paying, and
shareholder services to FIIOC for which FIIOC receives its allocable share
of all such fees. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .90%, 1.65% and .65% of average net
assets for Class A, Class B and Institutional Class shares, respectively.
For the period, the reimbursement reduced expenses by $81,669, $16,431 and
$20,297 for Class A, Class B and Institutional Class shares, respectively.
Effective July 1, 1995, FMR voluntarily agreed to reimburse the funds'
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of 1.00%, 1.75% and .75% of
average net assets for Class A, Class B and Institutional Class shares,
respectively.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1995 1994 A 1995 1994 A
CLASS A
Shares sold 8,261,959 14,851,591 $ 85,794,045 $ 158,332,548
Reinvestment of distributions 425,013 505,870 4,427,167 5,325,831
Shares redeemed (3,989,236) (6,838,590) (41,359,421) (72,563,524)
Net increase (decrease) 4,697,736 8,518,871 $ 48,861,791 $ 91,094,855
CLASS B
Shares sold 624,302 350,868 $ 6,469,549 $ 3,635,180
Reinvestment of distributions 10,827 2,301 112,798 23,687
Shares redeemed (145,788) (45,350) (1,511,487) (466,837)
Net increase (decrease) 489,341 307,819 $ 5,070,860 $ 3,192,030
7. SHARE TRANSACTIONS - CONTINUED
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1995 1994 1995 1994
INSTITUTIONAL CLASS
Shares sold 5,583,082 9,336,746 $ 57,964,311 $ 99,248,710
Reinvestment of distributions 161,272 246,604 1,679,796 2,616,244
Shares redeemed (5,029,679) (9,291,204) (52,109,577) (98,071,623)
Net increase (decrease) 714,675 292,146 $ 7,534,530 $ 3,793,331
A SHARE TRANSACTIONS FOR CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALES OF SHARES) TO NOVEMBER 30, 1994.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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 - Class A
Fidelity Investments Institutional Operations Company
Boston, MA - Class B
CUSTODIAN
Bank of New York
New York, NY
*INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income 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)
(registered trademark)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
LIMITED TERM BOND
FUND - INSTITUTIONAL CLASS
SEMIANNUAL REPORT
MAY 31, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 17 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.
FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND, INCLUDING CHARGES AND
EXPENSES,
CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE PROSPECTUS. READ IT
CAREFULLY BEFORE
YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been positive market indications so far in 1995, no one
can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
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 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. Total return includes
changes in share price, plus reinvestment of any dividends (or income) and
capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at income to measure performance.
If Fidelity had not reimbursed certain expenses during the periods shown,
the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIODS ENDED MAY 31, 1995 PAST 6 PAST 1 PAST 5 PAST 10
MONTHS YEAR YEARS YEARS
Advisor Limited Term Bond - Institutional 6.97% 7.89% 54.56% 140.94%
Class
Lehman Brothers Intermediate Government
- - 9.26% 9.65% 53.16% 139.63%
Corporate Bond Index
Average Intermediate Investment Grade
Bond Fund 9.96% 9.92% 52.46% 140.37%
Consumer Price Index 1.53% 3.19% 17.80% 41.85%
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, six months, one year,
five years, or 10 years. For example, if you invested $1,000 in a fund that
had a 5% return over the past year, the value of your investment would be
$1,050. You can compare Institutional Class' returns to those of the
Lehman Brothers Intermediate Government - Corporate Bond Index - a broad
gauge of the intermediate (one-to-ten-year) bond market. To measure how
Institutional Class' performance stacked up against its peers, you can
compare it to the average intermediate investment grade bond fund, which
reflects the performance of 153 funds with similar objectives tracked by
Lipper Analytical Services over the past six months. These benchmarks
include reinvested dividends and capital gains, if any. Comparing
Institutional Class' performance to the consumer price index (CPI) helps
show how the class did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MAY 31, 1995 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Institutional Class 7.89% 9.10% 9.19%
Lehman Brothers Intermediate Government -
Corporate Bond Index 9.65% 8.90% 9.13%
Average Intermediate Investment Grade Bond 9.92% 8.79% 9.15%
Fund
Consumer Price Index 3.19% 3.33% 3.56%
AVERAGE ANNUAL TOTAL RETURNS take Institutional Class shares' actual (or
cumulative) return and show you what would have happened if Institutional
Class shares had performed at a constant rate each year.
$100,000 OVER 10 YEARS
Fidelity Advisor LiGovernment/Corporate
05/31/85 100000.00 100000.00
06/30/85 101216.71 101010.00
07/31/85 100215.85 100999.90
08/31/85 102233.14 102464.40
09/30/85 102487.54 103232.88
10/31/85 103958.78 104791.70
11/30/85 106240.71 106604.59
12/31/85 109253.81 109077.82
01/31/86 110054.67 109775.92
02/28/86 113830.37 112355.65
03/31/86 117334.91 115310.61
04/30/86 118028.50 116083.19
05/31/86 116203.50 114736.62
06/30/86 119002.51 117398.51
07/31/86 120000.88 118584.24
08/31/86 122618.43 121252.38
09/30/86 121238.16 120258.11
10/31/86 122786.66 121821.47
11/30/86 124339.15 122978.77
12/31/86 124907.28 123396.90
01/31/87 126481.41 124643.21
02/28/87 127242.69 125278.89
03/31/87 126649.88 125015.80
04/30/87 123382.07 122728.01
05/31/87 122911.83 122445.74
06/30/87 124554.44 123927.33
07/31/87 124550.73 124212.37
08/31/87 123945.41 123889.41
09/30/87 121901.22 122278.85
10/31/87 124939.86 125776.03
11/30/87 126547.10 126580.99
12/31/87 127806.41 127910.09
01/31/88 131686.97 131184.59
02/29/88 133658.49 132640.74
03/31/88 132621.31 132136.71
04/30/88 132341.10 131912.07
05/31/88 131565.08 131331.66
06/30/88 133999.70 133419.83
07/31/88 133859.45 133139.65
08/31/88 134238.35 133339.36
09/30/88 136717.60 135659.47
10/31/88 138549.79 137504.43
11/30/88 137694.29 136335.65
12/31/88 137820.93 136458.35
01/31/89 139320.47 137891.16
02/28/89 138990.52 137325.81
03/31/89 139539.77 137916.31
04/30/89 141886.98 140674.64
05/31/89 144555.40 143459.99
06/30/89 148077.47 147075.18
07/31/89 151210.14 150090.23
08/31/89 149168.00 148154.06
09/30/89 149872.19 148850.39
10/31/89 152999.29 152006.01
11/30/89 154257.72 153450.07
12/31/89 154512.05 153879.73
01/31/90 152975.27 152894.90
02/28/90 153478.43 153460.61
03/31/90 153263.79 153660.11
04/30/90 152272.94 153122.30
05/31/90 155889.62 156490.99
06/30/90 157973.84 158587.97
07/31/90 160082.95 160792.34
08/31/90 158746.59 160133.10
09/30/90 159920.06 161366.12
10/31/90 161427.17 163237.97
11/30/90 164221.45 165719.18
12/31/90 166737.73 167989.54
01/31/91 167977.24 169703.03
02/28/91 169324.39 171060.65
03/31/91 170397.15 172223.87
04/30/91 172297.69 174101.11
05/31/91 173216.78 175163.12
06/30/91 173268.91 175285.74
07/31/91 175217.60 177248.94
08/31/91 178896.14 180634.39
09/30/91 182218.91 183741.30
10/31/91 184375.06 185835.96
11/30/91 186139.10 187973.07
12/31/91 192011.22 192559.61
01/31/92 189554.22 190807.32
02/29/92 190045.93 191551.47
03/31/92 189361.88 190804.42
04/30/92 190425.95 192483.50
05/31/92 193906.07 195466.99
06/30/92 196640.33 198359.90
07/31/92 201268.57 202307.26
08/31/92 203129.44 204330.34
09/30/92 205717.07 207109.23
10/31/92 202729.24 204416.81
11/30/92 203290.94 203640.03
12/31/92 206058.08 206368.80
01/31/93 210401.69 210372.36
02/28/93 214447.84 213696.24
03/31/93 215902.50 214551.02
04/30/93 217300.47 216267.43
05/31/93 217558.11 215791.64
06/30/93 221950.95 219179.57
07/31/93 223994.90 219705.60
08/31/93 229036.13 223198.92
09/30/93 229778.66 224114.04
10/31/93 231095.47 224719.15
11/30/93 230067.27 223460.72
12/31/93 230955.13 224488.64
01/31/94 233479.47 226980.46
02/28/94 228814.78 223621.15
03/31/94 224458.66 219931.40
04/30/94 223902.24 218435.87
05/31/94 223316.02 218588.77
06/30/94 223343.51 218610.63
07/31/94 225513.23 221758.63
08/31/94 225539.10 222446.08
09/30/94 224494.44 220399.57
10/31/94 224543.73 220377.53
11/30/94 225237.57 219385.84
12/31/94 226201.50 220153.69
01/31/95 228701.38 223852.27
02/28/95 231349.82 228486.01
03/31/95 232804.36 229788.38
04/30/95 234923.51 232637.76
05/31/95 240938.27 239630.00
$100,000 OVER 10 YEARS: Let's say you invested $100,000 in Fidelity
Advisor Limited Term Bond Fund - Institutional Class on May 31, 1985. As
the chart shows, by May 31, 1995, the value of your investment would have
grown to $240,938 - a 140.94% 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 $239,630 - a 139.63%
increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED NOVEMBER 30,
MONTHS
ENDED
MAY 31,
1995 1994 1993 1992 1991 1990
Dividend return 3.70% 5.87% A 8.28% 8.36% 9.30% 9.05%
Capital appreciation 3.27% -7.97% 4.89% 0.85% 4.05% -2.59%
return
Total return 6.97% -2.10% 13.17% 9.21% 13.35% 6.46%
</TABLE>
DIVIDEND returns and capital appreciation returns are both part of a class'
total return. A dividend return reflects the actual dividends paid by the
class. A capital appreciation return reflects both the amount paid by the
class to shareholders as capital gain distributions and changes in the
class' share price. Both returns assume the dividends or capital gains are
reinvested, if any.
DIVIDENDS AND YIELD
PERIODS ENDED MAY 31, 1995 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 5.73(cents) 32.41(cents) 63.38(cents)
Annualized dividend rate 6.39% 6.26% 6.10%
30-day annualized yield 6.02% - -
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. If you annualize this number,
based on an average net asset value of $10.56 over the past month, $10.38
over the past six months and $10.39 over the past year, you can compare the
class' income over these three periods. The 30-day annualized YIELD is a
standard formula for all bond funds based on the yields of the bonds in the
fund, averaged over the past 30 days. This figure shows you the yield
characteristics of the fund's investments at the end of the period. It also
helps you compare funds from different companies on an equal basis. If
Fidelity had not reduced certain expenses during the period shown, the
30-day yield would have been 5.99%.
A DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT INCOME AND DO NOT
REFLECT CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES, DIVIDENDS
PAID OF APPROXIMATELY 6.2(CENTS) PER SHARE WERE A NON-TAXABLE RETURN OF
CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Michael Gray, Portfolio Manager of Fidelity Advisor
Limited Term Bond Fund
Q. MICHAEL, HOW HAS THE FUND PERFORMED?
A. Not as well as I would have liked. For the six months ended May 31,
1995, Fidelity Advisor Limited Term Bond Fund - Institutional Class had a
total return of 6.97%. According to Lipper Analytical Services, the average
intermediate investment grade bond fund returned 9.96% during the same
period. For the 12 months ended May 31, the fund returned 7.89%, while the
average investment grade bond fund tracked by Lipper returned 9.92%. The
Lehman Brothers Intermediate Government-Corporate Bond Index was up 9.26%
and 9.65% for the six- and 12-month periods, respectively.
Q. WHY DID THE FUND TRAIL ITS PEERS?
A. Most of the underperformance occurred in the past six months. There were
two reasons for it. First, I believed that there was potential for a new
round of short-term interest rate increases by the Federal Reserve Board. I
felt that if those increases occurred, bonds with short or intermediate
maturities would suffer the most. To protect against this, I used a barbell
strategy - targeting the fund's investments in cash and other short-term
investments on one end of the maturity spectrum, and in longer-term bonds
on the other end. Unfortunately, despite a Fed rate increase in February,
short- and intermediate-term bonds actually rallied. In turn, the fund lost
out on some performance there.
Q. WHAT WAS THE SECOND REASON?
A. The second reason was that the fund had a shorter duration than many of
the funds in the Lipper category. Duration is a measure of a fund's
sensitivity to interest rate changes. When interest rates went down during
the period, the fund didn't perform as well as other funds. Let me add that
currently and going forward, I'll be measuring the fund's performance more
closely against the Lehman Brothers Intermediate Government-Corporate Bond
Index. My goal will be to generate returns that are better than the
intermediate market as a whole, while attempting to limit volatility
relative to the benchmark. As a result, I've positioned the fund so that
its sensitivity to interest rates is more in line with the index.
Q. HOW HAVE YOU FOCUSED THE FUND'S INVESTMENTS?
A. I've been reducing the fund's weighting in corporate bonds and
increasing the fund's exposure to government securities, mainly Treasuries.
Over the past six months, corporate yield spreads - or the difference
between the yield offered by corporates and Treasury issues with the same
maturity - have been relatively tight, meaning that corporates have been
priced relatively high in light of historical levels and haven't offered
enough added yield to offset their lower credit quality, relative to
Treasuries. In addition, given where we are in the economic cycle - where
growth peaked in the fourth quarter - corporate earnings may suffer going
forward. As a result, corporate credit quality probably will deteriorate on
the margin. Furthermore, the supply of corporate issues has increased
recently. New issues have come to market as corporations have tried to take
advantage of lower interest rates. The existing tight yield spread, a
possible drop in corporate earnings, and added supply are all negatives for
the corporate bond market. By reducing the fund's corporate exposure, I'm
trying to lock in the outperformance of the fund's corporate investments
and avoid holding on to them as the spread widens.
Q. HAVE YOU FOCUSED YOUR CORPORATE BOND INVESTMENTS IN ANY PARTICULAR
SECTOR?
A. The one area I've overweighted - relative to the index - during the
period has been bonds issued by banks. The credit fundamentals of the bank
positions have been strong. That means banks' earnings have been strong;
the difference between the rates at which banks lend and the rates they pay
has remained wide; there has been tremendous loan demand; and loan quality
remains high. In addition, the limited supply of and strong demand for bank
issues caused them to perform well.
Q. YOU'VE ALSO SLIGHTLY INCREASED THE FUND'S WEIGHTING IN MORTGAGE-BACKED
SECURITIES . . .
A. Yes, because they have improved in valuation relative to other corporate
opportunities. Because the Treasury market has rallied - meaning Treasury
yields have fallen and prices have risen - mortgage yield spreads have
widened, making the mortgage securities more attractive purchase
candidates. Spreads have widened because prepayment risk - the risk that
mortgage holders will pay off their loans early - increases significantly
when interest rates in the Treasury market fall. As a result, sellers of
mortgage-backed securities have to offer higher yields - and lower prices -
to make the bonds attractive enough to offset the increased prepayment
risk. I've increased the mortgage-backed securities position, but I
probably won't add significantly more to the current stake.
Q. WHY HAVE YOU REDUCED THE FUND'S OVERSEAS INVESTMENTS?
A. I believe the current environment for foreign bonds doesn't look
attractive, so I've cut back on investments there and likely won't invest
in non dollar-denominated securities in the near future given my shift in
emphasis to outperforming the market while also limiting volatility. One of
the areas I have maintained a small position in is Yankee bonds, which are
U.S. dollar-denominated foreign bonds issued in the U.S. market. The fund's
Yankee holdings are mostly Canadian provincial securities that have done
quite well.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Even though there was some weakness in the economy at the end of the
period, it could, I believe, strengthen in the second half of the year.
That re-
acceleration of growth could cause inflation to be a little higher than
last year. Some of the indications that this could happen are strength in
industrial prices and firm commodity prices. In addition, the dollar
remains weak, increasing the possibility that higher-priced imported goods
could fuel inflation. If, in fact, this pick-up occurs, the Fed might
re-think its policies.
FUND FACTS
GOAL: to provide a high rate
of income through investment
primarily in investment-grade
fixed-income securities
START DATE: February 2, 1984
SIZE: as of May 31, 1995,
more than $391 million
MANAGER: Michael Gray,
since 1987; joined Fidelity in
1982
(checkmark)
MICHAEL GRAY ON HIS
INVESTING STRATEGY:
"Recently, I've altered the
fund's strategy somewhat. I've
begun to manage the fund
relative to its benchmark index
- - the Lehman Brothers
Intermediate
Government-Corporate Bond
Index. I'm implementing this
approach to keep the volatility
of the fund's returns in line
with the volatility of the index's
returns. My strategy is
designed to help the fund
exceed the performance of
the index by utilizing
research-driven investment
ideas that I believe have a
high probability of success. I'll
continue to use an active
bottom-up investment
approach, which means that
I'll make investment decisions
based on the merits of
individual securities. So while
operating within defined
parameters relative to the
benchmark to limit volatility, I'll
look to add value to the fund
beyond the benchmark."
(solid bullet) Two key factors have
fueled the resurgence in the
corporate bond market over
the past six months. First,
overall credit quality has
improved; economic growth
and corporate cost cutting
have helped companies post
strong earnings. In addition, a
limited supply of new
corporate issues has helped
boost corporate bond prices.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF MAY 31, 1995
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 48.4 32.4
Aa 10.0 16.1
A 10.9 13.8
Baa 0.1 0.8
Ba 0.0 0.0
B 0.0 0.0
Not rated 0.3 0.5
TABLE EXCLUDES SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF MAY 31, 1995
6 MONTHS AGO
Years 7.0 6.3
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY DOLLAR
AMOUNT.
DURATION AS OF MAY 31, 1995
6 MONTHS AGO
Years 3.0 2.7
DURATION SHOWS HOW MUCH A BOND FUND'S PRICE FLUCTUATES WITH CHANGES IN
COMPARABLE INTEREST RATES. IF RATES RISE 1%, FOR EXAMPLE, A FUND WITH A
FIVE-YEAR DURATION IS LIKELY TO LOSE ABOUT 5% OF ITS VALUE. OTHER FACTORS
ALSO CAN INFLUENCE A BOND FUND'S PERFORMANCE AND SHARE PRICE. ACCORDINGLY,
A BOND FUND'S ACTUAL PERFORMANCE MAY DIFFER FROM THIS EXAMPLE.
ASSET ALLOCATION
AS OF MAY 31, 1995* AS OF NOVEMBER 30, 1994**
Corporate bonds 18.9%
U.S. government
and agency
obligations 45.7%
Foreign government
obligations 3.4%
Other 1.7%
Short-term
investments 30.3%
FOREIGN
INVESTMENTS 11.1%
Corporate bonds 22.4%
U.S. government
and agency
obligations 28.8%
Foreign government
obligations 9.5%
Other 2.9%
Short-term
investments 36.4%
FOREIGN
INVESTMENTS 18.5%
Row: 1, Col: 1, Value: 30.3
Row: 1, Col: 2, Value: 2.7
Row: 1, Col: 3, Value: 3.4
Row: 1, Col: 4, Value: 45.7
Row: 1, Col: 5, Value: 18.9
Row: 1, Col: 1, Value: 36.4
Row: 1, Col: 2, Value: 2.9
Row: 1, Col: 3, Value: 9.5
Row: 1, Col: 4, Value: 28.8
Row: 1, Col: 5, Value: 22.4
*
**
INVESTMENTS MAY 31, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 18.9%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
ENERGY - 2.2%
ENERGY SERVICES - 0.8%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (a) $ 3,160,000 $ 3,142,999
OIL & GAS - 1.4%
B.P. America, Inc. 7 7/8%, 5/15/02 100,000 107,308
Elf Aquitaine yankee 8%, 10/15/01 5,000,000 5,349,000
5,456,308
TOTAL ENERGY 8,599,307
FINANCE - 13.2%
ASSET-BACKED SECURITIES - 3.3%
Chase Manhattan Credit Card Master Trust
8 3/4%, 8/15/99 1,200,000 1,228,872
Discover Card Trust 7 7/8%, 4/16/98 270,000 273,205
Premier Auto Trust 6.65%, 3/4/97 3,000,000 3,011,484
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 695,109 699,015
Standard Credit Card Master Trust I:
8%, 10/7/97 830,000 846,857
participation certificate, 5 1/2%, 9/7/98 5,000,000 4,907,800
7.65%, 2/15/00 1,200,000 1,236,372
United Federal Savings Bank Grantor Trust:
1994-B 6.975%, 7/10/00 256,045 255,341
1994-C 7.275%, 11/10/00 275,662 276,958
12,735,904
BANKS - 3.9%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 161,016
7 3/4%, 7/15/02 100,000 104,269
7.20%, 9/15/02 100,000 100,963
Chemical Bank New York Trust Co. 7 1/4%, 9/15/02 3,000,000 3,049,230
First Hawaiian Bank secured 6.93%, 12/1/03 (a) 2,000,000 1,924,400
Korea Development Bank 8.09%, 10/6/04 6,000,000 6,397,500
National City Corp. 8 3/8%, 3/15/96 200,000 202,796
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 3,199,710
15,139,884
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - 3.8%
Deere (John) Capital Corp. 9 5/8%, 11/1/98 $ 2,500,000 $ 2,732,325
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 106,836
Ford Motor Credit Co.:
8%, 6/15/02 100,000 106,342
7 3/4%, 11/15/02 100,000 104,435
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,061,080
Household Finance Corp. 6 3/4%, 6/1/00 530,000 532,544
Secured Finance, Inc. Kroger gtd. secured 9.05%, 12/15/04 4,000,000
4,536,800
Society Corp. 8 7/8%, 5/15/96 3,600,000 3,670,920
14,851,282
INSURANCE - 2.2%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (a) 5,000,000 4,728,500
Nationwide Mutual Insurance Co. 6 1/2%, 2/15/04 (a) 1,000,000 957,080
Protective Life Corp. 7.95%, 7/1/04 1,000,000 1,051,040
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,022,840
8,759,460
TOTAL FINANCE 51,486,530
NONDURABLES - 0.4%
TOBACCO - 0.4%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 105,739
9.45%, 11/19/97 100,000 106,453
9.80%, 12/15/98 1,340,000 1,364,120
1,576,312
TECHNOLOGY - 1.2%
COMPUTER SERVICES & SOFTWARE - 1.2%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,873,700
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
UTILITIES - 1.9%
ELECTRIC UTILITY - 1.9%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 $ 6,000,000 $ 7,108,560
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 155,543
7,264,103
TOTAL NONCONVERTIBLE BONDS
(Cost $73,741,132) 73,799,952
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 39.6%
U.S. TREASURY OBLIGATIONS - 37.5%
9 3/8%, 4/15/96 4,900,000 5,040,875
6 1/2%, 5/15/97 15,000,000 15,173,400
5 1/8%, 3/31/98 28,535,000 27,937,477
8 7/8%, 2/15/99 3,000,000 3,282,660
6 3/4%, 6/30/99 17,010,000 17,440,523
7 1/8%, 9/30/99 3,260,000 3,391,932
6 7/8%, 3/31/00 3,000,000 3,098,430
6 1/4%, 2/15/03 5,000,000 4,992,950
10 3/4%, 5/15/03 60,000 76,622
11 7/8%, 11/15/03 590,000 802,123
11 5/8%, 11/15/04 4,410,000 6,043,067
9%, 11/15/18 12,310,000 15,466,407
8 7/8%, 2/15/19 22,820,000 28,339,473
8 1/8%, 8/15/19 (b) 3,000,000 3,465,930
12%, 8/15/23 8,300,000 12,203,573
146,755,442
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.1%
Federal National Mortgage Association 8 1/4%, 3/10/98 $ 200,000 $ 210,438
Financing Corp. principal strips 0%, 3/7/19 44,755,000 8,152,571
8,363,009
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $149,148,428) 155,118,451
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 6.1%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.6%
6%, 6/1/01 2,000,000 1,963,512
12 1/2%, 2/1/11 to 7/1/15 170,456 188,888
2,152,400
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 5.5%
8%, 6/15/23 4,041,739 4,141,489
8 1/2%, 4/15/17 to 8/15/24 996,243 1,035,370
9%, 6/15/16 to 3/15/25 15,600,108 16,392,325
21,569,184
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $23,171,439) 23,721,584
COMMERCIAL MORTGAGE SECURITIES - 0.4%
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 137,987 137,814
Resolution Trust Corp. commercial:
Series 1994-N2 Class 2, 6 1/2%, 12/15/04 (a)(c) 600,000 600,188
Series 1994-C2 Class A-2, 7 3/4%, 4/25/25 288,067 290,948
Series 1994-C2 Class A-4, 7 1/2%, 4/25/25 408,159 411,221
Series 1994-C1 Class A-4, 7 1/4%, 6/25/26 364,966 364,054
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $1,788,236) 1,804,225
FOREIGN GOVERNMENT OBLIGATIONS - 3.4%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Ontario Province yankee:
7 3/4%, 6/4/02 $ 6,000,000 $ 6,350,280
15 1/8%, 5/1/11 5,000,000 5,647,150
17%, 11/5/11 1,000,000 1,202,210
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $14,608,910) 13,199,640
SUPRANATIONAL OBLIGATIONS - 1.3%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 5,001,030
REPURCHASE AGREEMENTS - 30.3%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.13% dated
5/31/95 due 6/1/95 (Note 3) $ 118,844,233 118,824,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $385,659,025) $ 391,468,882
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
285 U.S. Treasury Bond Futures Contracts June 1995 $ 32,213,906 $
(2,630,085)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 8.2%
LEGEND
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $11,353,167 or 2.9% of net
assets.
(b) 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 $1,155,310.
(c) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
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 69.3% AAA, AA, A 69.5%
Baa 0.1% BBB 0.2%
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%
For some foreign government obligations, FMR has assigned the ratings of
the sovereign credit of the issuing government. The percentage not rated by
either S&P or Moody's amounted to 0.0%.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 88.9%
Canada 5.2
Korea 1.6
France 1.4
Supranational 1.3
Others (individually less than 1%) 1.6
TOTAL 100.0%
INCOME TAX INFORMATION
At May 31, 1995, the aggregate cost of investment securities for income tax
purposes was $385,659,025. Net unrealized appreciation aggregated
$5,809,857, of which $10,227,602 related to appreciated investment
securities and $4,417,745 related to depreciated investment securities.
At November 30, 1994, the fund had a capital loss carryforward of
approximately $6,852,000 of which $5,673,000, $1,034,000 and $145,000 will
expire on November 30, 1998, 1999 and 2002, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
MAY 31, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 391,468,882
agreements of $118,824,000) (cost $385,659,025) -
See accompanying schedule
Cash 364
Receivable for investments sold 19,014
Receivable for fund shares sold 1,657,086
Interest receivable 3,887,479
TOTAL ASSETS 397,032,825
LIABILITIES
Payable for investments purchased $ 4,090,442
Distributions payable 758,369
Accrued management fee 144,158
Distribution fees payable 46,309
Payable for daily variation on futures contracts 26,719
Other payables and accrued expenses 99,776
TOTAL LIABILITIES 5,165,773
NET ASSETS $ 391,867,052
Net Assets consist of:
Paid in capital $ 400,588,041
Distributions in excess of net investment income (1,377,599)
Accumulated undistributed net realized gain (loss) on (10,523,897)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 3,180,507
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 391,867,052
CALCULATION OF MAXIMUM OFFERING PRICE $10.64
CLASS A:
NET ASSET VALUE, and redemption price per share
($197,183,320 (divided by) 18,527,724 shares)
Maximum offering price per share (100/95.25 of $10.64) $11.17
CLASS B: $10.63
NET ASSET VALUE, and offering price per share
($8,477,089 (divided by) 797,160 shares) A
INSTITUTIONAL CLASS: $10.65
NET ASSET VALUE, offering price and redemption price per
share ($186,206,643 (divided by) 17,481,356 shares)
</TABLE>
A REDEMPTION PRICE PER SHARE IS EQUAL TO NET ASSET VALUE LESS ANY
APPLICABLE CONTINGENT DEFERRED SALES CHARGE.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
INVESTMENT INCOME $ 12,236,871
Interest
EXPENSES
Management fee $ 768,145
Transfer agent fees 175,674
Class A
Class B 8,258
Institutional Class 133,911
Distribution fees 203,958
Class A
Class B 28,931
Accounting fees and expenses 68,130
Non-interested trustees' compensation 820
Custodian fees and expenses 5,435
Registration fees 19,739
Class A
Class B 12,295
Institutional Class 12,535
Audit 19,098
Reports to shareholders 11,690
Total expenses before reductions 1,468,619
Expense reductions (118,397) 1,350,222
NET INVESTMENT INCOME 10,886,649
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (388,829)
Foreign currency transactions (1,384,563)
Futures contracts (1,173,264) (2,946,656)
Change in net unrealized appreciation (depreciation) on:
Investment securities 19,407,595
Assets and liabilities in foreign currencies (293,305)
Futures contracts (3,285,233) 15,829,057
NET GAIN (LOSS) 12,882,401
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 23,769,050
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED MAY 31, NOVEMBER 30,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 10,886,649 $ 18,192,377
Net investment income
Net realized gain (loss) (2,946,656) (3,565,582)
Change in net unrealized appreciation (depreciation) 15,829,057 (21,185,698)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 23,769,050 (6,558,903)
FROM OPERATIONS
Distributions to shareholders (4,902,462) (5,494,879)
From net investment income
Class A
Class B (149,206) (29,216)
Institutional Class (5,461,399) (10,193,519)
Return of capital (Note 1) - (571,345)
Class A
Class B - (3,038)
Institutional Class - (1,059,899)
TOTAL DISTRIBUTIONS (10,513,067) (17,351,896)
Share transactions - net increase (decrease) 61,467,181 98,080,216
TOTAL INCREASE (DECREASE) IN NET ASSETS 74,723,164 74,169,417
NET ASSETS
Beginning of period 317,143,888 242,974,471
End of period (including distributions in excess of net $ 391,867,052 $ 317,143,888
investment income of $1,377,599 and $1,751,181,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1995
(UNAUDITED) 1994 D 1993 1992 E
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.260 $ 11.140 $ 10.640 $ 10.960
Income from Investment Operations
Net investment income .334 .609 .785 .170
Net realized and unrealized gain (loss) .357 (.876) .511 (.320)
on investments
Total from investment operations .691 (.267) 1.296 (.150)
Less Distributions
From net investment income (.311) (.555) (.796) (.170)
From return of capital - (.058) - -
Total distributions (.311) (.613) (.796) (.170)
Net asset value, end of period $ 10.640 $ 10.260 $ 11.140 $ 10.640
TOTAL RETURN A, B 6.84% (2.44)% 12.50% (1.37)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 197,183 $ 141,866 $ 59,184 $ 2,583
Ratio of expenses to average net assets .90% 1.02% 1.23% .82%
C C
Ratio of expenses to average net assets 1.00% 1.09% 1.23% .82%
before expense reductions C C
Ratio of net investment income to average 6.24% 6.04% 6.81% 7.67%
net assets C C
Portfolio turnover 119% 68% 59% 7%
C
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C ANNUALIZED
D 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
E FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
FINANCIAL HIGHLIGHTS - CLASS B
SIX MONTHS PERIOD ENDED
ENDED NOVEMBER 30,
MAY 31, 1995
(UNAUDITED) 1994 D
<TABLE>
<CAPTION>
<S> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 10.250 $ 10.430
Income from Investment Operations
Net investment income .305 .204
Net realized and unrealized gain (loss) on investments .345 (.178)
Total from investment operations .650 .026
Less Distributions
From net investment income (.270) (.187)
From return of capital - (.019)
Total distributions (.270) (.206)
Net asset value, end of period $ 10.630 $ 10.250
TOTAL RETURN A, B 6.44% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 8,477 $ 3,156
Ratio of expenses to average net assets 1.65% C 1.65%
C
Ratio of expenses to average net assets before expense 2.22% C 2.41%
reductions C
Ratio of net investment income to average net assets 5.48% C 5.42%
C
Portfolio turnover 119% C 68%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C ANNUALIZED
D FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED NOVEMBER 30,
ENDED
MAY 31, 1995
(UNAUDITED) 1994 B 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410
beginning of period
Income from
Investment
Operations
Net investment .337 .602 .832 .840 .884 .901
income
Net realized and .367 (.833) .531 .102 .411 (.270)
unrealized gain
(loss) on
investments
Total from .704 (.231) 1.363 .942 1.295 .631
investment
operations
Less Distributions
From net investment (.324) (.597) (.843) (.852) (.885) (.901)
income
From return of - (.062) - - - -
capital
Total distributions (.324) (.659) (.843) (.852) (.885) (.901)
Net asset value, end of $ 10.650 $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140
period
TOTAL RETURN A 6.97% (2.10) 13.17 9.21 13.35 6.46
% % % % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 186,207 $ 172,122 $ 183,790 $ 160,156 $ 327,756 $ 356,564
period (000 omitted)
Ratio of expenses to .65% .61% .64 .57 .57 .58
average net assets C % % % %
Ratio of expenses to .68% .61% .64 .57 .57 .58
average net assets C % % % %
before expense
reductions
Ratio of net investment 6.48% 6.45% 7.41 7.96 8.59 8.90
income to average C % % % %
net assets
Portfolio turnover 119% 68% 59 7 60 59
C % % % %
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO
FINANCIAL STATEMENTS).
B 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, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.
C ANNUALIZED
NOTES TO FINANCIAL STATEMENTS
For the period ended May 31, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
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 Class A, Class B and Institutional Class shares, each of
which has equal rights as to assets and voting privileges. Each class has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the fund are allocated on a prorata basis to each class based
on the relative net assets of each class to the total net assets of the
fund. Each class of shares differs in its respective distribution, transfer
agent, registration, and certain other class-specific fees and expenses.
The following summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days of their purchase date are valued either at
amortized cost or original cost plus accrued interest, both of which
approximate current value. 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 prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES - CONTINUED
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. Income dividends are declared
separately for each class, while capital gain distributions are declared at
the fund level and allocated to each class on a prorata basis based on the
number of shares held by each class 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures and options transactions,
foreign currency transactions, market discount and capital loss
carryforwards.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences that will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
For the period ended November 30, 1994, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains resulting in
a return of capital. This was due to certain foreign currency losses which
decreased taxable income available for distribution after certain
distributions had been made.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
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. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the bond market and to fluctuations in interest rates and currency values.
Buying futures, writing puts, and buying calls tend to increase the fund's
exposure to the underlying instrument. Selling futures, buying puts, and
writing calls tend to decrease the fund's exposure to the underlying
instrument, or hedge other fund investments. Futures contracts and written
options involve, to varying degrees, risk of loss in excess of the futures
variation margin or the option value reflected in the Statement of Assets
and Liabilities. The underlying face amount at value is shown in the
schedule of investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options 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, 1995 and due June 1, 1995. The
maturity values of the joint trading account investments were $118,844,233
at 6.13%. The investments in repurchase agreements through the joint
trading account are summarized as follows:
SUMMARY OF JOINT TRADING
Number of dealers or banks 23
Maximum amount with one dealer or bank 12.1%
Aggregate principal amount of agreements $15,683,611,000
Aggregate maturity amount of agreements $15,686,280,644
Aggregate market value of collateral $16,024,168,994
Coupon rates of collateral 0% to 15 3/4%
Maturity dates of collateral 6/1/95 to 2/15/25
4. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $186,948,887 and $132,594,713, respectively, of which U.S.
government and government agency obligations aggregated $171,295,148 and
$115,774,160, respectively.
The market value of futures contracts opened and closed during the period
amounted to $47,917,257 and $52,765,535, respectively.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1200% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. On
December 14, 1994, shareholders of the fund approved an increase in the
individual fund fee rate from the previous rate of .25% to .30%, which
became effective February 24, 1995. For the period, the management fee was
equivalent to an annualized rate of .45% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
DISTRIBUTION AND SERVICE PLAN - CONTINUED
distribution plans with respect to the fund's Class A shares ("Class A
Plan") and Class B shares ("Class B Plan"), pursuant to which the fund pays
Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee. This fee is based on annual rates of .25% and
1.00% (of which .75% represents a distribution fee and .25% represents a
shareholder service fee) of the average net assets of the Class A and Class
B shares, respectively. For the period, the fund paid FDC $203,958 and
$28,931 under the Class A Plan and Class B Plan, respectively, of which
$203,958 and $7,207 were paid to securities dealers, banks and other
financial institutions for the distribution of Class A and Class B shares,
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 Plans also authorize payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made under the Plans during
the period.
SALES LOAD. FDC receives a front-end sales charge of up to 4.75% for
selling Class A shares of the fund. For the period, FDC received sales
charges of $622,881 on sales of Class A shares of the fund, of which
$527,572 was paid to securities dealers, banks, and other financial
institutions. FDC also receives the proceeds of a contingent deferred sales
charge levied on Class B share redemptions occurring within five years of
purchase. The charge is based on declining rates which range from 4% to 1%
of the lesser of the cost of shares at the initial date of purchase or the
net asset value of the redeemed shares, excluding any reinvested dividends
and capital gains. For the period, FDC received contingent deferred sales
charges of $10,994 on Class B share redemptions from the fund. When Class B
shares are sold, FDC pays commissions from its own resources to dealers
through which the sales are made.
TRANSFER AGENT FEES. State Street Bank and Trust Company (State Street) is
the transfer, dividend disbursing, and shareholder servicing agent for the
fund's Class A shares, while Fidelity Investments Institutional Operations
Company (FIIOC), an affiliate of FMR (collectively, with State Street,
referred to as the Transfer Agents) acts in that capacity for the fund's
Class B and Institutional Class shares. During the period December 1, 1994
to December 31, 1994, the Transfer Agents received fees based on the type,
size, number of accounts and the number of transactions made by
shareholders of the respective classes of the fund. Effective January 1,
1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the Transfer Agents receive account fees and asset-based
fees that
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -
CONTINUED
TRANSFER AGENT FEES - CONTINUED
vary according to the account size and type of account of the shareholders
of the respective classes of the fund. With respect to the Class A shares,
State Street has delegated certain transfer, dividend paying, and
shareholder services to FIIOC for which FIIOC receives its allocable share
of all such fees. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
6. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of .90%, 1.65% and .65% of average net
assets for Class A, Class B and Institutional Class shares, respectively.
For the period, the reimbursement reduced expenses by $81,669, $16,431 and
$20,297 for Class A, Class B and Institutional Class shares, respectively.
Effective July 1, 1995, FMR voluntarily agreed to reimburse the funds'
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annual rate of 1.00%, 1.75% and .75% of
average net assets for Class A, Class B and Institutional Class shares,
respectively.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1995 1994 A 1995 1994 A
CLASS A
Shares sold 8,261,959 14,851,591 $ 85,794,045 $ 158,332,548
Reinvestment of distributions 425,013 505,870 4,427,167 5,325,831
Shares redeemed (3,989,236) (6,838,590) (41,359,421) (72,563,524)
Net increase (decrease) 4,697,736 8,518,871 $ 48,861,791 $ 91,094,855
CLASS B
Shares sold 624,302 350,868 $ 6,469,549 $ 3,635,180
Reinvestment of distributions 10,827 2,301 112,798 23,687
Shares redeemed (145,788) (45,350) (1,511,487) (466,837)
Net increase (decrease) 489,341 307,819 $ 5,070,860 $ 3,192,030
7. SHARE TRANSACTIONS - CONTINUED
SHARES DOLLARS
SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1995 1994 1995 1994
INSTITUTIONAL CLASS
Shares sold 5,583,082 9,336,746 $ 57,964,311 $ 99,248,710
Reinvestment of distributions 161,272 246,604 1,679,796 2,616,244
Shares redeemed (5,029,679) (9,291,204) (52,109,577) (98,071,623)
Net increase (decrease) 714,675 292,146 $ 7,534,530 $ 3,793,331
A SHARE TRANSACTIONS FOR CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALES OF SHARES) TO NOVEMBER 30, 1994.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
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
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income 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)
(registered trademark)
