(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
LIMITED TERM BOND
FUND - CLASS A & CLASS B
ANNUAL REPORT
NOVEMBER 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 12 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 15 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 16 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as well as
financial highlights.
NOTES 27 Notes to the financial statements.
REPORT OF INDEPENDENT 33 The auditors' opinion.
ACCOUNTANTS
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:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued in
the fourth quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
negative returns for many bond investments and below-average returns for
many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. 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. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured 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, as we have discussed here. 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 a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance. On September 10, 1992, the fund began
offering Class A shares. See page 6 for additional information about Class
A's performance.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class A -2.44% 44.42% 146.17%
Advisor Limited Term Bond - Class A
(incl. max. 4.75% sales charge) -7.07% 37.56% 134.48%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 42.95% 140.83%
Average Intermediate Investment Grade Bond -3.42% 40.86% 140.78%
Fund
Consumer Price Index 2.81% 19.06% 42.36%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, 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, you would end up with $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
currently reflects the performance of 114 intermediate investment grade
bond funds tracked by Lipper Analytical Services. 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 NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class A -2.44% 7.63% 9.43%
Advisor Limited Term Bond - Class A
(incl. max. 4.75% sales charge) -7.07% 6.59% 8.90%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 7.41% 9.19%
Average Intermediate Investment Grade Bond -3.42% 7.08% 9.17%
Fund
Consumer Price Index 2.81% 3.55% 3.59%
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
Advisor Ltd. Term Bond PoGovernment/Corporat
11/30/84 9525.00 10000.00
12/31/84 9563.38 10144.00
01/31/85 9832.60 10320.51
02/28/85 9598.31 10208.01
03/31/85 9733.71 10377.47
04/30/85 9969.19 10576.71
05/31/85 10525.16 10980.74
06/30/85 10653.22 11091.65
07/31/85 10547.88 11090.54
08/31/85 10760.20 11251.35
09/30/85 10786.98 11335.74
10/31/85 10941.83 11506.91
11/30/85 11182.00 11705.98
12/31/85 11499.14 11977.55
01/31/86 11583.43 12054.21
02/28/86 11980.83 12337.49
03/31/86 12349.69 12661.96
04/30/86 12422.68 12746.80
05/31/86 12230.60 12598.93
06/30/86 12525.20 12891.23
07/31/86 12630.29 13021.43
08/31/86 12905.79 13314.41
09/30/86 12760.51 13205.23
10/31/86 12923.50 13376.90
11/30/86 13086.90 13503.98
12/31/86 13146.70 13549.90
01/31/87 13312.38 13686.75
02/28/87 13392.50 13756.55
03/31/87 13330.11 13727.66
04/30/87 12986.16 13476.45
05/31/87 12936.67 13445.45
06/30/87 13109.56 13608.14
07/31/87 13109.18 13639.44
08/31/87 13045.46 13603.98
09/30/87 12830.31 13427.13
10/31/87 13150.13 13811.14
11/30/87 13319.29 13899.53
12/31/87 13451.83 14045.48
01/31/88 13860.26 14405.04
02/29/88 14067.77 14564.94
03/31/88 13958.61 14509.59
04/30/88 13929.12 14484.93
05/31/88 13847.45 14421.19
06/30/88 14103.69 14650.49
07/31/88 14088.93 14619.72
08/31/88 14128.81 14641.65
09/30/88 14389.75 14896.42
10/31/88 14582.59 15099.01
11/30/88 14492.55 14970.67
12/31/88 14505.88 14984.14
01/31/89 14663.71 15141.47
02/28/89 14628.98 15079.39
03/31/89 14686.79 15144.24
04/30/89 14933.84 15447.12
05/31/89 15214.69 15752.97
06/30/89 15585.39 16149.95
07/31/89 15915.11 16481.02
08/31/89 15700.17 16268.42
09/30/89 15774.29 16344.88
10/31/89 16103.42 16691.39
11/30/89 16235.87 16849.96
12/31/89 16262.64 16897.14
01/31/90 16100.90 16789.00
02/28/90 16153.86 16851.12
03/31/90 16131.27 16873.02
04/30/90 16026.98 16813.97
05/31/90 16407.64 17183.87
06/30/90 16627.01 17414.14
07/31/90 16849.00 17656.19
08/31/90 16708.35 17583.80
09/30/90 16831.86 17719.20
10/31/90 16990.48 17924.74
11/30/90 17284.58 18197.20
12/31/90 17549.43 18446.50
01/31/91 17679.88 18634.65
02/28/91 17821.67 18783.73
03/31/91 17934.58 18911.46
04/30/91 18134.61 19117.59
05/31/91 18231.35 19234.21
06/30/91 18236.83 19247.68
07/31/91 18441.94 19463.25
08/31/91 18829.10 19835.00
09/30/91 19178.83 20176.16
10/31/91 19405.77 20406.17
11/30/91 19591.43 20640.84
12/31/91 20209.49 21144.48
01/31/92 19950.88 20952.06
02/29/92 20002.63 21033.77
03/31/92 19930.63 20951.74
04/30/92 20042.62 21136.12
05/31/92 20408.91 21463.73
06/30/92 20696.70 21781.39
07/31/92 21183.83 22214.84
08/31/92 21379.69 22436.99
09/30/92 21628.52 22742.13
10/31/92 21309.31 22446.48
11/30/92 21363.70 22361.19
12/31/92 21649.97 22660.83
01/31/93 22081.49 23100.45
02/28/93 22522.07 23465.43
03/31/93 22670.00 23559.30
04/30/93 22809.20 23747.77
05/31/93 22825.24 23695.53
06/30/93 23277.77 24067.55
07/31/93 23458.05 24125.31
08/31/93 23974.08 24508.90
09/30/93 24042.75 24609.39
10/31/93 24172.19 24675.83
11/30/93 24033.79 24537.65
12/31/93 24138.27 24650.52
01/31/94 24393.19 24924.14
02/28/94 23921.73 24555.26
03/31/94 23458.36 24150.10
04/30/94 23365.09 23985.88
05/31/94 23284.46 24002.67
06/30/94 23278.01 24005.07
07/31/94 23498.92 24350.74
08/31/94 23496.12 24426.23
09/30/94 23379.50 24201.51
10/31/94 23380.92 24199.09
11/30/94 23447.96 24083.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Advisor
Limited Term Bond Fund - Class A on November 30, 1984, and paid the maximum
4.75% sales charge. As the chart shows, by November 30, 1994, the value of
your investment would have grown to $23,448 - a 134.48% 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
$24,083 - a 140.83% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
All performance information for Class A prior to September 10, 1992
reflects the performance of the Institutional Class and therefore does not
reflect Class A's 12b-1 fee and different transfer agent fee arrangements
(see Notes to Financial Statements), which if included, would have lowered
Class A's
performance. If Fidelity had not reimbursed certain Class A expenses during
the periods shown, the total returns and dividends would have been lower.
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1994 1993 1992 1991 1990
Dividend return 1 5.46% 7.80% 8.19% 9.30% 9.05%
Capital appreciation return -7.90% 4.70% 0.86% 4.05% -2.59%
Total return -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 and exclude the effects of sales charges.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 1 4.95(cents) 29.32(cents) 61.25(cents)
Annualized dividend rate 5.87% 5.63% 5.77%
30-day annualized yield 5.98% - -
</TABLE>
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 $10.26 over the past month, $10.38
over the past six months and $10.62 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 5.91%.
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 5.8(CENTS) PER SHARE PAID
DURING 1994 FOR CLASS A ARE EXPECTED TO BE A NON-TAXABLE RETURN OF CAPITAL.
THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN
WILL BE REPORTED TO YOU IN JANUARY, 1995.
ADVISOR LIMITED TERM BOND FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells securities that have grown in value). You can also look at the fund's
income to measure performance.
On June 30, 1994, the fund began offering Class B shares. All performance
information for Class B prior to June 30, 1994 reflects the performance of
the Institutional Class up to September 9, 1992, and the performance of
Class A thereafter, and therefore does not reflect different Class B 12b-1
fee and transfer agent fee arrangements (see Notes to the Financial
Statements), which if included, would have lowered Class B's performance.
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 charges included in the past 1 year, past 5 years
and past 10 year total return figures are 4%, 1% and 0%, respectively.
Cumulative total returns and average annual total returns for Class B are
listed on the following page.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class B -2.91% 43.72% 144.98%
Advisor Limited Term Bond - Class B
(incl. contingent deferred sales charge) -6.59% 42.74% 144.98%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 42.95% 140.83%
Average Intermediate Investment Grade Bond -3.42% 40.86% 140.78%
Fund
Consumer Price Index 2.81% 19.06% 42.36%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, 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, you would end up with $1,050. You can compare Class B's returns
to those of the Lehman Brothers Intermediate Government - Corporate Bond
Index - a broad guage 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
currently reflects the performance of 114 intermediate investment grade
bond funds tracked by Lipper Analytical Services. 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 NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Class B -2.91% 7.52% 9.37%
Advisor Limited Term Bond - Class B
(incl. contingent deferred sales charge) -6.59% 7.38% 9.37%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 7.41% 9.19%
Average Intermediate Investment Grade Bond -3.42% 7.08% 9.17%
Fund
Consumer Price Index 2.81% 3.55% 3.59%
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
Advisor Ltd. Term Bond PoGovernment/Corporat
11/30/84 9525.00 10000.00
12/31/84 9563.38 10144.00
01/31/85 9832.60 10320.51
02/28/85 9598.31 10208.01
03/31/85 9733.71 10377.47
04/30/85 9969.19 10576.71
05/31/85 10525.16 10980.74
06/30/85 10653.22 11091.65
07/31/85 10547.88 11090.54
08/31/85 10760.20 11251.35
09/30/85 10786.98 11335.74
10/31/85 10941.83 11506.91
11/30/85 11182.00 11705.98
12/31/85 11499.14 11977.55
01/31/86 11583.43 12054.21
02/28/86 11980.83 12337.49
03/31/86 12349.69 12661.96
04/30/86 12422.68 12746.80
05/31/86 12230.60 12598.93
06/30/86 12525.20 12891.23
07/31/86 12630.29 13021.43
08/31/86 12905.79 13314.41
09/30/86 12760.51 13205.23
10/31/86 12923.50 13376.90
11/30/86 13086.90 13503.98
12/31/86 13146.70 13549.90
01/31/87 13312.38 13686.75
02/28/87 13392.50 13756.55
03/31/87 13330.11 13727.66
04/30/87 12986.16 13476.45
05/31/87 12936.67 13445.45
06/30/87 13109.56 13608.14
07/31/87 13109.18 13639.44
08/31/87 13045.46 13603.98
09/30/87 12830.31 13427.13
10/31/87 13150.13 13811.14
11/30/87 13319.29 13899.53
12/31/87 13451.83 14045.48
01/31/88 13860.26 14405.04
02/29/88 14067.77 14564.94
03/31/88 13958.61 14509.59
04/30/88 13929.12 14484.93
05/31/88 13847.45 14421.19
06/30/88 14103.69 14650.49
07/31/88 14088.93 14619.72
08/31/88 14128.81 14641.65
09/30/88 14389.75 14896.42
10/31/88 14582.59 15099.01
11/30/88 14492.55 14970.67
12/31/88 14505.88 14984.14
01/31/89 14663.71 15141.47
02/28/89 14628.98 15079.39
03/31/89 14686.79 15144.24
04/30/89 14933.84 15447.12
05/31/89 15214.69 15752.97
06/30/89 15585.39 16149.95
07/31/89 15915.11 16481.02
08/31/89 15700.17 16268.42
09/30/89 15774.29 16344.88
10/31/89 16103.42 16691.39
11/30/89 16235.87 16849.96
12/31/89 16262.64 16897.14
01/31/90 16100.90 16789.00
02/28/90 16153.86 16851.12
03/31/90 16131.27 16873.02
04/30/90 16026.98 16813.97
05/31/90 16407.64 17183.87
06/30/90 16627.01 17414.14
07/31/90 16849.00 17656.19
08/31/90 16708.35 17583.80
09/30/90 16831.86 17719.20
10/31/90 16990.48 17924.74
11/30/90 17284.58 18197.20
12/31/90 17549.43 18446.50
01/31/91 17679.88 18634.65
02/28/91 17821.67 18783.73
03/31/91 17934.58 18911.46
04/30/91 18134.61 19117.59
05/31/91 18231.35 19234.21
06/30/91 18236.83 19247.68
07/31/91 18441.94 19463.25
08/31/91 18829.10 19835.00
09/30/91 19178.83 20176.16
10/31/91 19405.77 20406.17
11/30/91 19591.43 20640.84
12/31/91 20209.49 21144.48
01/31/92 19950.88 20952.06
02/29/92 20002.63 21033.77
03/31/92 19930.63 20951.74
04/30/92 20042.62 21136.12
05/31/92 20408.91 21463.73
06/30/92 20696.70 21781.39
07/31/92 21183.83 22214.84
08/31/92 21379.69 22436.99
09/30/92 21628.52 22742.13
10/31/92 21309.31 22446.48
11/30/92 21363.70 22361.19
12/31/92 21649.97 22660.83
01/31/93 22081.49 23100.45
02/28/93 22522.07 23465.43
03/31/93 22670.00 23559.30
04/30/93 22809.20 23747.77
05/31/93 22825.24 23695.53
06/30/93 23277.77 24067.55
07/31/93 23458.05 24125.31
08/31/93 23974.08 24508.90
09/30/93 24042.75 24609.39
10/31/93 24172.19 24675.83
11/30/93 24033.79 24537.65
12/31/93 24138.27 24650.52
01/31/94 24393.19 24924.14
02/28/94 23921.73 24555.26
03/31/94 23458.36 24150.10
04/30/94 23365.09 23985.88
05/31/94 23284.46 24002.67
06/30/94 23278.01 24005.07
07/31/94 23498.92 24350.74
08/31/94 23496.12 24426.23
09/30/94 23379.50 24201.51
10/31/94 23380.92 24199.09
11/30/94 23447.96 24083.00
$10,000 OVER 10 YEARS: Let's say you invested $10,000 in Fidelity Advisor
Limited Term Bond Fund - Class B on November 30, 1984. As the chart shows,
by November 30, 1994, the value of your investment would have grown to
$24,498 - a 144.98% 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 $24,083 - a 140.83% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1994 1993 1992 1991 1990
Dividend return 1 5.08% 7.80% 8.19% 9.30% 9.05%
Capital appreciation return -7.99% 4.70% 0.86% 4.05% -2.59%
Total return -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 and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIOD ENDED NOVEMBER 30, 1994 PAST
MONTH
Dividends per share 1 4.27(cents)
Annualized dividend rate 5.07%
30-day annualized yield 5.47%
DIVIDENDS per share show the income paid by the class for a set period and
do not reflect any tax reclassifications. The annualized dividend rate is
based on an average net asset value of $10.24 over the past month. 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 4.71%.
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 1.9(CENTS) PER SHARE PAID
DURING 1994 FOR CLASS B ARE EXPECTED TO BE A NON-TAXABLE RETURN OF CAPITAL.
THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR INCOME TAX RETURN
WILL BE REPORTED TO YOU IN JANUARY, 1995.
The fund commenced operations on February 2, 1984 by offering Institutional
Class shares, which are sold to eligible institutional investors without a
sales charge or a 12b-1 fee.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond Fund -
Institutional Class -2.10% 46.01% 148.89%
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YERS
Advisor Limited Term Bond Fund -
Institutional Class -2.10% 7.86% 9.55%
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
INSTITUTIONAL CLASS 1994 1993 1992 1991 1990
Dividend return 1 5.87% 8.28% 8.36% 9.30% 9.05%
Capital appreciation return -7.97% 4.89% 0.85% 4.05% -2.59%
Total return -2.10% 13.17% 9.21% 13.35% 6.46%
</TABLE>
YIELD
PERIOD ENDED NOVEMBER 30, 1994
Institutional Class 30-day annualized yield 6.53%
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 6.2(CENTS) PER SHARE PAID
DURING 1994 FOR THE INSTITUTIONAL CLASS ARE EXPECTED TO BE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR
INCOME TAX RETURN WILL BE REPORTED TO YOU IN JANUARY, 1995.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended November 30, 1994, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. market
- - had a total return of -3.06%.
After interest rates remained low
and relatively steady in December
1993 and January 1994, the rate
environment changed dramatically.
The Federal Reserve Board raised
the federal funds rate - the rate
banks charge each other for
overnight loans - from 3.00% to
5.50% from February through
November. The Fed was hoping to
head off future inflation that might
be triggered by an improving U.S.
economy. However, investors
heavily sold bonds at the very
threat of inflation because inflation
diminishes the value of their
fixed-rate income payments. After
reaching a low of 5.79% in October
1993, the yield on the benchmark
30-year Treasury bond broke the
8% barrier in October 1994. Higher
interest rates in many foreign bond
markets followed the rate hikes in
the United States. The Salomon
Brothers World Government Bond
Index - a measure of bond market
performance in developed nations
that includes U.S. issues - rose
2.93% for the 12 months. Although
they were especially hard hit during
the first half of 1994, emerging
market bonds rebounded
somewhat in late summer. The J.P.
Morgan Emerging Markets Bond
Index returned -7.56% during the
12 months ended November 30.
An interview with Michael Gray, Portfolio Manager of Fidelity Advisor
Limited Term Bond Fund
Q. HOW HAS THE FUND PERFORMED,
MICHAEL?
A. It had a negative return, although it did beat the average fund.
Fidelity Advisor Limited Term Bond Fund - Class A and Class B had total
returns of -2.44% and -2.91% respectively for the 12 months ended November
30, 1994. The average intermediate investment grade bond fund had a return
of -3.42% over the same period.
Q. WHY DID THE FUND PERFORM BETTER THAN ITS PEERS?
A. There were two main factors. First, I shortened the fund's duration -
its sensitivity to changes in comparable interest rates - early in the
year, and have kept it short through this year's bear market. A shorter
duration means that the fund's net asset value has not been as negatively
affected by this year's rising interest rates as it would have been if the
duration had been longer. Second, I've employed a defensive barbell
strategy - heavily weighting the two ends of the maturity spectrum - with
most of the fund in cash on one end and securities with longer maturities
on the other. Because short rates rose more than long rates, this strategy
helped the fund's performance.
Q. WHAT OTHER STRATEGIES HAVE YOU ADOPTED TO DEAL WITH THIS ENVIRONMENT?
A. I've reduced the fund's investments in corporate bonds because the yield
differential between corporate bonds and Treasury bonds has narrowed. That
means that corporate bonds offer a less attractive yield advantage, given
the potential risk. Recently, I've had a less negative outlook because it
appears the bulk of the Fed's short-term interest rate increases are behind
us. As a result, I lengthened the fund's duration modestly in November.
Although rates may rise
a little bit more, I want to position the fund to benefit when the market
actually turns.
Q. HOW HAVE YOU LENGTHENED THE DURATION?
A. I use derivative instruments called Treasury bond futures contracts and
options on these futures to help manage the duration of the fund. They
track the performance of actual bonds because they're tied to the movement
of Treasuries, and are easier and often cheaper to buy and sell. Selling
futures and options acts as a balance against the fund's longer-term bond
holdings when I want to keep the duration short. To lengthen it in
November, I bought back some futures and options.
Q. DO YOU USE OTHER KINDS OF DERIVATIVES?
A. The fund also invested in foreign forward currency contracts during the
period to hedge currency risk on the fund's foreign investments. Although
my general defensive strategy fared relatively well in a rising interest
rate environment, one regret is that the hedging strategy didn't work
better. Some of the currencies I hedged appreciated versus the dollar,
causing the fund to realize losses when the hedge contracts matured. The
fund also realized losses from selling some unhedged bonds whose currencies
had weakened versus the dollar. For tax purposes, these currency losses
will cause part of this year's dividend to be treated as a return of
capital, which won't be taxable to the fund's shareholders. The exact
amount will be reported on shareholder's 1994 tax information that we'll be
sending out in January.
Q. ARE THERE SIGNS THAT THE FED MIGHT RAISE INTEREST RATES AGAIN?
A. The economy is very strong. In November, the unemployment rate was 5.6%,
the lowest since 1989. An unemployment rate of 6% is considered full
employment, so anything below that signals that inflationary pressures may
be building. Growth is so robust that investors are afraid of inflation,
although it still hasn't emerged. The Gross Domestic Product (GDP) - what
the economy produces in goods and services - for the third quarter of 1994
was revised upward to 3.9% from 3.4%, and was up 4.4% during the past 12
months. The Fed has said anything over 3% is inflationary. Fourth quarter
GDP looks to be equally strong. Industrial raw materials prices have
increased as well, and the economy has had significant gains in
productivity. Given that the economy is strong and the Fed feels that
growth of this magnitude is inflationary, it looks to me as if the Fed will
raise the federal funds rate to try to slow growth and ease pressures that
might lead to inflation.
Q. WHAT WILL BE YOUR STRATEGY GOING FORWARD?
A. I remain bearish, although, as I said, I am less negative than earlier
this year. Again, although I believe the bulk of interest rate increases is
behind us, it looks as if the Fed could continue to raise interest rates
because it is concerned that inflation could increase as a result of
sustained, strong economic growth. The fund is going to stay somewhat
defensive. I'll be looking for opportunities because certain securities or
sectors are starting to sell at inexpensive prices. When I think the
market's turning, I'm going to move into those areas that present the best
deals.
FUND FACTS
GOAL: high current income
by investing primarily in
investment grade bonds, with
an average maturity of three
to 10 years.
START DATE: February 2, 1984
SIZE: As of November 30,
1994, more than $317 million
MANAGER: Michael Gray,
since September 1987;
joined Fidelity in 1986
(checkmark)
MICHAEL GRAY ON THE
FEDERAL RESERVE BOARD:
"It is said that there is a lag of
six to nine months before
Federal Reserve Board actions
have any impact. It has been
10 months since the Fed's first
interest rate increase. There
should be some effects of this
move, but it's hard to measure.
So far, though, there has been
no perceptible slowdown in the
economy.
"There is always a risk that the
Fed's moves might turn the
economy too strongly in the
other direction. It's very difficult
to fine-tune the economy. It's
like tightening a screw and not
knowing exactly when to stop
tightening. With the Fed, it's
only after it's finished its moves
that one might realize it has
gone too far in trying to slow
the economy. This was true
when the Fed was lowering
interest rates. It went too far. At
the time it didn't seem so, but
rates ended up too low and too
stimulative for the economy.
"The Fed often overshoots one
way or the other. Has it done
enough to overshoot yet? I
don't believe so. I believe
there are more rate increases
to come."
DISTRIBUTIONS
A total of 24.8% of the
dividends distributed during
the fiscal year was derived
from interest on U.S.
Government securities which
is generally exempt from state
income tax.
The fund will notify
shareholders in January 1995
of the applicable percentage
for use in preparing 1994
income tax returns.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF NOVEMBER 30, 1994
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 32.4 33.3
Aa 16.1 16.0
A 13.8 18.9
Baa 0.8 0.7
Ba - -
B - -
Not rated 0.5 -
TABLE EXCLUDES SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1994
6 MONTHS AGO
Years 6.3 7.4
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 NOVEMBER 30, 1994
6 MONTHS AGO
Years 2.7 2.6
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 NOVEMBER 30, 1994* AS OF MAY 31, 1994**
26
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
Row: 1, Col: 1, Value: 31.1
Row: 1, Col: 2, Value: 1.8
Row: 1, Col: 3, Value: 11.2
Row: 1, Col: 4, Value: 29.7
Row: 1, Col: 5, Value: 26.2
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%
Corporate bonds 26.2%
U.S. government
and agency
obligations 29.7%
Foreign government
obligations 11.2%
Other 1.8%
Short-term
investments 31.1%
* FOREIGN
INVESTMENTS 18.5%
** FOREIGN
INVESTMENTS 22.0%
INVESTMENTS NOVEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 22.4%
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
ENERGY - 2.8%
ENERGY SERVICES - 1.2%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) $ 4,100,000 $ 3,655,970
OIL & GAS - 1.6%
B.P. America, Inc. 7 7/8%, 5/15/02 100,000 97,644
Societe Nationale Elf Aquitaine 8%, 10/15/01 5,000,000 4,878,300
4,975,944
TOTAL ENERGY 8,631,914
FINANCE - 15.4%
ASSET-BACKED SECURITIES - 2.0%
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 803,195 792,151
Standard Credit Card Master Trust I, participation certificate,
5 1/2%, 9/7/98 5,000,000 4,685,938
United Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 311,854 301,165
7.275%, 11/10/00 357,487 347,097
6,126,351
BANKS - 4.4%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 147,582
7 3/4%, 7/15/02 100,000 95,002
7 1/5%, 9/15/02 100,000 91,530
Chemical Bank New York Trust Co. 7 1/4%, 9/15/02 3,000,000 2,786,100
First Hawaiian Bank secured 6.93%, 12/1/03 (b) 2,000,000 1,747,200
First Interstate Bancorp 9 1/8%, 2/1/04 1,000,000 1,023,120
Korea Development Bank 8.09%, 10/6/04 5,000,000 4,899,500
National City Corp. 8 3/8%, 3/15/96 200,000 201,232
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 2,910,180
13,901,446
CREDIT & OTHER FINANCE - 4.7%
American General Financial Corp. 12 3/4%, 12/1/94 1,000,000 1,000,000
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,607,725
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 103,139
Ford Motor Credit Co.:
8%, 6/15/02 100,000 96,592
7 3/4%, 11/15/02 100,000 95,235
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,018,990
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Secured Finance, Inc. Kroger gtd. secured
9.05%, 12/15/04 $ 4,000,000 $ 4,102,800
Society Corp. 8 7/8%, 5/15/96 3,600,000 3,639,744
14,664,225
INSURANCE - 2.8%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (b) 5,000,000 4,221,500
NYLIFE Funding, Inc. gtd. 9 1/4%, 5/15/95 700,000 707,203
Nationwide Mutual Insurance Co. 6 1/2%, 2/15/04 (b) 1,000,000 856,930
Protective Life Corp. 7.95%, 7/1/04 1,000,000 946,200
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,053,580
8,785,413
SAVINGS & LOANS - 1.4%
Household Bank FSB Newport Beach, CA 6 1/2%, 7/15/03 5,000,000 4,326,650
SECURITIES INDUSTRY - 0.1%
TNE Funding Corp. gtd. 9%, 5/1/95 200,000 201,088
TOTAL FINANCE 48,005,173
NONDURABLES - 0.0%
TOBACCO - 0.0%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 103,357
9.45%, 11/19/97 100,000 103,034
TOTAL NONDURABLES 206,391
TECHNOLOGY - 1.4%
COMPUTER SERVICES & SOFTWARE - 1.4%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,407,650
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
Southwest Airlines Co. 8 3/4%, 10/15/03 1,500,000 1,513,740
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
UTILITIES - 2.3%
ELECTRIC UTILITY - 2.3%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 $ 6,000,000 $ 7,133,520
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 141,998
TOTAL UTILITIES 7,275,518
TOTAL NONCONVERTIBLE BONDS
(Cost $74,948,133) 70,040,386
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 25.2%
U.S. TREASURY OBLIGATIONS - 21.4%
8 5/8%, 1/15/95 (c) 5,000,000 5,017,200
9 3/8%, 4/15/96 4,900,000 5,033,966
6 1/2%, 5/15/97 15,000,000 14,650,800
5 1/8%, 3/31/98 16,000,000 14,800,000
8 7/8%, 2/15/99 3,000,000 3,118,110
8 7/8%, 8/15/17 6,750,000 7,271,033
8 1/8%, 8/15/19 16,130,000 16,135,000
6 1/4%, 8/15/23 1,000,000 800,470
TOTAL U.S. TREASURY OBLIGATIONS 66,826,579
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.8%
Financing Corp. :
10.70%, 10/6/17 4,500,000 5,549,063
principal strips 0%, 3/7/19 44,755,000 6,056,694
Federal Home Loan Banks, consolidated 8.60%, 2/27/95 200,000 200,750
Federal National Mortgage Association 8.20%, 3/10/98 200,000 203,062
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 12,009,569
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $84,441,662) 78,836,148
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 3.6%
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.0%
12 1/2%, 2/1/11 to 7/1/15 $ 230,397 $ 260,061
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.6%
8%, 6/15/23 4,203,662 3,996,085
8 1/2%, 4/15/17 to 8/15/24 1,071,221 1,048,865
9%, 5/15/16 to 10/15/18 6,146,253 6,196,480
11,241,430
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $11,731,694) 11,501,491
COMMERCIAL MORTGAGE SECURITIES - 1.3%
CS First Boston Mortgage Securities Corp. commercial
Series 1994-CFB1 Class A-2, 7.90%, 1/25/28 1,294,212 1,250,533
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 197,354 195,103
Resolution Trust Corp. commercial:
Series 1991-M5 Class A, 9%, 3/25/17 913,789 899,653
Series 1994-C2 Class A-2, 7 3/4%, 4/25/25 400,000 395,750
Series 1994-C2 Class A-4, 7 1/2%, 4/25/25 600,000 593,438
Series 1994-C1 Class A-4, 7 1/4%, 6/25/26 681,021 671,444
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $4,083,668) 4,005,921
FOREIGN GOVERNMENT OBLIGATIONS - 9.5%
Danish Government Bullet 7%, 12/15/04 DKK 90,000,000 13,107,022
French Government OAT 8 1/2%, 4/25/03 FRF 20,000,000 3,857,302
Province of Ontario, Canada:
6 5/8%, 6/22/04 6,000,000 5,676,600
15 1/8%, 5/1/11 5,000,000 5,737,650
17%, 11/5/11 1,000,000 1,215,880
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $32,702,881) 29,594,454
SUPRANATIONAL OBLIGATIONS - 1.5%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,613,490
REPURCHASE AGREEMENTS - 36.4%
MATURITY VALUE (NOTE1)
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 113,758,040 $ 113,740,000
PURCHASED OPTIONS - 0.1%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
135 Call Options on March U.S. Treasury
Bond Futures (Cost $311,819) Feb. 95/96 $ 13,238,438 407,109
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $326,336,737) $ 312,738,999
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
232 U.S. Treasury Bond Futures Contracts Dec. 94 $ 22,895,500 $ 709,612
99 U.S. Treasury Bond Futures Contracts Mar. 95 $ 9,708,189 (54,464)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 10.4%
$ 655,148
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE VALUE GAIN/(LOSS)
CONTRACTS TO SELL
87,504,611 DKK 1/9/95 $ 14,247,582 $ 64,823
23,560,600 FRF 1/20/95 4,381,330 192,212
TOTAL CONTRACTS TO SELL
(Receivable amount $18,885,947) $ 18,628,912 $ 257,035
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.0%
CURRENCY ABBREVIATIONS
DKK - Danish krone
FRF - French franc
LEGEND
1. Principal amount is stated in United States dollars unless otherwise
noted.
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $10,481,600 or 3.3% of net
assets.
3. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,103,784.
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 62.3% AAA, AA, A 62.6%
Baa 0.8% BBB 0.5%
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 81.5%
Canada 6.3
Denmark 4.2
France 2.8
Korea 1.6
Supranational 1.5
Malaysia 1.2
Others (individually less than 1%) 0.9
TOTAL 100.0%
INCOME TAX INFORMATION
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $326,336,737. Net unrealized depreciation
aggregated $13,597,738, of which $1,366,090 related to appreciated
investment securities and $14,963,828 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>
ASSETS NOVEMBER 30, 1994
Investment in securities, at value (including repurchase $ 312,738,999
agreements of $113,740,000) (cost $326,336,737) -
See accompanying schedule
Unrealized appreciation on foreign currency contracts 257,035
Receivable for fund shares sold 1,016,565
Interest receivable 4,128,709
Receivable from investment adviser for expense 76,652
reductions
TOTAL ASSETS 318,217,960
LIABILITIES
Payable to custodian bank $ 809
Dividends payable 676,805
Accrued management fee 104,904
Distribution fees payable 30,191
Payable for daily variation on futures contracts 206,500
Other payables and accrued expenses 54,863
TOTAL LIABILITIES 1,074,072
NET ASSETS $ 317,143,888
Net Assets consist of:
Paid in capital $ 339,120,860
Distributions in excess of net investment income (1,751,181)
Accumulated undistributed net realized gain (loss) on (7,577,241)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (12,648,550)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 317,143,888
CALCULATION OF MAXIMUM OFFERING PRICE $10.26
CLASS A:
NET ASSET VALUE, and redemption price per share
($141,865,543 (divided by) 13,829,988 shares)
Maximum offering price per share (100/95.25 of $10.26) $10.77
CLASS B: $10.25
NET ASSET VALUE, and offering price per share
($3,156,025 (divided by) 307,819 shares) A
INSTITUTIONAL CLASS: $10.27
NET ASSET VALUE, offering price and redemption price per
share ($172,122,320 (divided by) 16,766,681 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>
YEAR ENDED NOVEMBER 30, 1994
INVESTMENT INCOME 20,404,551
Interest
EXPENSES
Management fee $ 1,180,785
Transfer agent fees 317,202
Class A
Class B 3,403
Institutional Class 191,763
Distribution fees 264,949
Class A
Class B 6,759
Accounting fees and expenses 118,125
Non-interested trustees' compensation 1,636
Custodian fees and expenses 84,839
Registration fees 47,012
Class A
Class B 2,933
Institutional Class 11,119
Audit 31,482
Legal 18,390
Reports to shareholders 8,591
Miscellaneous 3,231
Total expenses before reductions 2,292,219
Expense reductions (80,045) 2,212,174
NET INVESTMENT INCOME 18,192,377
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (6,154,243)
Foreign currency transactions (2,189,908)
Futures contracts 4,778,569 (3,565,582)
Change in net unrealized appreciation (depreciation) on:
Investment securities (20,871,221)
Futures contracts (467,572)
Assets and liabilities in foreign currencies 153,095 (21,185,698)
NET GAIN (LOSS) (24,751,280)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (6,558,903)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 18,192,377 $ 14,447,662
Net investment income
Net realized gain (loss) (3,565,582) 4,656,282
Change in net unrealized appreciation (depreciation) (21,185,698) 3,826,967
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (6,558,903) 22,930,911
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (5,494,879) (1,503,763)
Class B (29,216) -
Institutional Class (10,193,519) (13,259,775)
Return of capital (Note 1)
Class A (571,345) -
Class B (3,038) -
Institutional Class (1,059,899) -
Total distributions (17,351,896) (14,763,538)
Share transactions - net increase (decrease) 98,080,216 72,068,562
TOTAL INCREASE (DECREASE) IN NET ASSETS 74,169,417 80,235,935
NET ASSETS
Beginning of period 242,974,471 162,738,536
End of period (including distributions in excess of net $ 317,143,888 $ 242,974,471
investment income of $1,751,181 and $517,821,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS CLASS A & CLASS B
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
YEARS ENDED NOVEMBER 30, YEAR ENDED
NOVEMBER 30,
1994 1993 1992 D 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.140 $ 10.640 $ 10.960 $ 10.430
Income from Investment Operations
Net investment income .609 .785 .170 .204
Net realized and unrealized gain (loss) (.876) .511 (.320) (.178)
on investments
Total from investment operations (.267) 1.296 (.150) .026
Less Distributions
From net investment income (.555) (.796) (.170) (.187)
From return of capital (.058) - - (.019)
Total distributions (.613) (.796) (.170) (.206)
Net asset value, end of period $ 10.260 $ 11.140 $ 10.640 $ 10.250
TOTAL RETURN A, B (2.44)% 12.50% (1.37)% .24%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 142 $ 59 $ 3 $ 3
Ratio of expenses to average net assets 1.02% 1.23% .82% 1.65%
C F F
Ratio of expenses to average net assets 1.09% 1.23% .82% 2.41%
before expense reductions C F F
Ratio of net investment income to 6.04% 6.81% 7.67% 5.42%
average net assets F F
Portfolio turnover 68% 59% 7% 68%
</TABLE>
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
D FOR THE PERIOD SEPTEMBER 10, 1992 (COMMENCEMENT OF SALES OF CLASS A
SHARES) TO NOVEMBER 30, 1992.
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
NOVEMBER 30, 1994.
F ANNUALIZED
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
Advisor Series IV (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers 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. The fund
commenced sale of Class B shares on June 30, 1994. 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.
Effective December 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported 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. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. 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 are primarily due to differing treatments for
paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, market discount, capital loss
carryforwards, and losses deferred due to futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Distributions in excess of net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
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. (The tax treatment of distributions for the
1994 calendar year will be reported to shareholders prior to February 1,
1995.)
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of the beginning of the fiscal year have been
reclassified to reflect an increase in paid in capital of $16,863, an
increase in undistributed net investment income of $189,510 and an increase
in accumulated net realized loss on investments of $206,373.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars, as reflected in the schedule of
investments under the caption "Forward Foreign Currency Contracts,"
reflects the total exposure the fund has in that particular currency
contract. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. Losses may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of 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.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. The face or contract
amounts, as reflected in the schedule of investments under the captions
"Purchased Options" and "Futures Contracts," reflect the extent of the
involvement the fund has in the particular classes of instruments. Risks
may be caused by an imperfect correlation between movements in the price of
the instruments and the price of the underlying securities and interest
rates. Risks also may arise if there is an illiquid secondary market for
the instruments, or due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint trading account. These repurchase
agreements were with entities whose creditworthiness has been reviewed and
found satisfactory by FMR. The repurchase agreements were dated November
30, 1994 and due December 1, 1994. The maturity values of the joint trading
account investments were $113,758,040 at 5.71%. The investments in
repurchase agreements through the joint trading account are summarized as
follows:
SUMMARY OF JOINT TRADING
Number of dealers or banks 27
Maximum amount with one dealer or bank 12.6%
Aggregate principal amount of agreements $15,846,209,000
Aggregate maturity amount of agreements $15,848,720,893
Aggregate market value of collateral $16,195,630,163
Coupon rates of collateral 3 7/8% to 15 3/4%
Maturity dates of collateral 12/1/94 to 11/15/24
4. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $187,738,291 and $137,192,250, respectively, of which U.S.
government and government agency obligations aggregated $145,176,153 and
$82,850,765, respectively.
The market value of futures contracts opened and closed during the period
amounted to $166,921,612 and $158,380,105, 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 .1325% to .3700% for the period December 1, 1993 to July
31, 1994 and .1200% to .3700% for the period August 1, 1994 to November 30,
1994. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .25%. On December 14, 1994, shareholders of
the fund approved an increase in the individual fund fee rate from .25% to
.30%, effective February 24, 1995. For the period, the management fee was
equivalent to an annual rate of .41% of average net assets.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate 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 $264,949 and $6,759 under the Class A Plan and
Class B Plan, respectively, of which $264,949 and $1,689 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 $1,598,883 on sales of Class A shares of the fund, of which
$1,361,236 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 $1,279 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. The Transfer Agents receive fees
based on the type, size, number of accounts, and the number of transactions
made by 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.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
6. EXPENSE REDUCTIONS.
Effective July 1, 1994, FMR voluntarily agreed to reimburse the fund's
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annualized rate of .90% and 1.65% of
average net assets for Class A shares and Class B shares, respectively.
For the period, the reimbursement reduced expenses by $73,313 and $5,232
for Class A shares and Class B shares, respectively.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$1,500 under this arrangement.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994 A 1993 1994 A 1993
CLASS A
Shares sold 14,851,591 5,818,646 $ 158,332,548 $ 64,747,544
Reinvestment of distributions 505,870 103,874 5,325,831 1,150,638
Shares redeemed (6,838,590) (854,187) (72,563,524) (9,510,209)
Net increase (decrease) 8,518,871 5,068,333 $ 91,094,855 $ 56,387,973
CLASS B
Shares sold 350,868 - $ 3,635,180 $ -
Reinvestment of distributions 2,301 - 23,687 -
Shares redeemed (45,350) - (466,837) -
Net increase (decrease) 307,819 - $ 3,192,030 $ -
INSTITUTIONAL CLASS
Shares sold 9,336,746 7,097,429 $ 99,248,710 $ 78,489,883
Reinvestment of distributions 246,604 298,266 2,616,244 3,295,101
Shares redeemed (9,291,204) (5,977,104) (98,071,623) (66,104,395)
Net increase (decrease) 292,146 1,418,591 $ 3,793,331 $ 15,680,589
A SHARE TRANSACTIONS FOR THE CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Advisor Limited Term Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Advisor Limited Term Bond Fund,
including the schedule of portfolio investments, as of November 30, 1994,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended (Institutional Class) and for the two years in the period
then ended and for the period September 10, 1992 (commencement of sale of
Class A shares) to November 30, 1992 (Class A) and for the period June 30,
1994 (commencement of sale of Class B shares) to November 30, 1994 (Class
B). These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Advisor Limited Term Bond Fund as
of November 30, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended (Institutional Class) and for the two years in the
period then ended and for the period September 10, 1992 (commencement of
sale of Class A shares) to November 30, 1992 (Class A) and for the period
June 30, 1994 (commencement of sale of Class B shares) to November 30, 1994
(Class B), in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 9, 1995
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA - Class A
Fidelity Investments Institutional Operations Company
Boston, MA - Class B
CUSTODIAN
Bank of New York
New York, NY
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 Portfolio Income
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
ANNUAL REPORT
NOVEMBER 30, 1994
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 9 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 12 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 13 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and
liabilities, operations, and changes
in net assets, as well as financial
highlights.
NOTES 24 Notes to the financial statements.
REPORT OF INDEPENDENT 30 The auditors' opinion.
ACCOUNTANTS
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:
The unsettling period that began for bond investors when the Federal
Reserve Board raised short-term interest rates in February has continued in
the fourth quarter of 1994. The Board raised the federal funds rate - the
rate banks charge each other for overnight loans - five times from February
through August, taking it from 3.00% to 4.75%. A sixth increase in November
lifted the rate to 5.50%. The Fed rate hikes were intended to forestall
inflation that could result from an improving U.S. economy, and they led to
negative returns for many bond investments and below-average returns for
many stocks.
The volatility we have witnessed this year follows a period in which there
was a nearly perfect investing environment. Although there was a
late-summer rally in stocks and, to a lesser extent in bond markets, it is
impossible to predict where interest rates might go or what might happen in
the markets in the months ahead. That's why it probably is a good time to
again review your investment portfolio and how well it matches your goals.
Keeping in mind that the negative effects of rising rates on your bond
investments will only be "paper" losses unless you sell your shares,
staying in your bond fund may be appropriate. 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. As with any mutual fund, of course, there is no assurance that
a money market fund will achieve its goal, and money market funds are not
insured 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, as we have discussed here. 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 a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $100,000 investment. A fund's total
return includes changes in a fund's share price, plus reinvestment of any
dividends (or income) and capital gains (the profits the fund earns when it
sells bonds that have grown in value). You can also look at the fund's
income to measure performance.
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Institutional Class -2.10% 46.01% 148.89%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 42.95% 140.83%
Average Intermediate Investment Grade Bond -3.42% 40.86% 140.78%
Fund
Consumer Price Index 2.81% 19.06% 42.36%
</TABLE>
CUMULATIVE TOTAL RETURNS show Institutional Class' performance in
percentage terms over a set period - in this case, 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, you would end up with $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 currently reflects the
performance of 114 intermediate investment grade bond funds tracked by
Lipper Analytical Services. These benchmarks include reinvested dividends
and capital gains, if any, and exclude the effects of sales charges.
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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond - Institutional Class -2.10% 7.86% 9.55%
Lehman Brothers Intermediate Government -
Corporate Bond Index -1.83% 7.41% 9.19%
Average Intermediate Investment Grade Bond -3.42% 7.08% 9.17%
Fund
Consumer Price Index 2.81% 3.55% 3.59%
</TABLE>
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
Advisor Ltd Term Bond PGovernment/Cor
11/30/84 100000.00 100000.00
12/31/84 100402.91 101440.00
01/31/85 103229.38 103205.06
02/28/85 100769.61 102080.12
03/31/85 102191.08 103774.65
04/30/85 104663.28 105767.12
05/31/85 110500.18 109807.43
06/30/85 111844.65 110916.48
07/31/85 110738.69 110905.39
08/31/85 112967.79 112513.52
09/30/85 113248.90 113357.37
10/31/85 114874.62 115069.07
11/30/85 117396.16 117059.76
12/31/85 120725.65 119775.55
01/31/86 121610.59 120542.11
02/28/86 125782.75 123374.85
03/31/86 129655.27 126619.61
04/30/86 130421.69 127467.96
05/31/86 128405.06 125989.33
06/30/86 131497.98 128912.29
07/31/86 132601.17 130214.30
08/31/86 135493.58 133144.12
09/30/86 133968.37 132052.34
10/31/86 135679.46 133769.02
11/30/86 137394.97 135039.83
12/31/86 138022.75 135498.96
01/31/87 139762.16 136867.50
02/28/87 140603.38 137565.53
03/31/87 139948.32 137276.64
04/30/87 136337.39 134764.48
05/31/87 135817.77 134454.52
06/30/87 137632.86 136081.42
07/31/87 137628.77 136394.40
08/31/87 136959.88 136039.78
09/30/87 134701.04 134271.26
10/31/87 138058.75 138111.42
11/30/87 139834.75 138995.33
12/31/87 141226.29 140454.78
01/31/88 145514.32 144050.43
02/29/88 147692.85 145649.39
03/31/88 146546.77 145095.92
04/30/88 146237.13 144849.26
05/31/88 145379.63 144211.92
06/30/88 148069.89 146504.89
07/31/88 147914.91 146197.23
08/31/88 148333.60 146416.52
09/30/88 151073.19 148964.17
10/31/88 153097.76 150990.08
11/30/88 152152.43 149706.67
12/31/88 152292.37 149841.40
01/31/89 153949.35 151414.74
02/28/89 153584.76 150793.94
03/31/89 154191.68 151442.35
04/30/89 156785.35 154471.20
05/31/89 159733.96 157529.73
06/30/89 163625.84 161499.48
07/31/89 167087.45 164810.22
08/31/89 164830.88 162684.17
09/30/89 165609.01 163448.78
10/31/89 169064.46 166913.90
11/30/89 170455.03 168499.58
12/31/89 170736.05 168971.38
01/31/90 169037.91 167889.96
02/28/90 169593.91 168511.15
03/31/90 169356.73 168730.22
04/30/90 168261.83 168139.66
05/31/90 172258.27 171838.73
06/30/90 174561.34 174141.37
07/31/90 176891.90 176561.94
08/31/90 175415.22 175838.03
09/30/90 176711.91 177191.99
10/31/90 178377.27 179247.41
11/30/90 181464.95 181971.97
12/31/90 184245.44 184464.99
01/31/91 185615.10 186346.53
02/28/91 187103.70 187837.31
03/31/91 188289.10 189114.60
04/30/91 190389.21 191175.95
05/31/91 191404.80 192342.12
06/30/91 191462.41 192476.76
07/31/91 193615.71 194632.50
08/31/91 197680.51 198349.98
09/30/91 201352.17 201761.60
10/31/91 203734.73 204061.68
11/30/91 205683.99 206408.39
12/31/91 212172.69 211444.76
01/31/92 209457.70 209520.61
02/29/92 210001.05 210337.74
03/31/92 209245.17 209517.42
04/30/92 210420.97 211361.18
05/31/92 214266.51 214637.28
06/30/92 217287.87 217813.91
07/31/92 222402.09 222148.40
08/31/92 224458.35 224369.89
09/30/92 227317.69 227421.32
10/31/92 224016.13 224464.84
11/30/92 224636.81 223611.87
12/31/92 227694.50 226608.27
01/31/93 232494.20 231004.47
02/28/93 236965.20 234654.35
03/31/93 238572.60 235592.96
04/30/93 240117.36 237477.71
05/31/93 240402.05 236955.26
06/30/93 245256.15 240675.45
07/31/93 247514.72 241253.07
08/31/93 253085.30 245089.00
09/30/93 253905.79 246093.86
10/31/93 255360.87 246758.32
11/30/93 254224.70 245376.47
12/31/93 255205.79 246505.20
01/31/94 257995.19 249241.41
02/28/94 252840.70 245552.64
03/31/94 248027.19 241501.02
04/30/94 247412.34 239858.81
05/31/94 246764.57 240026.71
06/30/94 246794.94 240050.71
07/31/94 249192.49 243507.44
08/31/94 249221.07 244262.32
09/30/94 248066.72 242015.10
10/31/94 248121.19 241990.90
11/30/94 248887.87 240830.00
$100,000 OVER 10 YEARS: Let's say you invested $100,000 in Fidelity
Advisor Limited Term Bond Fund - Institutional Class on November 30, 1984.
As the chart shows, by November 30, 1994,
the value of your investment would have grown to $248,890 - a 148.89%
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 $240,830 - a 140.83% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, move in the
opposite direction of interest
rates. In turn, the share price,
return, and yield of a fund
that invests in bonds will vary.
That means if you sell your
shares during a market
downturn, you might lose
money. But if you can ride out
the market's ups and downs,
you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1994 1993 1992 1991 1990
Dividend return 1 5.87% 8.28% 8.36% 9.30% 9.05%
Capital appreciation return -7.97% 4.89% 0.85% 4.05% -2.59%
Total return -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.
DIVIDENDS AND YIELD
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PERIODS ENDED NOVEMBER 30, 1994 PAST PAST 6 PAST 1
MONTH MONTHS YEAR
Dividends per share 1 5.18(cents) 30.96(cents) 65.87(cents)
Annualized dividend rate 6.14% 5.94% 6.20%
30-day annualized yield 6.53% - -
</TABLE>
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 $10.26 over the past month, $10.39
over the past six months and $10.63 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.
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 6.2(CENTS) PER SHARE PAID
DURING 1994 FOR THE INSTITUTIONAL CLASS ARE EXPECTED TO BE A NON-TAXABLE
RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE IN PREPARING YOUR
INCOME TAX RETURN WILL BE REPORTED TO YOU IN JANUARY, 1995.
On September 10, 1992, the fund began offering Class A shares, and on June
30, 1994, the fund began offering Class B shares to retail investors. All
performance information for Class A prior to September 10,1992 reflects the
performance of the Institutional Class and therefore does not reflect Class
A's 12b-1 fee and different transfer agent fee arrangements (see Notes to
the Financial Statements), which if included, would have lowered Class A's
performance. All performance information for Class B prior to June 30, 1994
reflects the performance of the Institutional Class up to September 9,
1992, and the performance of Class A thereafter, and therefore does not
reflect Class B's different 12b-1 fee and transfer agent fee arrangements
(see Notes to the Financial Statements), which if included, would have
lowered Class B's performance. Average annual total returns include the
effect of Class A's maximum 4.75% sales charge and Class B's contingent
deferred sales charges of 4%, 1%, and 0% for the past 1 year, past 5 year
and past 10 year total return figures, respectively. Cumlative total
returns exclude the effect of sales charges. If Fidelity had not reimbursed
certain Class A and Class B expenses during the periods shown, the total
returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond Fund - Class A -2.44% 44.42% 146.17%
Advisor Limited Term Bond Fund - Class B -2.91% 43.72% 144.98%
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED NOVEMBER 30, 1994 PAST 1 PAST 5 PAST 10
YEAR YEARS YEARS
Advisor Limited Term Bond Fund - Class A -7.07% 6.59% 8.90%
Advisor Limited Term Bond Fund - Class B -6.59% 7.38% 9.37%
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
CLASS A 1994 1993 1992 1991 1990
Dividend return 1 5.46% 7.80% 8.19% 9.30% 9.05%
Capital appreciation return -7.90% 4.70% 0.86% 4.05% -2.59%
Total return -2.44% 12.50% 9.05% 13.35% 6.46%
CLASS B
Dividend return 1 5.08% 7.80% 8.19% 9.30% 9.05%
Capital appreciation return -7.99% 4.70% 0.86% 4.05% -2.59%
Total return -2.91% 12.50% 9.05% 13.35% 6.46%
</TABLE>
Returns exclude the effects of sales charges.
YIELDS
PERIOD ENDED NOVEMBER 30, 1994
Class A 30-day annualized yield 5.98%
Class B 30-day annualized yield 5.47%
The offering price used in the calculation of the yield for Class A
includes the effect of Class A's maximum 4.75% sales charge, whereas the
calculation of the yield for Class B excludes the effect of Class B's
contingent deferred sales charge. If Fidelity had not reduced certain
expenses during the period shown, the 30-day yield would have been 5.91%
and 4.71%, for Class A and Class B, respectively.
1 NON-TAXABLE DIVIDENDS: DIVIDENDS PAID ARE BASED ON THE CLASS' INVESTMENT
INCOME AND DO NOT REFLECT CURRENCY RELATED GAINS AND LOSSES. AS A RESULT OF
CURRENCY LOSSES, DIVIDENDS OF APPROXIMATELY 5.8(CENTS) AND 1.9(CENTS) PER
SHARE PAID DURING 1994 FOR CLASS A AND CLASS B, RESPECTIVELY, ARE EXPECTED
TO BE A NON-TAXABLE RETURN OF CAPITAL. THE EXACT NON-TAXABLE AMOUNT TO USE
IN PREPARING YOUR INCOME TAX RETURN WILL BE REPORTED TO YOU IN JANUARY,
1995.
FUND TALK: THE MANAGER'S OVERVIEW
MARKET RECAP
Sharply rising interest rates and
ongoing inflation worries caused a
severe downturn in U.S. bond
markets in 1994. Yields rose
sharply - and prices fell - on
virtually all types of fixed-income
investments. For the 12 months
ended November 30, 1994, the
Lehman Brothers Aggregate Bond
Index - a broad measure of
taxable bonds in the U.S. market
- - had a total return of -3.06%.
After interest rates remained low
and relatively steady in December
1993 and January 1994, the rate
environment changed dramatically.
The Federal Reserve Board raised
the federal funds rate - the rate
banks charge each other for
overnight loans - from 3.00% to
5.50% from February through
November. The Fed was hoping to
head off future inflation that might
be triggered by an improving U.S.
economy. However, investors
heavily sold bonds at the very
threat of inflation because inflation
diminishes the value of their
fixed-rate income payments. After
reaching a low of 5.79% in October
1993, the yield on the benchmark
30-year Treasury bond broke the
8% barrier in October 1994. Higher
interest rates in many foreign bond
markets followed the rate hikes in
the United States. The Salomon
Brothers World Government Bond
Index - a measure of bond market
performance in developed nations
that includes U.S. issues - rose
2.93% for the 12 months. Although
they were especially hard hit during
the first half of 1994, emerging
market bonds rebounded
somewhat in late summer. The J.P.
Morgan Emerging Markets Bond
Index returned -7.56% during the
12 months ended November 30.
An interview with Michael Gray, Portfolio Manager of Fidelity Advisor
Limited Term Bond Fund
Q. HOW HAS THE FUND PERFORMED,
MICHAEL?
A. It had a negative return, although it did beat the average fund.
Fidelity Advisor Limited Term Bond Fund - Institutional Class had a total
return of -2.10% for the 12 months ended November 30, 1994. The average
intermediate investment grade bond fund had a return of -3.42% over the
same period.
Q. WHY DID THE FUND PERFORM BETTER THAN ITS PEERS?
A. There were two main factors. First, I shortened the fund's duration -
its sensitivity to changes in comparable interest rates - early in the
year, and have kept it short through this year's bear market. A shorter
duration means that the fund's net asset value has not been as negatively
affected by this year's rising interest rates as it would have been if the
duration had been longer. Second, I've employed a defensive barbell
strategy - heavily weighting the two ends of the maturity spectrum - with
most of the fund in cash on one end and securities with longer maturities
on the other. Because short rates rose more than long rates, this strategy
helped the fund's performance.
Q. WHAT OTHER STRATEGIES HAVE YOU ADOPTED TO DEAL WITH THIS ENVIRONMENT?
A. I've reduced the fund's investments in corporate bonds because the yield
differential between corporate bonds and Treasury bonds has narrowed. That
means that corporate bonds offer a less attractive yield advantage, given
the potential risk. Recently, I've had a less negative outlook because it
appears the bulk of the Fed's short-term interest rate increases are behind
us. As a result, I lengthened the fund's duration modestly in November.
Although rates may rise a little bit more, I want to position the fund to
benefit when the market actually turns.
Q. HOW HAVE YOU LENGTHENED THE DURATION?
A. I use derivative instruments called Treasury bond futures contracts and
options on these futures to help manage the duration of the fund. They
track the performance of actual bonds because they're tied to the movement
of Treasuries, and are easier and often cheaper to buy and sell. Selling
futures and options acts as a balance against the fund's longer-term bond
holdings when I want to keep the duration short. To lengthen it in
November, I bought back some futures and options.
Q. DO YOU USE OTHER KINDS OF DERIVATIVES?
A. The fund also invested in foreign forward currency contracts during the
period to hedge currency risk on the fund's foreign investments. Although
my general defensive strategy fared relatively well in a rising interest
rate environment, one regret is that the hedging strategy didn't work
better. Some of the currencies I hedged appreciated versus the dollar,
causing the fund to realize losses when the hedge contracts matured. The
fund also realized losses from selling some unhedged bonds whose currencies
had weakened versus the dollar. For tax purposes, these currency losses
will cause part of this year's dividend to be treated as a return of
capital, which won't be taxable to the fund's shareholders. The exact
amount will be reported on shareholder's 1994 tax information that we'll be
sending out in January.
Q. ARE THERE SIGNS THAT THE FED MIGHT RAISE INTEREST RATES AGAIN?
A. The economy is very strong. In November, the unemployment rate was 5.6%,
the lowest since 1989. An unemployment rate of 6% is considered full
employment, so anything below that signals that inflationary pressures may
be building. Growth is so robust that investors are afraid of inflation,
although it still hasn't emerged. The Gross Domestic Product (GDP) - what
the economy produces in goods and services - for the third quarter of 1994
was revised upward to 3.9% from 3.4%, and was up 4.4% during the past 12
months. The Fed has said anything over 3% is inflationary. Fourth quarter
GDP looks to be equally strong. Industrial raw materials prices have
increased as well, and the economy has had significant gains in
productivity. Given that the economy is strong and the Fed feels that
growth of this magnitude is inflationary, it looks to me as if the Fed will
raise the federal funds rate to try to slow growth and ease pressures that
might lead to inflation.
Q. WHAT WILL BE YOUR STRATEGY GOING FORWARD?
A. I remain bearish, although, as I said, I am less negative than earlier
this year. Again, although I believe the bulk of interest rate increases is
behind us, it looks as if the Fed could continue to raise interest rates
because it is concerned that inflation could increase as a result of
sustained, strong economic growth. The fund is going to stay somewhat
defensive. I'll be looking for opportunities because certain securities or
sectors are starting to sell at inexpensive prices. When I think the
market's turning, I'm going to move into those areas that present the best
deals.
FUND FACTS
GOAL: high current income
by investing primarily in
investment grade bonds, with
an average maturity of three
to 10 years.
START DATE: February 2, 1984
SIZE: As of November 30,
1994, more than $317 million
MANAGER: Michael Gray,
since September 1987;
joined Fidelity in 1986
(checkmark)
MICHAEL GRAY ON THE
FEDERAL RESERVE BOARD:
"It is said that there is a lag of
six to nine months before
Federal Reserve Board actions
have any impact. It has been
10 months since the Fed's first
interest rate increase. There
should be some effects of this
move, but it's hard to measure.
So far, though, there has been
no perceptible slowdown in the
economy.
"There is always a risk that the
Fed's moves might turn the
economy too strongly in the
other direction. It's very difficult
to fine-tune the economy. It's
like tightening a screw and not
knowing exactly when to stop
tightening. With the Fed, it's
only after it's finished its moves
that one might realize it has
gone too far in trying to slow
the economy. This was true
when the Fed was lowering
interest rates. It went too far. At
the time it didn't seem so, but
rates ended up too low and too
stimulative for the economy.
"The Fed often overshoots one
way or the other. Has it done
enough to overshoot yet? I
don't believe so. I believe there
are more rate increases to
come."
DISTRIBUTIONS
A total of 24.8% of the dividends
distributed during the fiscal year
was derived from interest on
U.S. Government securities
which is generally exempt from
state income tax.
The fund will notify
shareholders in January 1995
of the applicable percentage
for use in preparing 1994
income tax returns.
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF NOVEMBER 30, 1994
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S INVESTMENTS
INVESTMENTS 6 MONTHS AGO
Aaa 32.4 33.3
Aa 16.1 16.0
A 13.8 18.9
Baa 0.8 0.7
Ba - -
B - -
Not rated 0.5 -
TABLE EXCLUDES SHORT-TERM INVESTMENTS.
AVERAGE YEARS TO MATURITY AS OF NOVEMBER 30, 1994
6 MONTHS AGO
Years 6.3 7.4
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 NOVEMBER 30, 1994
6 MONTHS AGO
Years 2.7 2.6
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 NOVEMBER 30, 1994* AS OF MAY 31, 1994**
26
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
Row: 1, Col: 1, Value: 31.1
Row: 1, Col: 2, Value: 1.8
Row: 1, Col: 3, Value: 11.2
Row: 1, Col: 4, Value: 29.7
Row: 1, Col: 5, Value: 26.2
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%
Corporate bonds 26.2%
U.S. government
and agency
obligations 29.7%
Foreign government
obligations 11.2%
Other 1.8%
Short-term
investments 31.1%
* FOREIGN
INVESTMENTS 18.5%
** FOREIGN
INVESTMENTS 22.0%
INVESTMENTS NOVEMBER 30, 1994
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 22.4%
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
ENERGY - 2.8%
ENERGY SERVICES - 1.2%
Petroliam Nasional BHD yankee 6 7/8%, 7/1/03 (b) $ 4,100,000 $ 3,655,970
OIL & GAS - 1.6%
B.P. America, Inc. 7 7/8%, 5/15/02 100,000 97,644
Societe Nationale Elf Aquitaine 8%, 10/15/01 5,000,000 4,878,300
4,975,944
TOTAL ENERGY 8,631,914
FINANCE - 15.4%
ASSET-BACKED SECURITIES - 2.0%
SCFC Recreational Vehicle Loan Trust 7 1/4%, 9/15/06 803,195 792,151
Standard Credit Card Master Trust I, participation certificate,
5 1/2%, 9/7/98 5,000,000 4,685,938
United Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 311,854 301,165
7.275%, 11/10/00 357,487 347,097
6,126,351
BANKS - 4.4%
BankAmerica Corp.:
8 3/8%, 3/15/02 150,000 147,582
7 3/4%, 7/15/02 100,000 95,002
7 1/5%, 9/15/02 100,000 91,530
Chemical Bank New York Trust Co. 7 1/4%, 9/15/02 3,000,000 2,786,100
First Hawaiian Bank secured 6.93%, 12/1/03 (b) 2,000,000 1,747,200
First Interstate Bancorp 9 1/8%, 2/1/04 1,000,000 1,023,120
Korea Development Bank 8.09%, 10/6/04 5,000,000 4,899,500
National City Corp. 8 3/8%, 3/15/96 200,000 201,232
Nationsbank Corp. 8 1/8%, 6/15/02 3,000,000 2,910,180
13,901,446
CREDIT & OTHER FINANCE - 4.7%
American General Financial Corp. 12 3/4%, 12/1/94 1,000,000 1,000,000
Deere (John) Capital Corp. 9 5/8%, 11/1/98 2,500,000 2,607,725
Ford Capital BV yankee 9 3/8%, 1/1/98 100,000 103,139
Ford Motor Credit Co.:
8%, 6/15/02 100,000 96,592
7 3/4%, 11/15/02 100,000 95,235
Grand Metropolitan Investment Corp. 8 1/8%, 8/15/96 3,000,000 3,018,990
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Secured Finance, Inc. Kroger gtd. secured
9.05%, 12/15/04 $ 4,000,000 $ 4,102,800
Society Corp. 8 7/8%, 5/15/96 3,600,000 3,639,744
14,664,225
INSURANCE - 2.8%
Metropolitan Life Insurance Co. 6.30%, 11/1/03 (b) 5,000,000 4,221,500
NYLIFE Funding, Inc. gtd. 9 1/4%, 5/15/95 700,000 707,203
Nationwide Mutual Insurance Co. 6 1/2%, 2/15/04 (b) 1,000,000 856,930
Protective Life Corp. 7.95%, 7/1/04 1,000,000 946,200
SAFECO Corp. 10 3/4%, 9/15/95 2,000,000 2,053,580
8,785,413
SAVINGS & LOANS - 1.4%
Household Bank FSB Newport Beach, CA 6 1/2%, 7/15/03 5,000,000 4,326,650
SECURITIES INDUSTRY - 0.1%
TNE Funding Corp. gtd. 9%, 5/1/95 200,000 201,088
TOTAL FINANCE 48,005,173
NONDURABLES - 0.0%
TOBACCO - 0.0%
Philip Morris Cos., Inc.:
9 3/4%, 5/1/97 100,000 103,357
9.45%, 11/19/97 100,000 103,034
TOTAL NONDURABLES 206,391
TECHNOLOGY - 1.4%
COMPUTER SERVICES & SOFTWARE - 1.4%
First Data Corp. 6 5/8%, 4/1/03 5,000,000 4,407,650
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.5%
Southwest Airlines Co. 8 3/4%, 10/15/03 1,500,000 1,513,740
NONCONVERTIBLE BONDS - CONTINUED
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
UTILITIES - 2.3%
ELECTRIC UTILITY - 2.3%
British Columbia Hydro & Power Authority
15 1/2%, 11/15/11 $ 6,000,000 $ 7,133,520
Virginia Electric & Power Co. 1st & ref. mtg.,
7 3/8%, 7/1/02 150,000 141,998
TOTAL UTILITIES 7,275,518
TOTAL NONCONVERTIBLE BONDS
(Cost $74,948,133) 70,040,386
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 25.2%
U.S. TREASURY OBLIGATIONS - 21.4%
8 5/8%, 1/15/95 (c) 5,000,000 5,017,200
9 3/8%, 4/15/96 4,900,000 5,033,966
6 1/2%, 5/15/97 15,000,000 14,650,800
5 1/8%, 3/31/98 16,000,000 14,800,000
8 7/8%, 2/15/99 3,000,000 3,118,110
8 7/8%, 8/15/17 6,750,000 7,271,033
8 1/8%, 8/15/19 16,130,000 16,135,000
6 1/4%, 8/15/23 1,000,000 800,470
TOTAL U.S. TREASURY OBLIGATIONS 66,826,579
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.8%
Financing Corp. :
10.70%, 10/6/17 4,500,000 5,549,063
principal strips 0%, 3/7/19 44,755,000 6,056,694
Federal Home Loan Banks, consolidated 8.60%, 2/27/95 200,000 200,750
Federal National Mortgage Association 8.20%, 3/10/98 200,000 203,062
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 12,009,569
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $84,441,662) 78,836,148
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 3.6%
PRINCIPAL VALUE
AMOUNT (A) (NOTE1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.0%
12 1/2%, 2/1/11 to 7/1/15 $ 230,397 $ 260,061
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.6%
8%, 6/15/23 4,203,662 3,996,085
8 1/2%, 4/15/17 to 8/15/24 1,071,221 1,048,865
9%, 5/15/16 to 10/15/18 6,146,253 6,196,480
11,241,430
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $11,731,694) 11,501,491
COMMERCIAL MORTGAGE SECURITIES - 1.3%
CS First Boston Mortgage Securities Corp. commercial
Series 1994-CFB1 Class A-2, 7.90%, 1/25/28 1,294,212 1,250,533
FDIC commercial Series 1994-C1 Class II-A1,
6.30%, 9/25/25 197,354 195,103
Resolution Trust Corp. commercial:
Series 1991-M5 Class A, 9%, 3/25/17 913,789 899,653
Series 1994-C2 Class A-2, 7 3/4%, 4/25/25 400,000 395,750
Series 1994-C2 Class A-4, 7 1/2%, 4/25/25 600,000 593,438
Series 1994-C1 Class A-4, 7 1/4%, 6/25/26 681,021 671,444
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $4,083,668) 4,005,921
FOREIGN GOVERNMENT OBLIGATIONS - 9.5%
Danish Government Bullet 7%, 12/15/04 DKK 90,000,000 13,107,022
French Government OAT 8 1/2%, 4/25/03 FRF 20,000,000 3,857,302
Province of Ontario, Canada:
6 5/8%, 6/22/04 6,000,000 5,676,600
15 1/8%, 5/1/11 5,000,000 5,737,650
17%, 11/5/11 1,000,000 1,215,880
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $32,702,881) 29,594,454
SUPRANATIONAL OBLIGATIONS - 1.5%
African Development Bank 8.70%, 5/1/01
(Cost $4,376,880) 4,500,000 4,613,490
REPURCHASE AGREEMENTS - 36.4%
MATURITY VALUE (NOTE1)
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 113,758,040 $ 113,740,000
PURCHASED OPTIONS - 0.1%
EXPIRATION DATE/ UNDERLYING FACE
STRIKE PRICE AMOUNT AT VALUE
135 Call Options on March U.S. Treasury
Bond Futures (Cost $311,819) Feb. 95/96 $ 13,238,438 407,109
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $326,336,737) $ 312,738,999
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
SOLD
232 U.S. Treasury Bond Futures Contracts Dec. 94 $ 22,895,500 $ 709,612
99 U.S. Treasury Bond Futures Contracts Mar. 95 $ 9,708,189 (54,464)
THE FACE VALUE OF FUTURES SOLD AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 10.4%
$ 655,148
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE VALUE GAIN/(LOSS)
CONTRACTS TO SELL
87,504,611 DKK 1/9/95 $ 14,247,582 $ 64,823
23,560,600 FRF 1/20/95 4,381,330 192,212
TOTAL CONTRACTS TO SELL
(Receivable amount $18,885,947) $ 18,628,912 $ 257,035
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.0%
CURRENCY ABBREVIATIONS
DKK - Danish krone
FRF - French franc
LEGEND
1. Principal amount is stated in United States dollars unless otherwise
noted.
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $10,481,600 or 3.3% of net
assets.
3. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $1,103,784.
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 62.3% AAA, AA, A 62.6%
Baa 0.8% BBB 0.5%
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 81.5%
Canada 6.3
Denmark 4.2
France 2.8
Korea 1.6
Supranational 1.5
Malaysia 1.2
Others (individually less than 1%) 0.9
TOTAL 100.0%
INCOME TAX INFORMATION
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $326,336,737. Net unrealized depreciation
aggregated $13,597,738, of which $1,366,090 related to appreciated
investment securities and $14,963,828 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>
ASSETS NOVEMBER 30, 1994
Investment in securities, at value (including repurchase $ 312,738,999
agreements of $113,740,000) (cost $326,336,737) -
See accompanying schedule
Unrealized appreciation on foreign currency contracts 257,035
Receivable for fund shares sold 1,016,565
Interest receivable 4,128,709
Receivable from investment adviser for expense 76,652
reductions
TOTAL ASSETS 318,217,960
LIABILITIES
Payable to custodian bank $ 809
Dividends payable 676,805
Accrued management fee 104,904
Distribution fees payable 30,191
Payable for daily variation on futures contracts 206,500
Other payables and accrued expenses 54,863
TOTAL LIABILITIES 1,074,072
NET ASSETS $ 317,143,888
Net Assets consist of:
Paid in capital $ 339,120,860
Distributions in excess of net investment income (1,751,181)
Accumulated undistributed net realized gain (loss) on (7,577,241)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (12,648,550)
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 317,143,888
CALCULATION OF MAXIMUM OFFERING PRICE $10.26
CLASS A:
NET ASSET VALUE, and redemption price per share
($141,865,543 (divided by) 13,829,988 shares)
Maximum offering price per share (100/95.25 of $10.26) $10.77
CLASS B: $10.25
NET ASSET VALUE, and offering price per share
($3,156,025 (divided by) 307,819 shares) A
INSTITUTIONAL CLASS: $10.27
NET ASSET VALUE, offering price and redemption price per
share ($172,122,320 (divided by) 16,766,681 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>
YEAR ENDED NOVEMBER 30, 1994
INVESTMENT INCOME 20,404,551
Interest
EXPENSES
Management fee $ 1,180,785
Transfer agent fees 317,202
Class A
Class B 3,403
Institutional Class 191,763
Distribution fees 264,949
Class A
Class B 6,759
Accounting fees and expenses 118,125
Non-interested trustees' compensation 1,636
Custodian fees and expenses 84,839
Registration fees 47,012
Class A
Class B 2,933
Institutional Class 11,119
Audit 31,482
Legal 18,390
Reports to shareholders 8,591
Miscellaneous 3,231
Total expenses before reductions 2,292,219
Expense reductions (80,045) 2,212,174
NET INVESTMENT INCOME 18,192,377
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (6,154,243)
Foreign currency transactions (2,189,908)
Futures contracts 4,778,569 (3,565,582)
Change in net unrealized appreciation (depreciation) on:
Investment securities (20,871,221)
Futures contracts (467,572)
Assets and liabilities in foreign currencies 153,095 (21,185,698)
NET GAIN (LOSS) (24,751,280)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ (6,558,903)
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 18,192,377 $ 14,447,662
Net investment income
Net realized gain (loss) (3,565,582) 4,656,282
Change in net unrealized appreciation (depreciation) (21,185,698) 3,826,967
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (6,558,903) 22,930,911
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (5,494,879) (1,503,763)
Class B (29,216) -
Institutional Class (10,193,519) (13,259,775)
Return of capital (Note 1)
Class A (571,345) -
Class B (3,038) -
Institutional Class (1,059,899) -
Total distributions (17,351,896) (14,763,538)
Share transactions - net increase (decrease) 98,080,216 72,068,562
TOTAL INCREASE (DECREASE) IN NET ASSETS 74,169,417 80,235,935
NET ASSETS
Beginning of period 242,974,471 162,738,536
End of period (including distributions in excess of net $ 317,143,888 $ 242,974,471
investment income of $1,751,181 and $517,821,
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.160 $ 10.640 $ 10.550 $ 10.140 $ 10.410
period
Income from Investment
Operations
Net investment income .602 .832 .840 .884 .901
Net realized and unrealized (.833) .531 .102 .411 (.270)
gain (loss) on investments
Total from investment (.231) 1.363 .942 1.295 .631
operations
Less Distributions
From net investment income (.597) (.843) (.852) (.885) (.901)
From return of capital (.062) - - - -
Total distributions (.659) (.843) (.852) (.885) (.901)
Net asset value, end of period $ 10.270 $ 11.160 $ 10.640 $ 10.550 $ 10.140
TOTAL RETURN (2.10)% 13.17% 9.21% 13.35% 6.46%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 172 $ 184 $ 160 $ 328 $ 357
(in millions)
Ratio of expenses to average .61% .64% .57% .57% .58%
net assets
Ratio of net investment income 6.45% 7.41% 7.96% 8.59% 8.90%
to average net assets
Portfolio turnover 68% 59% 7% 60% 59%
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended November 30, 1994
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Limited Term Bond Fund (the fund) is a fund of Fidelity
Advisor Series IV (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust.
The fund offers 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. The fund
commenced sale of Class B shares on June 30, 1994. 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.
Effective December 1, 1993, the fund adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported 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. Further, as permitted under the SOP, the effects of
changes in foreign currency exchange rates on investments in securities are
not segregated in the Statement of Operations from the effects of changes
in market prices of those securities, but are included with the net
realized and unrealized gain or loss on investment securities.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. 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 are primarily due to differing treatments for
paydown gains/losses on certain securities, futures and options
transactions, foreign currency transactions, market discount, capital loss
carryforwards, and losses deferred due to futures and options.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect net investment income per share. Distributions in excess of net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
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. (The tax treatment of distributions for the
1994 calendar year will be reported to shareholders prior to February 1,
1995.)
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1, 1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of the beginning of the fiscal year have been
reclassified to reflect an increase in paid in capital of $16,863, an
increase in undistributed net investment income of $189,510 and an increase
in accumulated net realized loss on investments of $206,373.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The fund may enter into forward foreign
currency contracts. These contracts involve market risk in excess of the
amount reflected in the fund's Statement of Assets and Liabilities. The
face or contract amount in U.S. dollars, as reflected in the schedule of
investments under the caption "Forward Foreign Currency Contracts,"
reflects the total exposure the fund has in that particular currency
contract. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. Losses may arise due to changes in the value of the foreign
currency or if the counterparty does not perform under the contract.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset, otherwise gain (loss) is recognized on
settlement date.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible for
determining that the value of these underlying securities remains at least
equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of 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.
FUTURES CONTRACTS AND OPTIONS. The fund may invest in futures and options
contracts, and may also write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. The face or contract
amounts, as reflected in the schedule of investments under the captions
"Purchased Options" and "Futures Contracts," reflect the extent of the
involvement the fund has in the particular classes of instruments. Risks
may be caused by an imperfect correlation between movements in the price of
the instruments and the price of the underlying securities and interest
rates. Risks also may arise if there is an illiquid secondary market for
the instruments, or due to the inability of counterparties to perform.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Options traded
on an exchange are valued using the last sale price or, in the absence of a
sale, the last offering price. Options traded over-the-counter are valued
using dealer-supplied valuations.
3. JOINT TRADING ACCOUNT.
At the end of the period, the fund had 20% or more of its total investments
in repurchase agreements through a joint trading account. These repurchase
agreements were with entities whose creditworthiness has been reviewed and
found satisfactory by FMR. The repurchase agreements were dated November
30, 1994 and due December 1, 1994. The maturity values of the joint trading
account investments were $113,758,040 at 5.71%. The investments in
repurchase agreements through the joint trading account are summarized as
follows:
SUMMARY OF JOINT TRADING
Number of dealers or banks 27
Maximum amount with one dealer or bank 12.6%
Aggregate principal amount of agreements $15,846,209,000
Aggregate maturity amount of agreements $15,848,720,893
Aggregate market value of collateral $16,195,630,163
Coupon rates of collateral 3 7/8% to 15 3/4%
Maturity dates of collateral 12/1/94 to 11/15/24
4. PURCHASES AND SALES OF
INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $187,738,291 and $137,192,250, respectively, of which U.S.
government and government agency obligations aggregated $145,176,153 and
$82,850,765, respectively.
The market value of futures contracts opened and closed during the period
amounted to $166,921,612 and $158,380,105, 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 .1325% to .3700% for the period December 1, 1993 to July
31, 1994 and .1200% to .3700% for the period August 1, 1994 to November 30,
1994. In the event that these rates were lower than the contractual rates
in effect during those periods, FMR voluntarily implemented the above
rates, as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .25%. On December 14, 1994, shareholders of
the fund approved an increase in the individual fund fee rate from .25% to
.30%, effective February 24, 1995. For the period, the management fee was
equivalent to an annual rate of .41% of average net assets.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted separate 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 $264,949 and $6,759 under the Class A Plan and
Class B Plan, respectively, of which $264,949 and $1,689 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 $1,598,883 on sales of Class A shares of the fund, of which
$1,361,236 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 $1,279 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. The Transfer Agents receive fees
based on the type, size, number of accounts, and the number of transactions
made by 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.
5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
ACCOUNTING FEES. FSC maintains the fund's accounting records. The fee is
based on the level of average net assets for the month plus out-of-pocket
expenses.
6. EXPENSE REDUCTIONS.
Effective July 1, 1994, FMR voluntarily agreed to reimburse the fund's
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) above an annualized rate of .90% and 1.65% of
average net assets for Class A shares and Class B shares, respectively.
For the period, the reimbursement reduced expenses by $73,313 and $5,232
for Class A shares and Class B shares, respectively.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. For the period, the fund's expenses were reduced by
$1,500 under this arrangement.
7. SHARE TRANSACTIONS.
Share transactions for each class were as follows:
SHARE TRANSACTIONS
SHARES DOLLARS
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994 A 1993 1994 A 1993
CLASS A
Shares sold 14,851,591 5,818,646 $ 158,332,548 $ 64,747,544
Reinvestment of distributions 505,870 103,874 5,325,831 1,150,638
Shares redeemed (6,838,590) (854,187) (72,563,524) (9,510,209)
Net increase (decrease) 8,518,871 5,068,333 $ 91,094,855 $ 56,387,973
CLASS B
Shares sold 350,868 - $ 3,635,180 $ -
Reinvestment of distributions 2,301 - 23,687 -
Shares redeemed (45,350) - (466,837) -
Net increase (decrease) 307,819 - $ 3,192,030 $ -
INSTITUTIONAL CLASS
Shares sold 9,336,746 7,097,429 $ 99,248,710 $ 78,489,883
Reinvestment of distributions 246,604 298,266 2,616,244 3,295,101
Shares redeemed (9,291,204) (5,977,104) (98,071,623) (66,104,395)
Net increase (decrease) 292,146 1,418,591 $ 3,793,331 $ 15,680,589
A SHARE TRANSACTIONS FOR THE CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALE OF SHARES) TO NOVEMBER 30, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Advisor Limited Term Bond Fund:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Advisor Limited Term Bond Fund,
including the schedule of portfolio investments, as of November 30, 1994,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended (Institutional Class) and for the two years in the period
then ended and for the period September 10, 1992 (commencement of sale of
Class A shares) to November 30, 1992 (Class A) and for the period June 30,
1994 (commencement of sale of Class B shares) to November 30, 1994 (Class
B). These financial statements and financial highlights are the
responsibility of the fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Advisor Limited Term Bond Fund as
of November 30, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended (Institutional Class) and for the two years in the
period then ended and for the period September 10, 1992 (commencement of
sale of Class A shares) to November 30, 1992 (Class A) and for the period
June 30, 1994 (commencement of sale of Class B shares) to November 30, 1994
(Class B), in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 9, 1995
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Michael Gray, Vice President
Thomas J. Steffanci, Vice President
Gary L. French, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
Arthur S. Loring, Secretary
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Company
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
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 Portfolio Income
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)
