(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
INCOME & GROWTH
FUND - CLASS A
SEMIANNUAL REPORT
APRIL 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 29 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 33 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND
INCLUDING
CHARGES AND EXPENSES, CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE
PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been some positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor Income & Growth - Class A 2.92% 2.92% 76.76% 150.37%
Advisor Income & Growth - Class A
(incl. max. 4.75% sales charge) -1.97% -1.97% 68.36% 138.47%
S&P 500(registered trademark) 10.47% 17.47% 81.29% 166.01%
Lehman Brothers Aggregate Bond Index 7.01% 6.51% 56.73% n/a
Average Balanced Fund 6.31% 8.59% 64.66% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 6, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. For comparison, you can look at both the
performance of the Standard & Poor's Composite Index of 500 Stocks - a
common proxy for the U.S. stock market - and the performance of the Lehman
Brothers Aggregate Bond Index, a broad measure of the bond market. To
measure how the fund's performance stacked up against its peers, you can
compare it to the average balanced fund, which reflects the performance of
199 balanced funds with similar objectives tracked by Lipper Analytical
Services over the past six months. These benchmarks include reinvested
dividends and capital gains, if any, and exclude the effects of sales
charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor Income & Growth - Class A 2.92% 12.07% 11.66%
Advisor Income & Growth - Class A
(incl. max. 4.75% sales charge) -1.97% 10.98% 11.01%
S&P 500 17.47% 12.64% 12.48%
Lehman Brothers Aggregate Bond Index 6.51% 9.40% n/a
Average Balanced Fund 8.59% 10.42% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity AdvisorStandard & Poor'Aggregate Bond In
01/31/87 9525.00 10000.00 10000.00
02/28/87 9808.91 10395.00 10069.35
03/31/87 10193.23 10695.42 10023.96
04/30/87 9944.62 10600.23 9749.09
05/31/87 9916.99 10692.45 9710.95
06/30/87 10156.26 11232.42 9844.60
07/31/87 10646.94 11801.90 9837.04
08/31/87 10869.14 12242.11 9784.40
09/30/87 10684.30 11974.01 9576.04
10/31/87 8801.03 9394.81 9917.10
11/30/87 8642.53 8620.68 9996.53
12/31/87 9020.35 9276.71 10132.70
01/31/88 9549.84 9667.26 10488.89
02/29/88 9946.97 10117.75 10613.40
03/31/88 9975.33 9805.11 10513.79
04/30/88 10147.81 9913.95 10457.05
05/31/88 10186.14 10000.20 10386.76
06/30/88 10608.64 10459.21 10637.35
07/31/88 10569.81 10419.47 10581.56
08/31/88 10530.99 10065.20 10609.30
09/30/88 10725.98 10493.98 10849.49
10/31/88 10883.28 10785.71 11053.74
11/30/88 10775.14 10631.48 10919.46
12/31/88 10904.25 10817.53 10931.76
01/31/89 11333.24 11609.37 11089.05
02/28/89 11373.14 11320.30 11008.67
03/31/89 11564.55 11584.06 11056.26
04/30/89 12029.15 12185.28 11287.63
05/31/89 12423.05 12678.78 11584.24
06/30/89 12594.29 12606.51 11936.96
07/31/89 13166.30 13744.88 12190.70
08/31/89 13370.58 14014.28 12010.09
09/30/89 13391.46 13956.82 12071.55
10/31/89 13184.96 13633.02 12369.11
11/30/89 13453.41 13911.13 12487.00
12/31/89 13586.37 14245.00 12520.41
01/31/90 12929.15 13289.16 12371.63
02/28/90 12963.14 13460.59 12411.35
03/31/90 13144.59 13817.30 12420.49
04/30/90 12972.54 13471.87 12306.70
05/31/90 13454.27 14785.37 12671.08
06/30/90 13511.35 14684.83 12874.39
07/31/90 13476.53 14637.84 13052.48
08/31/90 12652.38 13314.58 12878.17
09/30/90 12360.36 12666.16 12984.71
10/31/90 12242.75 12611.70 13149.57
11/30/90 12795.50 13426.41 13432.62
12/31/90 13186.54 13801.01 13641.92
01/31/91 13867.37 14402.73 13810.56
02/28/91 14679.58 15432.53 13928.45
03/31/91 15052.43 15805.99 14024.27
04/30/91 15341.90 15843.93 14176.20
05/31/91 15981.14 16528.39 14259.10
06/30/91 15653.60 15771.39 14251.85
07/31/91 16323.08 16506.33 14449.49
08/31/91 16736.94 16897.53 14762.17
09/30/91 16860.17 16615.34 15061.31
10/31/91 17351.36 16837.99 15229.00
11/30/91 16946.12 16159.42 15368.64
12/31/91 17733.45 18008.06 15825.06
01/31/92 17850.12 17673.11 15609.77
02/29/92 18226.05 17902.86 15711.27
03/31/92 18161.34 17553.75 15622.70
04/30/92 18305.17 18069.83 15735.54
05/31/92 18671.27 18158.37 16032.47
06/30/92 18501.50 17887.81 16253.11
07/31/92 19041.79 18619.43 16584.71
08/31/92 19041.79 18237.73 16752.72
09/30/92 19199.32 18452.93 16951.30
10/31/92 19132.94 18517.52 16726.56
11/30/92 19252.43 19148.96 16730.34
12/31/92 19364.85 19384.50 16996.38
01/31/93 19730.23 19547.33 17322.30
02/28/93 20151.82 19813.17 17625.53
03/31/93 20912.40 20231.23 17698.98
04/30/93 21507.46 19741.63 17822.22
05/31/93 21918.34 20270.71 17844.92
06/30/93 21777.21 20329.49 18168.32
07/31/93 22005.70 20248.18 18271.08
08/31/93 22805.38 21015.58 18591.33
09/30/93 22592.17 20853.76 18642.40
10/31/93 22894.36 21285.43 18712.06
11/30/93 22592.17 21083.22 18552.88
12/31/93 23171.03 21338.33 18653.43
01/31/94 23815.08 22063.83 18905.28
02/28/94 23395.70 21465.90 18576.83
03/31/94 22461.33 20529.99 18118.83
04/30/94 22280.19 20792.77 17974.15
05/31/94 22370.76 21133.77 17971.63
06/30/94 21946.21 20616.00 17931.91
07/31/94 22370.58 21292.20 18288.10
08/31/94 22643.39 22165.18 18310.80
09/30/94 22492.08 21622.14 18041.29
10/31/94 22279.46 22108.63 18025.22
11/30/94 21975.72 21303.44 17985.19
12/31/94 21990.90 21619.37 18109.38
01/31/95 21929.65 22179.96 18467.77
02/28/95 22312.50 23044.31 18906.86
03/31/95 22683.21 23724.35 19022.85
04/28/95 22930.27 24423.03 19288.57
$10,000 OVER LIFE OF FUND: Let's
say you invested $10,000 in Fidelity Advisor Income & Growth Fund - Class A
on January 31, 1987, shortly after the fund started, and paid the maximum
4.75% sales charge. As the chart shows, by April 30, 1995, the value of
your investment would have grown to $22,930 - a 129.30% increase on your
initial investment. For comparison, look at how both the S&P 500 and Lehman
Brothers Aggregate Bond Index did over the same period. With dividends
reinvested, the same $10,000 investment in the S&P 500 would have grown to
$24,423 - a 144.23% increase. If you had put $10,000 in the bond index, it
would have grown to $19,289 - a 92.89% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In
turn, the share price and
return of a fund that invests in
stocks or 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Robert Haber, Portfolio Manager of Fidelity Advisor
Income and Growth Fund
Q. BOB, HOW DID THE FUND DO?
A. The fund had a total return of 2.92% for both the six- and 12-month
periods ended April 30, 1995. That compared to total returns of 6.31% and
8.59% for the average balanced fund during the same periods, respectively,
according to Lipper Analytical Services.
Q. LET'S DISCUSS THE SIX-MONTH PERIOD. WHY DID THE FUND TRAIL ITS PEER
GROUP AVERAGE?
A. Two key reasons. First, the fund emphasized cyclical stocks - those that
tend to rise and fall with the economy - based on my belief that strong
worldwide demand for commodities such as aluminum, chemicals and paper
would translate into excellent earnings growth for well-run cyclical
companies. As it turned out, I was correct on most of my earnings estimates
for these companies; earnings were strong. However, many investors worried
that rising interest rates would slow the economy, which, in turn, might
slow the profits of cyclical companies. That led to a broad market shift in
late 1994 and early 1995 away from cyclicals toward the stocks of companies
that might have more predictable earnings growth in the face of higher
rates. These included consumer nondurables such as beverages, food and
tobacco, and health care and pharmaceutical stocks. Because the fund was
underweighted in these sectors relative to many of its peers, it lagged
behind.
Q. AND THE SECOND REASON?
A. The second reason had to do with asset allocation. Six months ago I felt
that bonds generally offered better risk/reward prospects than stocks.
Stock valuations - prices relative to other measures such as earnings
- -still were historically high, while bonds appeared to be oversold after
their worst period of performance in decades. For those reasons, I kept the
portfolio overweighted in bonds and underweighted in stocks relative to
many of its peers. As the six months progressed, bonds did rally in the
U.S. and in many overseas countries. However, U.S. stocks were the big
winners. Continued strong earnings and greater confidence that the economy
could indeed slow without falling into recession propelled the market to
record highs. However, because of its asset allocation, the fund didn't
participate in that rally as fully as some of its peers.
Q. LET'S START WITH BONDS. HAVE YOU MADE ANY CHANGES TO THE FIXED-INCOME
PORTION OF THE PORTFOLIO?
A. I have. I've reduced the fund's overall stake in foreign investments
from 36.8% six months ago to 17.9% on April 30, 1995. Much of that
reduction occurred when I shifted some overseas fixed-income investments to
the United States. First, the fund's less than 10% stake in Latin American
bonds - in Argentina and Mexico - suffered when Mexico suddenly devalued
the peso. Although these bonds subsequently rallied a few months later, I
did reduce the fund's Latin American position mainly because economic and
political conditions in these countries were no longer as attractive as
they had been. In addition, I reduced the fund's investment in French
bonds, which made up roughly 6% of the fund six months ago. Those bonds had
recovered nicely through late '94 and early '95. Part of those solid
returns were due to the weak U.S. dollar, which boosted the returns of most
of the fund's overseas investments when translated back into dollars.
However, economies were starting to heat up in Europe, which made prospects
for inflation worrisome. In addition, the U.S. economy was showing signs of
slowing, and inflation here appeared to be under control. If the U.S.
economy appears to strengthen again and higher inflation begins to appear
more likely, I might revisit this strategy.
Q. DID YOU REDUCE OVERSEAS HOLDINGS IN STOCKS AS WELL?
A. I did reduce the fund's European stock investments at the beginning of
1995, and increased its stake in U.S. stocks. Again, my concern was that
strengthening economies might lead to higher interest rates. In addition,
if the dollar - which recently has been historically weak - strengthens
against European currencies, any positive returns on foreign investments
would be negated somewhat. As it turned out, U.S. stocks have performed far
better than European stocks thus far in 1995.
Q. GOING BACK TO THE FUND'S EMPHASIS ON CYCLICAL STOCKS, HAVE YOU SHIFTED
YOUR STRATEGY AT ALL?
A. I've made small shifts here and there, but my overall strategy with
regard to cyclicals hasn't changed. I still believe that many world
economies - including those in Europe and Japan - are showing signs of
strengthening. In addition, many cyclical companies effectively cut costs
when times were lean a few years back. Now that the supply/demand
environment has improved for most cyclical industries, earnings growth has
been strong, which I expect will continue. If it does, I believe that the
market, at some point, will have to reward the strong earnings growth of
cyclical companies with higher stock prices. A few of the fund's largest
cyclical stock investments include Union Camp and Temple-Inland, which are
paper manufacturers, and Olin, a chemical company.
Q. LOOKING BEYOND THESE BASIC INDUSTRIES STOCKS, THE FUND'S NEXT LARGEST
SECTORS ARE ENERGY AND TECHNOLOGY. WHERE HAVE YOU FOUND OPPORTUNITIES IN
THESE GROUPS?
A. These two groups have produced some of the fund's best performing stock
investments over the past six months. On the technology side, computer
hardware manufacturers IBM and Tandem Computers benefited from increasing
demand for their products, which helped both companies produce strong
earnings growth. As for energy stocks, rising oil prices and an effective
multi-year restructuring effort have resulted in strong earnings for
British Petroleum. And I believe that increasing worldwide demand for oil
and a potentially limited supply should bode well for the company's
business prospects going forward.
Q. BOB, WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. Stock valuations are certainly higher than they were six months ago,
which is worrisome. However, corporate earnings continue to be very strong.
Assuming interest rates remain relatively stable and economic growth
remains steady, albeit slower, stocks could do well. In that type of
environment, I believe positive market sentiment would have to broaden to
include cyclical stocks. The big risk for stocks is if interest rates have
slowed the economy enough to trigger a recession. As for bonds, the key is
inflation. Bond valuations remain quite attractive, so if the economy can
indeed grow without triggering higher inflation, bonds could continue to do
well. However, if the economy should get a second wind and strengthen
through the rest of the year, bonds could be at risk.
FUND FACTS
GOAL: to provide as much
income as possible,
consistent with the
preservation of capital, by
investing in both stocks and
bonds
START DATE: January 6, 1987
SIZE: as of April 30, 1995,
more than $3.4 billion
MANAGER: Robert Haber,
since January 1987; joined
Fidelity in 1985
(checkmark)
BOB HABER ON USING STANDARD &
POOR'S 500 FUTURES:
"On April 30, 1995, the fund
had a stake equivalent to
roughly 8.2% of its
investments in S&P 500 stock
index futures. I make limited
use of futures on occasion. For
example, early in 1995 I sold
some of the fund's stock
investments in Europe. While I
was deciding how best to
re-allocate that cash, I put the
money into S&P 500 futures.
These instruments track the
performance of the S&P 500
index, so they allow the fund
to participate in broad market
movements until I invest that
cash in individual stocks. As it
turned out, the performance
of the S&P 500 thus far in
1995 has been excellent
relative to that of most
stocks."
(solid bullet) On April 30, 1995 the
fund had 30.7% of its
investments in stocks and
equity futures, 19.7% in
bonds, 15.5% in convertible
securities and 34.1% in
short-term and other
investments. Six months ago,
the fund had 27.3% in stocks
and equity futures, 34.1% in
bonds, 19.4% in convertible
securities and 19.2% in
short-term and other
investments.
INVESTMENT CHANGES
TOP FIVE STOCKS AS OF APRIL 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Occidental Petroleum Corp. Indexed $3, Series 1.2 0.8
A
Union Camp Corp. 1.2 0.0
British Petroleum PLC ADR 1.1 0.6
Unocal Corp. $3.50 0.9 0.8
Temple-Inland, Inc. 0.8 0.8
TOP FIVE FIXED-INCOME SECURITIES AS OF APRIL 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
(BY ISSUER, WITH MATURITIES OF MORE THAN ONE YEAR) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE SECURITIES
6 MONTHS AGO
U.S. Treasury Obligations (various issues) 14.9 13.2
French Government (various issues) 2.2 6.0
United Kingdom Treasury (various issues) 1.5 1.0
Stone Container Corp. 8 7/8%, 7/15/00 1.3 1.3
Thermo Electron Corp. 4 5/8%, 8/1/97 1.0 0.9
</TABLE>
TOP FIVE INDUSTRIES AS OF APRIL 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE INDUSTRIES
6 MONTHS AGO
Basic Industries 11.9 12.6
Energy 6.4 6.4
Technology 5.6 6.2
Durables 2.1 2.3
Finance 1.7 2.8
ASSET ALLOCATION
AS OF APRIL 30, 1995 * AS OF OCTOBER 31, 1994 **
Stocks and
equity futures 27.3%
Bonds 34.1%
Convertible
securities 19.4%
Short-term
investments 19.1%
Other
investments 0.1%
FOREIGN
INVESTMENTS 36.8%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 33.0
Row: 1, Col: 3, Value: 15.5
Row: 1, Col: 4, Value: 19.7
Row: 1, Col: 5, Value: 30.7
Stocks and
equity futures 30.7%
Bonds 19.7%
Convertible
securities 15.5%
Short-term
investments 34.0%
Other
investments 0.1%
FOREIGN
INVESTMENTS 17.9%
Row: 1, Col: 1, Value: 2.0
Row: 1, Col: 2, Value: 19.1
Row: 1, Col: 3, Value: 19.4
Row: 1, Col: 4, Value: 33.0
Row: 1, Col: 5, Value: 27.3
*
**
INVESTMENTS APRIL 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 20.8%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 0.7%
AEROSPACE & DEFENSE - 0.5%
Northrop Corp. 268,300 $ 13,314
Rockwell International Corp. 80,000 3,490
16,804
DEFENSE ELECTRONICS - 0.2%
Raytheon Co. 62,700 4,561
Tech-Sym Corp. 5,500 139
Tracor, Inc. (a) 61,000 793
Watkins-Johnson Co. 64,700 2,564
8,057
TOTAL AEROSPACE & DEFENSE 24,861
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 2.3%
Cominco Fertilizer Ltd. 154,300 4,737
Geon Co. 1,000 27
Kemira OY 1,099,700 9,285
Methanex Corp. (a) 2,015,000 21,176
Mississippi Chemical Corp. 117,900 2,240
Olin Corp. 389,600 21,769
Vigoro Corp. 1,000 40
Wellman, Inc. 556,800 15,034
Witco Corp. 89,000 2,548
76,856
IRON & STEEL - 0.2%
Armco, Inc. (a) 1,000 7
J & L Specialty Steel, Inc. 287,300 5,315
Material Sciences Corp. (a) 122,100 2,213
Quanex Corp. 26,300 611
8,146
METALS & MINING - 1.4%
Alcan Aluminium Ltd. 348,300 9,889
Alumax, Inc. (a) 1,000 28
Aluminum Co. of America 332,800 14,934
Cominco Ltd. (a) 1,000 17
IMCO Recycling, Inc. 4,700 74
Kaiser Aluminum Corp. (a) 400 5
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
BASIC INDUSTRIES - CONTINUED
METALS & MINING - CONTINUED
Reynolds Metals Co. 166,600 $ 8,392
Sherritt Gordon Ltd. (a) 1,286,700 13,285
Union Miniere SA (a) 1,000 76
46,700
PACKAGING & CONTAINERS - 0.1%
Mayr Melnhof Karton AG (a) 79,600 4,604
PAPER & FOREST PRODUCTS - 3.7%
Aracruz Celulose SA ADR 1,153,733 11,105
Boise Cascade Corp. 1,000 33
Bowater, Inc. 1,000 38
Cascades, Inc. (a) 1,244,700 6,540
Chesapeake Corp. 146,200 4,532
Consolidated Papers, Inc. 268,800 13,171
Harmac Pacific, Inc. 1st installment receipt (a)(j) 323,000 1,727
James River Corp. of Virginia 1,000 27
Jefferson Smurfit Corp. (a) 205,100 2,769
Mead Corp. 1,000 52
QUNO Corp. (a) 217,530 4,011
QUNO Corp. (a)(e) 12,300 227
Smurfit (Jefferson) Group PLC 2,524,490 15,016
Temple-Inland, Inc. 621,600 27,350
Union Camp Corp. 800,700 40,135
126,733
TOTAL BASIC INDUSTRIES 263,039
CONGLOMERATES - 0.5%
Harris Corp. 184,400 8,667
Tyco International Ltd. 166,000 8,715
17,382
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.3%
Carlisle Companies, Inc. 1,000 38
Dexter Corp. 174,200 3,985
Texas Industries, Inc. 134,500 5,061
Vulcan Materials Co. 1,000 58
9,142
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
ENGINEERING - 0.0%
Maculan Holding AG Ord. 100 $ 4
REAL ESTATE INVESTMENT TRUSTS - 0.2%
CBL & Associates Properties 45,400 885
Cali Realty Corp. (a) 99,300 1,663
Crown American Realty Trust (SBI) 32,900 411
Equity Residential Property Trust (SBI) 4,100 110
Highwoods Properties, Inc. 78,000 1,716
LTC Properties, Inc. 211,300 2,747
7,532
TOTAL CONSTRUCTION & REAL ESTATE 16,678
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Bandag, Inc. 14,700 873
Borg-Warner Automotive, Inc. 43,200 1,112
Calsonic Corp. 148,000 1,169
Chrysler Corp. 1,000 43
Dana Corp. 111,300 2,866
Fiat Spa 3,115,600 12,714
Johnson Controls, Inc. 226,100 12,266
Michelin Class B 14,200 630
Montupet SA 4,385 739
Snap-on Tools Corp. 31,500 1,173
Superior Industries International, Inc. 100,100 2,653
TRW, Inc. 239,400 17,805
54,043
CONSUMER ELECTRONICS - 0.3%
Matsushita Electric Industrial Co. Ltd. 550,000 9,211
TEXTILES & APPAREL - 0.0%
Russell Corp. 1,400 41
Westpoint Stevens, Inc. Class A 1,000 18
59
TOTAL DURABLES 63,313
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - 2.6%
ENERGY SERVICES - 0.1%
Halliburton Co. 1,000 $ 38
Helmerich & Payne, Inc. 1,000 30
McDermott International, Inc. 1,000 28
Petroleum Helicopters, Inc. (non vtg.) 106,000 901
Pride Petroleum Services, Inc. (a) 100 1
Production Operators Corp. 86,600 2,425
Tuboscope Vetco Corp. (a) 1,000 7
3,430
OIL & GAS - 2.5%
Amerada Hess Corp. 44,100 2,233
Atlantic Richfield Co. 72,100 8,255
Barrett Resources Corp. (a) 100 2
Berry Petroleum Co. Class A 262,800 2,595
British Petroleum PLC ADR 430,100 37,042
Cabot Oil & Gas Corp. Class A 1,000 16
Canada Occidental Petroleum Ltd. 1,000 29
Crown Central Petroleum Corp.:
Class A (a) 1,000 15
Class B (a) 1,000 15
Forest Oil Corp. (a) 1,000 2
Imperial Oil Ltd. 344,100 12,276
Pancanadian Petroleum Ltd. 141,600 4,804
San Juan Basin Royalty Trust (UBI) 105,400 685
Santa Fe Energy Resources, Inc. (a) 238,000 2,231
Elf Gabon 29,650 5,903
Unocal Corp. 56,000 1,610
Wascana Energy, Inc. 568,300 5,344
83,057
TOTAL ENERGY 86,487
FINANCE - 0.2%
BANKS - 0.1%
Bank of Boston Corp. 35,634 1,194
CPR (Comp Par Reescompte) 20,298 1,484
First Security Corp. 73,600 1,757
4,435
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
INSURANCE - 0.1%
ACE Ltd. 109,100 $ 2,891
Travelers, Inc. (The) 1,000 41
USLIFE Corp. 1,000 38
2,970
TOTAL FINANCE 7,405
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Community Psychiatric Centers 247,600 3,281
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
ELECTRICAL EQUIPMENT - 0.5%
Mitsubishi Electric Co. Ord. 766,000 5,422
Omron Corp. 526,000 10,308
15,730
INDUSTRIAL MACHINERY & EQUIPMENT - 0.3%
Aida Engineering Ltd. Ord. 88,000 695
Allied Products Corp. (a) 100 2
Cascade Corp. 1,000 16
Caterpillar, Inc. 106,400 6,224
Finning Ltd. 1,000 15
Parker-Hannifin Corp. 64,300 3,344
Regal-Beloit Corp. 1,000 15
Varlen Corp. 51,100 1,201
11,512
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 27,242
MEDIA & LEISURE - 0.0%
ENTERTAINMENT - 0.0%
Players International, Inc. (a) 1,000 30
LODGING & GAMING - 0.0%
Resort Hotels PLC (a) 5,487,300 -
PUBLISHING - 0.0%
Harcourt General, Inc. 11,400 466
TOTAL MEDIA & LEISURE 496
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
NONDURABLES - 0.8%
FOODS - 0.4%
IBP, Inc. 353,900 $ 13,094
HOUSEHOLD PRODUCTS - 0.1%
Guest Supply, Inc. (a) 93,900 1,972
Helene Curtis Industries, Inc. 22,700 780
2,752
TOBACCO - 0.3%
Philip Morris Companies, Inc. 1,000 68
RJR Nabisco Holdings Corp. 338,760 9,274
9,342
TOTAL NONDURABLES 25,188
PRECIOUS METALS - 1.0%
Barrick Gold Corp. 172,000 4,186
Battle Mountain Gold Co. 1,959,200 21,551
Buffelsfontein Gold Mining Co. Ltd.:
ADR 28,300 184
Ord. (a) 3,100 21
Echo Bay Mines Ltd. 80,000 774
Free State Consolidated Gold Mines Ltd.:
ADR 96,600 1,147
Ord. 24,186 296
Glamis Gold Ltd. 89,500 751
Hecla Mining Co. (a) 193,100 2,052
Homestake Mining Co. 229,500 3,873
Newmont Mining Corp. 1,000 42
Vaal Reefs Exploration & Mining Co. Ltd. ADR 112,800 691
35,568
RETAIL & WHOLESALE - 0.2%
APPAREL STORES - 0.0%
Claire's Stores, Inc. 23,400 325
GENERAL MERCHANDISE STORES - 0.0%
Dayton Hudson Corp. 1,000 67
May Department Stores Co. (The) 1,000 36
103
GROCERY STORES - 0.1%
Vons Companies, Inc. 196,600 4,030
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Tandy Corp. 25,600 $ 1,267
Uny Co. Ltd. 204,000 3,683
4,950
TOTAL RETAIL & WHOLESALE 9,408
SERVICES - 0.5%
PRINTING - 0.3%
Donnelley (R.R.) & Sons Co. 1,000 34
Reynolds & Reynolds Co. Class A 31,900 845
Toppan Printing Co. Ltd. 525,000 7,607
8,486
SERVICES - 0.2%
BET PLC Ord. 3,399,700 6,494
Western Atlas, Inc. (a) 400 18
6,512
TOTAL SERVICES 14,998
TECHNOLOGY - 2.7%
COMMUNICATIONS EQUIPMENT - 0.1%
Dynatech Corp. 117,000 2,048
COMPUTER SERVICES & SOFTWARE - 0.1%
Policy Management Systems Corp. (a) 58,000 2,922
COMPUTERS & OFFICE EQUIPMENT - 0.5%
Amdahl Corp. 59,400 705
Apple Computer, Inc. 44,500 1,702
Hewlett-Packard Co. 2,000 132
In Focus Systems, Inc. (a) 224,500 6,005
International Business Machines Corp. 82,300 7,798
Sun Microsystems, Inc. (a) 1,000 40
16,382
ELECTRONIC INSTRUMENTS - 0.0%
TSI, Inc. 1,500 14
Teradyne, Inc. (a) 400 20
Varian Associates, Inc. 1,000 46
80
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - CONTINUED
ELECTRONICS - 2.0%
CMK Corp. 100,000 $ 1,485
Dallas Semiconductor Corp. 536,900 10,738
Hirose Electric Co. Ltd. 73,000 4,431
Hitachi Ltd. 854,000 8,672
Kyocera Corp. 94,000 7,257
Marshall Industries (a) 141,600 3,912
Methode Electronics, Inc. Class A 250,400 4,319
Nitto Denko Corp. 358,000 5,570
Nichicon Corp. 499,000 7,112
Ryoyo Electro Corp. Ord. 67,000 1,512
TDK Corp. 76,000 3,466
Texas Instruments, Inc. 95,200 10,091
68,565
TOTAL TECHNOLOGY 89,997
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
Northwest Airlines Corp. Class A (a) 1,000 30
TRUCKING & FREIGHT - 0.0%
Harper Group 32,000 616
TOTAL TRANSPORTATION 646
UTILITIES - 0.6%
ELECTRIC UTILITY - 0.2%
Texas Utilities Co. 233,500 7,618
GAS - 0.0%
ENSERCH Corp. 1,000 17
Questar Corp. 1,000 30
47
TELEPHONE SERVICES - 0.4%
Koninklijke PPT Nederland 205,800 7,173
Koninklijke PPT Nederland (e) 173,000 6,030
13,203
TOTAL UTILITIES 20,868
TOTAL COMMON STOCKS
(Cost $682,454) 706,857
PREFERRED STOCKS - 5.3%
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - 5.1%
BASIC INDUSTRIES - 1.4%
IRON & STEEL - 0.0%
Armco, Inc. Class A, $3.625 24,900 $ 1,320
METALS & MINING - 1.4%
Alumax, Inc., Series A, $4.00 54,133 6,537
Kaiser Aluminum Corp. despositary shares representing
1/10 share, Series A, $.65 1,085,800 9,365
Kaiser Aluminum Corp. $.97 Prides 242,800 2,671
Magna Copper Co. Series D $2.80 (g) 121,900 7,405
Reynolds Metals Co. $3.31 419,900 20,260
46,238
TOTAL BASIC INDUSTRIES 47,558
ENERGY - 2.1%
ENERGY SERVICES - 0.0%
McDermott International, Inc. $2.875, Series C (e) 8,900 408
OIL & GAS - 2.1%
Occidental Petroleum Corp. Indexed $3, Series A 718,400 40,949
Santa Fe Energy Resources, Inc. $.732 44,000 424
Unocal Corp. $3.50 (e) 554,100 30,060
71,433
TOTAL ENERGY 71,841
FINANCE - 0.7%
BANKS - 0.7%
Barnett Banks, Inc., Series A, $4.50 (g) 44,000 3,916
Citicorp $5.375 (e)(g) 103,900 13,247
Norwest Corp., Series B, $3.50 (g) 104,400 7,595
TOTAL FINANCE 24,758
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Westinghouse Electric Corp. $1.30 (e) 51,200 768
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TECHNOLOGY - 0.9%
COMPUTERS & OFFICE EQUIPMENT - 0.9%
IBM France 5 3/4%, 1/1/98 290,650 $ 30,300
TOTAL CONVERTIBLE PREFERRED STOCKS 175,225
NONCONVERTIBLE PREFERRED STOCKS - 0.2%
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc. pay-in-kind $14.25 (a) 104,129 2,864
FINANCE - 0.1%
SAVINGS & LOANS - 0.1%
First Nationwide Bank 11 1/2% 18,500 1,943
TOTAL NONCONVERTIBLE PREFERRED STOCKS 4,807
TOTAL PREFERRED STOCKS
(Cost $166,611) 180,032
CORPORATE BONDS - 10.4%
MOODY'S RATINGS (B) PRINCIPAL
AMOUNT (C) (000S)
CONVERTIBLE BONDS - 10.4%
AEROSPACE & DEFENSE - 0.2%
AEROSPACE & DEFENSE - 0.2%
Orbital Sciences Corp. 6 3/4%, 3/1/03 (g) B3 $ 3,971 5,003
BASIC INDUSTRIES - 2.8%
IRON & STEEL - 0.2%
Trimas Corp. 5%, 8/1/03 (g) Ba3 4,804 5,092
PAPER & FOREST PRODUCTS - 2.6%
Avenor, Inc. 7 1/2%, 2/8/04 -- CAD 8,614 8,640
Cascades, Inc. 7 1/4%, 8/19/03 -- CAD 8,100 7,109
Domtar, Inc. 8%, 3/18/03 -- CAD 7,275 9,657
Harmac Pacific, Inc. 8%, 10/5/04 -- CAD 5,274 4,434
St. Laurent Paperboard, Inc. 8%, 6/15/04 (e) -- CAD 930 940
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - CONTINUED
Stone Consolidated Corp. 8%, 12/31/03 -- CAD 16,425 $ 14,536
Stone Container Corp. 8 7/8%, 7/15/00 (e) B2 22,758 42,557
87,873
TOTAL BASIC INDUSTRIES 92,965
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Liberty Property LP 8%, 7/1/01 -- 7,022 6,688
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Matsushita Electric Industrial Co. Ltd.:
1.30%, 3/29/02 Aa2 JPY 93,000 1,070
1.40%, 3/31/04 Aa2 JPY 240,000 2,737
3,807
ENERGY - 1.7%
INDEPENDENT POWER - 1.0%
Thermo Electron Corp. 4 5/8%, 8/1/97 (e)(g) Ba1 19,134 33,102
OIL & GAS - 0.7%
Horsham Corp. 3 1/4%, 12/10/18 Ba2 26,199 22,924
TOTAL ENERGY 56,026
FINANCE - 0.7%
BANKS - 0.1%
West One Bancorp 7 3/4%, 6/30/06 (g) Baa1 3,120 4,633
CREDIT & OTHER FINANCE - 0.2%
Investor AB 8%, 6/1/01 (g) A- SEK 30,380 5,608
INSURANCE - 0.4%
Axa SA 6%, 1/1/01 -- FRF 30 8,904
Cincinnati Financial Corp. 5 1/2%, 5/1/02 (g) A2 3,132 3,790
12,694
TOTAL FINANCE 22,935
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.3%
Roche Holdings, Inc. liquid yield option notes
0%, 4/20/10 (e) -- $ 29,700 $ 11,119
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Omnicare, Inc. 5 3/4%, 10/1/03 (g) B2 2,410 4,049
MEDICAL FACILITIES MANAGEMENT - 0.2%
Hillhaven Corp. 7 3/4%, 11/1/02 (g) B3 2,490 4,009
Sun Healthcare Group euro 6%, 3/1/04 -- 2,300 2,754
6,763
TOTAL HEALTH 21,931
MEDIA & LEISURE - 1.4%
ENTERTAINMENT - 0.9%
Carnival Cruise Lines, Inc. 4 1/2%, 7/1/97 (g) Baa1 15,840 22,829
TPI Enterprises, Inc. gtd. 8 1/4%, 7/15/02 (g) B3 7,540 7,729
30,558
PUBLISHING - 0.2%
Daily Mail General Trust PLC 8 3/4%,
9/27/05 (g) -- GBP 2,280 5,403
RESTAURANTS - 0.3%
Wendy's International, Inc. 7%, 4/1/06 (g) Baa3 7,039 10,207
TOTAL MEDIA & LEISURE 46,168
RETAIL & WHOLESALE - 0.3%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Lowe's Companies, Inc. 3%, 7/22/03 (g) A3 8,604 9,905
SERVICES - 0.1%
First Financial Management Corp.
5%, 12/15/99 (g) Baa2 3,700 4,292
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 2.0%
COMMUNICATIONS EQUIPMENT - 0.8%
Aspect Telecommunications Corp. 5%,
10/15/03 (e)(g) B3 $ 6,648 $ 7,670
Ericsson (LM) 4 1/4%, 6/30/00 (g) A2 SEK 39,875 8,789
General Instrument Corp. 5%, 6/15/00 (g) B1 7,852 11,552
28,011
COMPUTER SERVICES & SOFTWARE - 0.1%
Sierra On-Line, Inc. 6 1/2%, 4/1/01 (e) B3 1,750 2,538
COMPUTERS & OFFICE EQUIPMENT - 0.3%
NEC Corp. 1.90%, 3/30/01 A3 JPY 788,000 9,518
ELECTRONIC INSTRUMENTS - 0.2%
LAM Research Corp. sub. 6%, 5/1/03 (g) B2 3,738 7,644
ELECTRONICS - 0.6%
Arrow Electronics, Inc. 5 3/4%, 10/15/02 (g) Baa3 8,056 11,248
Nitto Denko Corp. 3.90%, 3/30/01 Baa1 JPY 786,000 10,521
21,769
TOTAL TECHNOLOGY 69,480
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
AMR Corp. 6 1/8%, 11/1/24 Ba2 100 97
UTILITIES - 0.3%
CELLULAR - 0.1%
Rogers Communications, Inc. 2%, 11/26/05 (g) B2 4,700 2,468
TELEPHONE SERVICES - 0.2%
Compania de Telefonos de Chile yankee
4 1/2%, 1/15/03 (g) Baa2 7,145 6,984
TOTAL UTILITIES 9,452
TOTAL CONVERTIBLE BONDS 348,749
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - 0.0%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
Repap Enterprises, Inc. 9 1/8%, 7/21/97 (h) -- $ 678 $ 671
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
Third Mexican Acceptance Corp. coll. notes gtd.
by Grupo Sidek SA and Grupo Situr SA
10 1/2%, 3/15/98 (e) -- 5,000 1,500
TOTAL NONCONVERTIBLE BONDS 2,171
TOTAL CORPORATE BONDS
(Cost $344,812) 350,920
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 44.6%
U.S. TREASURY OBLIGATIONS - 27.7%
6 3/4%, 2/28/97 Aaa 72,750 72,977
8 1/2%, 5/15/97 Aaa 31,673 32,811
8 1/8%, 8/15/19 (f) Aaa 370,972 397,230
bills, yields at date of purchase
5.67% to 5.88%, 7/6/95 to 7/27/95 (f) Aaa 440,285 435,111
938,129
U.S. GOVERNMENT AGENCY OBLIGATIONS - 16.9%
Federal Home Loan Bank discount 0%, 7/5/95 Aaa 24,900 24,646
Federal Home Loan Mortgage Corp.
discount 0%, 6/2/95 to 7/7/95 Aaa 187,500 185,720
Federal National Mortgage Association
discount 0%, 6/7/95 to 7/19/95 Aaa 366,100 362,190
572,556
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $1,515,850) 1,510,685
FOREIGN GOVERNMENT OBLIGATIONS (I) - 4.8%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
Argentina Republic, Brady euro 5%, 3/31/23 (h) B1 $ 21,250 $ 9,350
Federative Republic of Brazil (h):
4 1/4%, 4/15/24 -- 55,450 21,972
4 1/4%, 4/15/24 -- 12,500 4,953
French Government:
BTAN 7%, 11/12/99 Aaa FRF 244,695 49,048
OAT 9 1/2%, 1/25/01 Aaa FRF 116,800 25,873
Mexico Value Recovery (rights) (a) -- 1 -
Province of Chaco 11 7/8%, 9/10/97 (d) -- 667 653
United Kingdom Treasury:
12%, 11/20/98 Aaa GBP 7,692 13,779
10%, 2/26/01 Aaa GBP 20,882 36,018
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $127,266) 161,646
INDEXED SECURITIES - 0.1%
Merrill Lynch & Co. Inc. Japan Index equity participation
securities 0%, 1/31/00 (Cost $3,320) 3,320 2,843
REPURCHASE AGREEMENTS - 14.0%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
4/28/95 due 5/1/95 $ 475,353 475,118
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,315,431) $ 3,388,101
FUTURES CONTRACTS
AMOUNTS IN THOUSANDS EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
522 Midcap 400 Futures Contracts June 95 $ 48,677 $ 1,141
1,078 S&P 500 Futures Contracts June 95 $ 278,528 6,938
$ 8,079
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 9.7%
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNTS IN THOUSANDS SETTLEMENT
DATE(S) VALUE
CONTRACTS TO BUY
29,775 CAD 5/23/95 $ 21,931 $ 211
21,782 DEM 5/3/95 15,709 (37)
1,144,633 JPY 5/8/95 13,613 213
TOTAL CONTRACTS TO BUY
(Payable amount $50,864) $ 51,253 387
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 1.5%
CONTRACTS TO SELL
128,794 CAD 5/23/95 $ 94,865 (3,700)
21,782 DEM 5/3/95 15,709 (1,348)
96,984 FRF 6/6/95 19,648 -
15,829 ITL 8/2/95 9,342 (142)
3,834,903 JPY 5/8/95 to 7/26/95 45,788 (1,284)
TOTAL CONTRACTS TO SELL
(Receivable amount $178,878) $ 185,352 (6,474)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 5.5%
$ (6,087)
SECURITIES SOLD SHORT
AMOUNTS IN THOUSANDS
NUMBER OF SHARES ISSUER VALUE
243 Arrow Electronics, Inc. $ 11,295
171 Aspect Telecommunications Corp. 7,122
83 Barnett Banks, Inc. 3,864
910 Carnival Corp. Class A 22,636
67 Cincinnati Financial Corp. 3,706
285 Citicorp 13,198
87 Compania de Telefonos de Chile sponsored ADR 6,010
82 Ericsson (LM) Class B ADR 5,499
51 Ericsson (LM) Class B free shares 3,359
53 First Financial Management Corp. 3,898
331 General Instrument Corp. 11,282
148 Hillhaven Corp. 4,073
197 Investor AB free shares 5,525
150 Lam Research Corp. 7,550
328 Lowe's Companies, Inc. 9,480
420 Magma Copper Co. 7,032
286 Norwest Corp. 7,584
83 Omnicare, Inc. 4,050
276 Orbital Sciences Corp. 4,623
125 Reuter Holdings PLC ADR 5,697
161 Rogers Communications, Inc. Class B 1,933
125 Sierra On-Line, Inc. 2,356
105 Sun Healthcare Group 2,540
1,160 TPI Enterprises, Inc. 7,247
585 Thermo Electron Corp. 31,512
212 Trimas Corp. 4,642
571 Wendy's International, Inc. 9,709
168 West One Bancorp 4,630
TOTAL SECURITIES SOLD SHORT
(Total proceeds $197,423) $ 212,052
THE VALUE OF SECURITIES SOLD SHORT AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.3%
CURRENCY ABBREVIATIONS
GBP - British pound
CAD - Canadian dollar
FRF - French franc
DEM - German deutsche mark
ITL - Italian lira
JPY - Japanese yen
SEK - Swedish krona
LEGEND
1. Non-income producing
2. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
3. Principal amount is stated in United States dollars unless otherwise
noted.
4. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST (000S)
Province of Chaco
11 7/8%, 9/10/97 3/9/94 $ 699
5. 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 $150,166,000 or 4.4% of net
assets.
6. 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 $35,571,000.
7. Security pledged to cover margin requirements on open short sale
transactions (see Note 2 of Notes to Financial Statements). At the period
end the value of securities pledged amounted to $214,169,000.
8. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
9. Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
10. Purchased on an installment basis. Market value reflects only those
payments made through April 30, 1995. The remaining installments
aggregating CAD 2,584,000 are due in May and November of 1995.
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 19.6% AAA, AA, A 18.2%
Baa 2.1% BBB 3.0%
Ba 1.8% BB 0.2%
B 3.1% B 2.1%
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 3.3% including long-term debt categorized
as other securities. FMR has determined that unrated debt securities that
are lower quality account for 3.3% of the total value of investment in
securities.
Distribution of investments by country of issue, as a percentage of total
value of investment in securities, is as follows:
United States 82.1%
Canada 4.8
France 3.4
Japan 3.0
United Kingdom 2.9
Brazil 1.1
Others (individually less than 1%) 2.7
TOTAL 100.0%
INCOME TAX INFORMATION
At April 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,316,045,000. Net unrealized appreciation aggregated
$72,056,000, of which $145,664,000 related to appreciated investment
securities and $73,608,000 related to depreciated investment securities.
At October 31, 1994, the fund had a capital loss carryforward of
approximately $18,673,000 all of which will expire on October 31, 2002.
At October 31, 1994, the fund was required to defer $3,123,000 of losses on
futures contracts and options.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 3,388,101
agreements of $475,118) (cost $3,315,431) -
See accompanying schedule
Securities sold short, at value (proceeds received (212,052) $ 3,176,049
$197,423)
Restricted cash on securities sold short 197,423
Cash 2,653
Receivable for investments sold 141,020
Unrealized appreciation on foreign currency contracts 1,428
Receivable for fund shares sold 9,249
Dividends receivable 862
Interest receivable 17,754
Receivable for daily variation on futures contracts 782
Other receivables 15
TOTAL ASSETS 3,547,235
LIABILITIES
Payable for investments purchased 122,481
Unrealized depreciation on foreign currency contracts 7,515
Payable for closed foreign currency contracts 213
Payable for fund shares redeemed 6,126
Accrued management fee 1,452
Distribution fees payable 1,827
Other payables and accrued expenses 3,041
TOTAL LIABILITIES 142,655
NET ASSETS $ 3,404,580
Net Assets consist of:
Paid in capital $ 3,419,007
Undistributed net investment income 26,486
Accumulated undistributed net realized gain (loss) on (102,287)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 61,374
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 229,240 shares outstanding $ 3,404,580
NET ASSET VALUE and redemption price per share $14.85
($3,404,580 (divided by) 229,240 shares)
Maximum offering price per share (100/95.25 of $14.85) $15.59
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 10,267
Dividends
Interest 86,969
TOTAL INCOME 97,236
EXPENSES
Management fee $ 8,378
Transfer agent fees 3,233
Distribution fees 10,511
Accounting fees and expenses 379
Non-interested trustees' compensation 12
Custodian fees and expenses 151
Registration fees 132
Audit 35
Legal 46
Dividends on securities sold short 1,276
Miscellaneous 209
Total expenses before reductions 24,362
Expense reductions (185) 24,177
NET INVESTMENT INCOME 73,059
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized gain (loss) of (88,732)
$656 on sales of investment in affiliated issuers)
Foreign currency transactions (3,794)
Futures contracts 15,100
Short sales 7,038 (70,388)
Change in net unrealized appreciation (depreciation) on:
Investment securities 96,143
Assets and liabilities in foreign currencies 4,702
Futures contracts 4,764
Short sales (9,142) 96,467
NET GAIN (LOSS) 26,079
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 99,138
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 73,059 $ 96,897
Net investment income
Net realized gain (loss) (70,388) (77,188)
Change in net unrealized appreciation (depreciation) 96,467 (102,068)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 99,138 (82,359)
FROM OPERATIONS
Distributions to shareholders (53,229) (40,466)
From net investment income
In excess of net investment income - (3,288)
From net realized gain - (56,730)
Return of capital (Note 1) - (6,785)
TOTAL DISTRIBUTIONS (53,229) (107,269)
Share transactions 600,743 2,113,111
Net proceeds from sales of shares
Reinvestment of distributions 48,811 95,269
Cost of shares redeemed (419,659) (544,100)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 229,895 1,664,280
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 275,804 1,474,652
NET ASSETS
Beginning of period 3,128,776 1,654,124
End of period (including undistributed net investment $ 3,404,580 $ 3,128,776
income of $26,486 and $6,656, respectively)
OTHER INFORMATION
Shares
Sold 41,463 139,531
Issued in reinvestment of distributions 3,389 6,294
Redeemed (28,941) (36,474)
Net increase (decrease) 15,911 109,351
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED
APRIL 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 14.67 $ 15.91 $ 14.41 $ 14.13 $ 10.41 $ 12.77
beginning of period
Income from
Investment
Operations
Net investment .32 .38 .48 .50 .51 .56
income
Net realized and .10 (.79) 2.18 .85 3.74 (1.34)
unrealized gain
(loss)
Total from .42 (.41) 2.66 1.35 4.25 (.78)
investment
operations
Less Distributions (.24) (.28) (.56) (.46) (.53) (1.06)
From net investment
income
In excess of net - (.02) - - - -
investment income
From net realized - (.49) (.60) (.61) - (.52)
gain
Return of capital - (.04) - - - -
Total distributions (.24) (.83) (1.16) (1.07) (.53) (1.58)
Net asset value, end $ 14.85 $ 14.67 $ 15.91 $ 14.41 $ 14.13 $ 10.41
of period
TOTAL RETURN B, C 2.92% (2.69) 19.66% 10.27% 41.73% (7.15)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 3,405 $ 3,129 $ 1,654 $ 398 $ 136 $ 61
period (in millions)
Ratio of expenses to 1.53% 1.58% 1.51% 1.60% 1.71% 1.85%
average net assets A
Ratio of expenses to 1.54% 1.59% 1.52% 1.60% 1.71% 1.85%
average net assets A
before expense
reductions
Ratio of net 4.61% 3.79% 3.24% 3.97% 4.19% 5.29%
investment income A
to average net
assets
Portfolio turnover rate 236% 202% 200% 389% 220% 297%
A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Income & Growth Fund (the fund) is a fund of Fidelity
Advisor Series II (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases debt
securities which trade on an exchange), are valued primarily using
dealer-supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general supervision
of the Board of Trustees. Short-term securities maturing within sixty days
of their purchase date are valued at amortized cost or original cost plus
accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes 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. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, futures and options transactions,
foreign currency transactions, market discount, partnerships, non-taxable
dividends and losses deferred due to wash sales and excise tax regulations.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain loss. Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences that will reverse in a subsequent period. Any taxable income or
gain remaining at fiscal year end is distributed in the following year.
For the period ended October 31, 1994, the fund's distributions exceeded
the aggregate amount of taxable income and net realized gains resulting in
a return of capital. This was due to certain foreign currency losses which
decreased taxable income available for distribution after certain
distributions had been made.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. These contracts involve market risk in
excess of the unrealized gain or loss reflected in the fund's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies the fund
has committed to buy or sell is shown in the schedule of investments under
the caption "Forward Foreign Currency Contracts." This amount represents
the aggregate exposure to each currency the fund has
2. OPERATING POLICIES -
CONTINUED
FORWARD FOREIGN CURRENCY
CONTRACTS - CONTINUED
acquired or hedged through currency contracts at period end. Losses may
arise from changes in the value of the foreign currency or if the
counterparties do not perform under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date. Contracts that have been offset with different
counterparties are reflected as both a contract to buy and a contract to
sell in the schedule of investments under the caption "Forward Foreign
Currency Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
SHORT SALES AGAINST THE BOX. The fund may hedge its investments against
changes in value by engaging in short sales against the box. In a short
sale against the box, the fund sells a borrowed security, while at the same
time either owning an identical security or having the right to obtain such
a security. By selling short against the box the equity underlying one of
its convertible holdings, the fund would seek to offset the effect that a
decline in the underlying equity might have on the value of the convertible
security. While the short sale is outstanding, the fund will not dispose of
the security hedged by the short sale.
The fund is required to establish a margin account with the broker lending
the security sold short. While the short sale is outstanding, the broker
retains the proceeds of the short sale and the fund instructs the custodian
to maintain in a separate account securities having a value at least equal
to the amount of the securities sold short.
FUTURES CONTRACTS AND OPTIONS.
The fund may use futures and options contracts to manage its exposure to
the stock and bond markets and to fluctuations in interest rates and
currency values. Buying futures, writing puts, and buying calls tend to
increase the fund's exposure to the underlying instrument. Selling futures,
buying puts, and writing
2. OPERATING POLICIES -
CONTINUED
FUTURES CONTRACTS AND OPTIONS - CONTINUED
calls tend to decrease the fund's exposure to the underlying instrument, or
hedge other fund investments. Futures contracts and written options
involve, to varying degrees, risk of loss in excess of the futures
variation margin or the option value reflected in the Statement of Assets
and Liabilities. The underlying face amount at value is shown in the
schedule of investments under the caption "Futures Contracts." This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or
if the counterparties do not perform under the contracts' terms.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded. Exchange-traded
options are valued using the last sale price or, in the absence of a sale,
the last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
INDEXED SECURITIES. The fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to
different underlying instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities. Indexed
securities may be more volatile than their underlying instruments, but any
loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $653,000 or 0.0% of net assets.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,726,707,000 and $3,065,997,000, respectively, of which U.S.
government and government agency obligations aggregated $788,870,000 and
$732,840,000, respectively.
The market value of futures contracts opened and closed during the period
amounted to $1,074,153,000 and $940,207,000, respectively.
4. 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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 .2700% to .5200% for the
period. In the event that these rates were lower than the contractual rates
in effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The annual
individual fund fee rate is .20%. For the period, the management fee was
equivalent to an annualized rate of .52% of average net assets.
DISTRIBUTION AND SERVICE PLAN.
Pursuant to the Distribution and Service Plan (the Plan), and in accordance
with Rule 12b-1 of the 1940 Act, the fund pays Fidelity Distributors
Corporation (FDC), an affiliate of FMR, a distribution and service fee that
is based on an annual rate of .65% of its average net assets. For the
period, the fund paid FDC $10,511,000 of which $7,976,000 was paid to
securities dealers, banks and other financial institutions for selling
shares of the fund and providing shareholder support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during the period.
SALES LOAD. FDC received sales charges for selling shares of the fund. The
sales charge rates ranged from 2.00% to 4.75% based on purchase amounts of
less than $1,000,000. Purchase amounts of $1,000,000 or more are not
charged a sales load. For the period, FDC received $6,046,000 of which
$5,030,000 was paid to securities dealers, banks and other financial
institutions.
TRANSFER AGENT FEES. State Street Bank and Trust Company (SSB) is the
transfer, dividend disbursing and shareholder servicing agent for the fund.
SSB has an arrangement for certain transfer, dividend disbursing and
shareholder servicing to be performed by Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR. During the period November
1, 1994 to December 31, 1994, the fund paid fees based on the type, size,
number of accounts and the number of transactions made by shareholders.
Effective January 1, 1995, the Board of Trustees approved a revised
transfer agent contract pursuant to which the fund pays account fees and
asset-based fees that vary according to account size and type of account.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, 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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $891,000 for the period.
5. EXPENSE REDUCTIONS.
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
$185,000 under this arrangement.
6. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Montupet SA $ - $ 663,000 $ - $ -
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Robert Haber, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Chase Manhattan Bank, N.A.
New York, NY
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund:
Money Market Portfolio
Daily Money Fund:
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
SHORT FIXED-INCOME
FUND - CLASS A
SEMIANNUAL REPORT
APRIL 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 7 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 10 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 11 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 23 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 27 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND
INCLUDING
CHARGES AND EXPENSES, CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE
PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been some positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Each figure includes
changes in 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 income to measure performance. If
Fidelity had not reimbursed certain expenses, the past five years and life
of fund total return figures would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor Short Fixed-Income - Class 1.37% 2.97% 40.13% 70.30%
A
Advisor Short Fixed-Income - Class A
(incl. max. 1.50% sales charge) -0.15% 1.42% 38.03% 67.75%
Lehman Brothers 1-3 Year
Government-Corporate Bond Index 4.06% 5.78% 42.71% n/a
Average Short Investment Grade Bond 3.66% 4.78% 41.17% n/a
Fund
Consumer Price Index 1.61% 3.05% 17.84% 32.09%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on September 16, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Lehman Brothers 1-3 Year Government-Corporate Bond Index
- - a broad measure of the performance of short-term government and corporate
bonds. To measure how the fund stacked up against its peers, you can
compare it to the average short investment grade bond fund, which reflects
the performance of 141 funds with similar objectives tracked by Lipper
Analytical Services over the past six months. These benchmarks include
reinvested dividends and capital gains, if any, and exclude the effect of
sales charges. Comparing the fund's performance to the consumer price index
(CPI) helps show how your fund 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 APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor Short Fixed-Income - Class A 2.97% 6.98% 7.23%
Advisor Short Fixed-Income - Class A
(incl. max. 1.50% sales charge) 1.42% 6.66% 7.02%
Lehman Brothers 1-3 Year
Government-Corporate Bond Index 5.78% 7.37% n/a
Average Short Investment Grade Bond Fund 4.78% 7.13% n/a
Consumer Price Index 3.05% 3.34% 3.74%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Advisor1-3 Year Governmen
09/30/87 9850.00 10000.00
10/31/87 9999.49 10198.00
11/30/87 10069.38 10266.33
12/31/87 10130.14 10337.16
01/31/88 10263.19 10493.26
02/29/88 10364.89 10584.55
03/31/88 10397.93 10607.83
04/30/88 10410.62 10621.62
05/31/88 10402.90 10617.37
06/30/88 10508.27 10723.55
07/31/88 10509.67 10731.05
08/31/88 10553.34 10757.88
09/30/88 10658.71 10882.67
10/31/88 10755.09 10992.59
11/30/88 10723.64 10966.21
12/31/88 10756.72 10991.43
01/31/89 10844.40 11079.36
02/28/89 10863.55 11081.58
03/31/89 10918.17 11125.90
04/30/89 11036.68 11306.14
05/31/89 11187.24 11466.69
06/30/89 11369.31 11678.82
07/31/89 11562.87 11852.84
08/31/89 11480.36 11785.28
09/30/89 11539.60 11854.81
10/31/89 11711.46 12039.74
11/30/89 11803.45 12148.10
12/31/89 11865.45 12196.69
01/31/90 11838.59 12208.89
02/28/90 11886.45 12273.60
03/31/90 11949.36 12312.87
04/30/90 11960.25 12343.66
05/31/90 12148.21 12534.98
06/30/90 12242.20 12667.85
07/31/90 12387.19 12821.13
08/31/90 12367.36 12867.29
09/30/90 12398.21 12963.80
10/31/90 12366.57 13097.32
11/30/90 12444.45 13225.68
12/31/90 12561.86 13380.42
01/31/91 12524.09 13502.18
02/28/91 12654.02 13599.39
03/31/91 12879.99 13697.31
04/30/91 13067.47 13831.54
05/31/91 13200.84 13917.30
06/30/91 13265.37 13968.79
07/31/91 13356.50 14091.72
08/31/91 13580.71 14283.37
09/30/91 13721.20 14437.63
10/31/91 13874.36 14593.55
11/30/91 14014.71 14740.95
12/31/91 14241.52 14963.54
01/31/92 14299.93 14948.57
02/29/92 14396.33 14996.41
03/31/92 14463.54 14993.41
04/30/92 14557.34 15129.85
05/31/92 14708.26 15272.07
06/30/92 14843.44 15427.84
07/31/92 15028.02 15608.35
08/31/92 15155.64 15734.78
09/30/92 15280.99 15884.26
10/31/92 15184.01 15788.95
11/30/92 15191.09 15766.85
12/31/92 15324.71 15915.06
01/31/93 15556.96 16085.35
02/28/93 15746.23 16217.25
03/31/93 15847.33 16269.14
04/30/93 15927.54 16371.64
05/31/93 15995.14 16333.98
06/30/93 16155.76 16458.12
07/31/93 16251.32 16495.97
08/31/93 16410.75 16634.54
09/30/93 16467.43 16687.77
10/31/93 16569.96 16726.15
11/30/93 16638.15 16731.17
12/31/93 16779.66 16799.77
01/31/94 16884.35 16907.29
02/28/94 16746.57 16804.15
03/31/94 16362.99 16716.77
04/30/94 16276.73 16653.25
05/31/94 16374.73 16676.56
06/30/94 16245.86 16719.92
07/31/94 16394.05 16872.07
08/31/94 16527.14 16929.44
09/30/94 16520.78 16892.19
10/31/94 16533.38 16931.04
11/30/94 16561.78 16859.93
12/31/94 16214.33 16891.97
01/31/95 16334.96 17123.39
02/28/95 16537.37 17359.69
03/31/95 16624.30 17458.64
04/28/95 16759.64 17615.77
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor Short Fixed-Income Fund - Class A on September 30, 1987, shortly
after the fund started, and paid the maximum 1.50% sales charge. As the
chart shows, by April 30, 1995, the value of your investment would have
grown to $16,760 - a 67.60% increase on your initial investment. For
comparison, look at how the Lehman Brothers 1-3 Year Government-Corporate
Bond Index did over the same period. With dividends reinvested, the same
$10,000 investment would have grown to $17,616 - a 76.16% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield of
a fund that invests in bonds
will vary. That means if you
sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
SIX YEARS ENDED OCTOBER 31,
MONTHS
ENDED
APRIL
30,
1995 1994 1993 1992 1991 1990
Dividend return 3.06% 5.82% A 7.72% 8.63% 9.59% 8.91%
Capital appreciation -6.04% 1.41% 0.81% 2.60% -3.32%
return -1.69%
Total return 1.37% -0.22% 9.13% 9.44% 12.19% 5.59%
DIVIDEND returns and capital appreciation returns are both part of a bond
fund's total return. A dividend return reflects the actual dividends paid
by the fund. A capital appreciation return reflects both the amount paid by
the fund to shareholders as capital gain distributions and changes in the
fund's share price. Both returns assume the dividends or gains are
reinvested and exclude the effects of sales charges.
DIVIDENDS AND YIELD
PERIODS ENDED APRIL 30, 1995 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 4.56(cents) 28.52(cents) 56.50(cents)
Annualized dividend rate 5.95% 6.18% 5.99%
30-day annualized yield 6.01% - -
DIVIDENDS per share show the income paid by the fund for a set period. If
you annualize this number, based on an average net asset value of $9.33
over the past month, $9.31 over the past six months and $9.43 over the past
year, you can compare the fund's income over these three periods. The
30-day annualized YIELD is a standard formula for all funds based on the
yields of the bonds in the fund, averaged over the past 30 days. This
figure shows you the yield characteristics of the fund's investments at the
end of the period. The offering share price used in the calculation of the
yield includes the effect of the fund's maximum 1.50% sales charge. It also
helps you compare funds from different companies on an equal basis.
A DIVIDENDS PAID ARE BASED ON THE FUND'S INTEREST INCOME AND DO NOT REFLECT
CURRENCY-RELATED LOSSES. AS A RESULT OF CURRENCY LOSSES,
DIVIDENDS PAID OF APPROXIMATELY 8(CENTS) PER SHARE WERE A NON-TAXABLE
RETURN OF CAPITAL.
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: On February 13, 1995, Charles Morrison (right photo)
became portfolio manager of Fidelity Advisor Short Fixed-Income Fund. The
following is an interview with Donald Taylor - who managed the fund during
most of the period covered by this report - with some comments from Charlie
Morrison on changes in the fund, outlook and strategy:
Q. DON, HOW HAS THE FUND PERFORMED?
D.T. For the six and 12 months ended April 30, 1995, the fund had total
returns of 1.37% and 2.97%, respectively. During the same periods, the
average short-term investment grade bond fund returned 3.66% and 4.78%,
respectively, according to Lipper Analytical Services, and the Lehman
Brothers 1-3 Year Government-Corporate Bond Index returned 4.06% and 5.78%,
respectively.
Q. WHAT ACCOUNTED FOR THE FUND'S
SUB-PAR PERFORMANCE?
A. The fund's exposure to emerging market debt, especially in Mexico. I was
using diversification as a strategy to try to reduce risk and enhance
returns, because different market sectors or regions tend not to move in
tandem. Given low expectations for the U.S. bond market in early 1994, I
sought opportunities abroad in both developed and emerging markets.
Unfortunately, European bond markets declined, in part because
stronger-than-expected growth fueled inflation fears. In addition, many
emerging markets were hurt by rising rates in the U.S. The situation for
the fund worsened in December, when Mexico unexpectedly devalued the peso
in an attempt to shore up the dwindling foreign currency reserves of its
central bank.
Q. HOW DID THAT AFFECT THE FUND?
A. The fund had less than 10% of its assets in Mexico at the time of the
devaluation. However, that was enough to cause the fund's net asset value
to drop due to peso devaluation as well as the declining market of
dollar-denominated Mexican bonds.
Q. WHY WAS THE FUND INVESTED IN MEXICO?
A. Last year, our research indicated that the country's long-term prospects
were solid. More importantly, the Mexican government had made a commitment
to maintaining a stable peso. With that backdrop, it made sense to explore
opportunities in Mexico, in order to diversify the fund's investments.
Q. DID YOU MAINTAIN THE FUND'S INVESTMENTS IN MEXICO AFTER THE DEVALUATION?
A. No. I sought to liquidate the fund's Mexican holdings as quickly as
possible. Unfortunately, I had to do that into the teeth of a very
difficult market. Nevertheless, the fund held no peso-denominated debt as
of February 1, 1995, and held less than 1% in dollar-denominated Mexican
debt at the end of the period.
Q. TURNING TO YOU, CHARLIE, WHAT CHANGES HAVE YOU MADE TO THE FUND?
C.M. I've been working to reduce the volatility of the fund. I've done this
in two ways. First, since I believe the current environment for foreign
bonds isn't attractive, I've dropped the fund's foreign position to under
1% of its investments. Second, I've reduced the fund's holdings in
long-duration corporate positions. Duration is a measure of the average
time required to receive all cash flows - principal and interest - from a
bond. It also is a good indicator of how sensitive a bond is to movements
in interest rates. Going forward, my goal will be to generate returns that
are better than the short-term market as a whole, while limiting downside
volatility. As a result, I've moved the fund's duration so that it is in
line with the duration of the fund's benchmark index, the Lehman Brothers
1-3 Year Government-Corporate Bond Index.
Q. WHERE HAVE YOU FOUND OPPORTUNITIES?
A. Given the fact that short-term bonds across most sectors of the market
are relatively rich - or priced too high in light of their historical
levels - I began to position the fund somewhat defensively over the recent
period. I have focused on upgrading the credit quality of the fund, in
addition to shortening the average maturity of its corporate bond
investments. However, I'm continuing to concentrate a large portion of the
fund's investments in corporate bonds, primarily in higher-quality finance
issues and asset-backed securities - bonds issued by creditors that are
backed by loans or credit payments. I believe these investments continue to
be supported by positive fundamentals - or factors relating to the fiscal
health of an issuer - and technicals - or market environment variables,
such as supply and demand.
Q. YOU'VE ALSO INVESTED IN SOME COMMERCIAL MORTGAGE-BACKED SECURITIES.
WHAT'S THEIR APPEAL?
A. The portfolio's investments in commercial mortgages consist primarily of
short-duration high-quality - AA- or AAA-rated - well-structured securities
that offer incremental yield above most other alternatives in the short end
of the market. I look at them as an alternative to investing in corporate
bonds. Unlike investments such as Ginnie Mae mortgage pass-throughs -
securities issued by the Government National Mortgage Association that are
backed by the full faith and credit of the U.S. government - these issues
depend on the underlying economic fundamentals of the businesses that are
responsible for supporting and retiring the mortgages on their properties.
An important benefit of commercial mortgage-backed securities versus
corporate bonds is that commercial mortgage-backed securities are secured
obligations - they are backed by real estate. The commercial
mortgage-backed market trades cheaply because it is a relatively new and
under-followed market. There are few firms that have committed the same
resources as Fidelity to track this market, which offers me a tremendous
opportunity to buy attractive securities.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. I have positioned the fund relatively defensively, given my view that
many sectors of the market already reflect a great deal of positive news.
However, as I've said, there are opportunities to add value to the fund
through sector weighting and security selection. I'll continue to focus on
commercial mortgage-backed, asset-backed and very short-term corporate
securities. In addition, I'm maintaining a neutral duration - that is,
matching the fund's benchmark index - given uncertainty over the direction
of interest rates, a result of conflicting economic statistics and unclear
Federal Reserve Board interest rate policy.
FUND FACTS
GOAL: high current income
with preservation of capital by
investing primarily in a broad
range of investment-grade
fixed-income securities, such
as corporate and government
bonds - both foreign and
domestic - with a
dollar-weighted average of
three years or less.
START DATE: September 16,
1987
SIZE: as of April 30, 1995,
more than $624 million
MANAGER: Donald Taylor,
1989 - February 1995;
Charles Morrison, starting
February 13, 1995; joined
Fidelity in 1987
(checkmark)
CHARLIE MORRISON ON HIS
INVESTMENT APPROACH:
"My approach will center
around trying to provide
consistency and stability of
performance. I plan to focus
less on trying to predict the
direction of interest rates, and
more on looking for areas
where I think I can truly add
value. The way I'll do this is
fourfold: first, there is security
selection, using corporate
credit and mortgage research
to uncover attractive
investment opportunities.
Second, I'll focus on market
sector rotation, deciding when
to focus more of the fund's
investments in different
sectors, such as corporates
or mortgage-backed
securities. Yield curve
positioning is third. This
strategy involves focusing the
fund's investments on
particular parts of the maturity
spectrum. Finally, due to
short-term volatility in the
markets, from time to time
opportunities arise to buy or
sell securities that are
temporarily under-priced or
over-priced. I'll seek to take
advantage of this through
opportunistic trading."
INVESTMENT CHANGES
QUALITY DIVERSIFICATION AS OF APRIL 30, 1995
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
Aaa 58.3 29.0
Aa 0.6 0.4
A 11.3 10.9
Baa 16.5 13.3
Ba 7.4 7.6
B - 2.0
Not rated 5.4 6.6
TABLE EXCLUDES SHORT-TERM INVESTMENTS. SECURITIES RATED AS "BA" OR BELOW
BY MOODY'S WERE RATED INVESTMENT GRADE BY OTHER NATIONALLY RECOGNIZED
RATING AGENCIES OR ASSIGNED AN INVESTMENT GRADE RATING AT THE TIME OF
ACQUISITION BY FIDELITY.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1995
6 MONTHS AGO
Years 2.2 2.2
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 APRIL 30, 1995
6 MONTHS AGO
Years 1.7 1.3
DURATION SHOWS HOW MUCH A BOND'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 APRIL 30, 1995* AS OF OCTOBER 31, 1994**
Row: 1, Col: 1, Value: 7.5
Row: 1, Col: 2, Value: 1.2
Row: 1, Col: 3, Value: 1.0
Row: 1, Col: 4, Value: 51.0
Row: 1, Col: 5, Value: 39.3
Corporate bonds 40.3%
U.S. government
and agency
obligations 51.4%
Foreign government
obligations 0.2%
Short-term
investments 0.4%
Other 7.7%
Row: 1, Col: 1, Value: 8.1
Row: 1, Col: 2, Value: 28.0
Row: 1, Col: 3, Value: 9.5
Row: 1, Col: 4, Value: 21.6
Row: 1, Col: 5, Value: 32.8
Corporate bonds 32.8%
U.S. government
and agency
obligations 21.6%
Foreign government
obligations 9.5%
Short-term
investments 28.0%
Other 8.1%
* TOTAL FOREIGN
ISSUES - 0.3%
** TOTAL FOREIGN
ISSUES - 15.1%
7.1
INVESTMENTS APRIL 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
NONCONVERTIBLE BONDS - 40.3%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
AEROSPACE & DEFENSE - 0.6%
AEROSPACE & DEFENSE - 0.4%
Lockheed Corp. 4 7/8%, 2/15/96 Baa1 $ 2,500,000 $ 2,464,114
SHIP BUILDING & REPAIR - 0.2%
Tennessee Gas Pipeline Co. 9 1/4%, 5/15/96 Baa2 1,320,000 1,348,552
TOTAL AEROSPACE & DEFENSE 3,812,666
BASIC INDUSTRIES - 0.3%
PAPER & FOREST PRODUCTS - 0.3%
Boise Cascade Corp. 9 5/8%, 7/15/98 Baa3 920,000 922,696
Chesapeake Corp. 11 3/4%, 8/1/95 Baa3 700,000 711,375
1,634,071
DURABLES - 0.4%
AUTOS, TIRES, & ACCESSORIES - 0.4%
Ford Motor Co. 1993-A Pass Thru Trust, ctf
4.67%, 1/1/96 A1 2,350,000 2,318,745
ENERGY - 1.5%
ENERGY SERVICES - 1.4%
McDermott International, Inc.
10 1/4%, 6/1/95 Baa3 8,485,000 8,506,382
OIL & GAS - 0.1%
McDermott, Inc. 7.95%, 7/2/97 Baa3 500,000 505,425
TOTAL ENERGY 9,011,807
FINANCE - 22.1%
ASSET-BACKED SECURITIES - 8.8%
Capital Auto Receivables Asset Trust
5.85%, 1/15/98 Aaa 444,312 439,521
Caterpillar Financial Asset Trust
6.65%, 6/25/00 A2 1,809,363 1,792,193
Chase Manhattan Credit Card Master Trust
8 3/4%, 8/15/99 Aaa 2,100,000 2,138,703
Concord Leasing, Inc. (c):
6.66%, 1/15/98 AAA 63,801 63,555
5.04%, 7/15/98 AAA 744,823 729,025
5.31%, 1/20/99 AAA 135,506 133,474
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
ASSET BACKED SECURITIES - CONTINUED
Discover Card:
7 7/8%, 4/16/98 A2 $ 480,000 $ 483,446
6 1/8%, 5/15/98 A2 1,700,000 1,680,875
6.90%, 2/16/00 A2 1,888,000 1,869,120
General Motors Acceptance Corp.
Grantor Trust 1995-A, 7.15%, 3/15/00 Aaa 7,181,934 7,204,378
Midlantic Grantor Trust, Class B,
5.15%, 9/15/97 A1 105,764 105,266
Premier Auto Trust:
6.85%, 10/4/97 Aaa 8,230,000 8,232,222
5.89%, 8/17/98 Aaa 761,329 757,065
4.90%, 12/15/98 Aaa 6,359,959 6,225,804
4.95%, 2/2/99 A2 2,011,728 1,954,205
8.05%, 4/4/00 Aaa 5,100,000 5,248,920
SC Finance Corp. Recreational Vehicle Loan Trust,
7 1/4%, 9/15/06 Aaa 41,020 40,905
Standard Credit Card:
5 7/8%, 7/7/96 Aaa 1,100,000 1,099,313
9%, 8/7/97 A2 1,700,000 1,741,969
8%, 10/7/97 Aaa 980,000 992,858
8 1/4%, 10/7/97 A2 6,310,000 6,418,453
4.85%, 3/7/99 A2 2,000,000 1,916,750
7.65%, 2/15/00 A2 800,000 808,000
Union Federal Savings 1994-D,
8.20%, 1/10/01 Baa2 688,786 695,028
United Federal Savings Bank Grantor Trust:
6.975%, 7/10/00 Baa2 745,866 739,106
7.275%, 11/10/00 Baa2 735,729 728,763
54,238,917
BANKS - 6.7%
Bank of Boston Corp. 9 1/2%, 8/15/97 Baa2 2,013,000 2,115,864
Baybanks, Inc. 6 3/8%, 9/30/97 (d) Baa2 1,730,000 1,714,949
Citicorp:
5.70%, 2/12/96 A2 2,000,000 1,984,580
euro 5.6875%, 7/10/97 (d) A3 3,100,000 3,085,120
Citicorp Person to Person, Inc.
6.3125%, 1/30/97 (d) A3 4,000,000 3,975,000
Continental Bank Mortgage Corp.
9 7/8%, 6/15/96 A2 1,200,000 1,233,036
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
BANKS - CONTINUED
First Bank Systems, Inc.:
9.89%, 3/6/96 A3 $ 100,000 $ 102,610
euro 6.3125%, 11/29/96 (d) A3 3,800,000 3,797,625
First Fidelity Bancorporation
9 3/4%, 5/25/95 A3 90,000 90,119
First Interstate Bancorp 10 1/2%, 3/1/96 A2 250,000 257,253
Fleet Financial Group, Inc.:
5 5/8%, 7/1/95 A2 750,000 748,733
7 7/8%, 7/19/96 A2 2,100,000 2,125,515
KeyCorp:
8.55%, 5/30/95 A1 300,000 300,459
7.10%, 3/28/97 A1 1,440,000 1,442,160
Manufacturers Hanover Trust, NY:
6.1875%, 4/30/97 (d) A2 1,000,000 992,500
euro 6 1/2%, 7/15/97 (d) A3 3,450,000 3,450,000
Marine Midland Banks, Inc.:
8 5/8%, 3/1/97 Baa1 1,850,000 1,890,145
euro 6 3/8%, 9/27/96 (d) Baa1 4,650,000 4,645,350
Mellon Financial Co. 6 1/8%, 11/15/95 A2 500,000 498,755
Meridian Bancorp, Inc. 6 3/8%,
12/1/96 (d) Baa1 590,000 587,569
National City Corp. 0%, 1/31/97 (d) A2 575,000 572,125
Provident Bank 5%, 6/15/96 A3 1,000,000 979,820
Security Pacific Corp. 10.05%, 5/1/95 A2 200,000 200,000
Shawmut Bank of Boston, euro
6 5/8%, 2/24/97 (d) Baa2 4,100,000 4,089,750
U.S. Bancorp 8.40%, 5/31/95 A3 500,000 500,625
41,379,662
CREDIT & OTHER FINANCE - 5.3%
Aristar, Inc. 8.55%, 6/1/95 A3 125,000 125,120
Associates Corp. of North America:
6%, 12/1/95 Aa3 2,300,000 2,291,881
6 7/8%, 1/15/97 Aa3 400,000 399,164
Beneficial Corp. 9 3/8%, 6/2/95 A2 300,000 300,597
Chrysler Financial Corp.:
6%, 4/15/96 A3 3,590,000 3,554,746
10.34%, 5/15/08 A3 3,450,000 3,556,674
euro 9 1/2%, 4/12/96 BBB 1,000,000 1,018,300
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE - CONTINUED
Ford Motor Credit Corp.:
9%, 6/28/96 A2 $ 50,000 $ 51,181
euro 9 5/8%, 2/27/96 A2 150,000 154,125
General Motors Acceptance Corp.:
9.40%, 5/18/95 Baa1 450,000 450,518
9 1/4%, 6/8/95 Baa1 1,300,000 1,303,172
6.10%, 7/3/95 Baa1 1,750,000 1,748,828
7 3/4%, 1/17/97 Baa1 3,110,000 3,144,490
7 7/8%, 2/27/97 Baa1 2,230,000 2,259,191
7.90%, 3/12/97 Baa1 3,650,000 3,699,421
Greyhound Financial Corp.:
8 1/4%, 3/11/97 Baa1 1,100,000 1,120,064
6.94%, 1/28/98 Baa2 3,000,000 2,967,990
Tenneco Credit Corp. 9%, 7/15/95 Baa2 100,000 100,430
Third Mexican Acceptance Corp. coll. notes
gtd. by Grupo Sidek SA and Grupo Situr SA
10 1/2%, 3/15/98 (c) - 500,000 150,000
Westinghouse Credit Corp.:
8 7/8%, 8/1/95 Ba1 975,000 978,968
9.13%, 8/1/95 Ba1 500,000 502,250
8.70%, 5/20/96 Ba1 935,000 944,976
8.79%, 5/22/96 Ba1 2,000,000 2,023,380
9.06%, 6/3/98 Ba1 400,000 411,592
33,257,058
INSURANCE - 0.1%
ITT Hartford Group, Inc. 7 1/4%, 12/1/96 A1 850,000 850,527
SAVINGS & LOANS - 1.2%
Golden West Financial Corp.
10 1/4%, 5/15/97 A3 300,000 316,452
Home Savings of America 10 1/2%, 6/12/97 A3 1,480,000 1,524,134
USAT Holdings, Inc. 8.05%, 5/15/98 (c) Ba2 6,000,000 5,880,000
7,720,586
TOTAL FINANCE 137,446,750
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Cardinal Distribution Inc. 8%, 3/1/97 Baa1 $ 950,000 $ 959,909
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Westinghouse Electric Corp.:
8.71%, 2/13/98 Ba1 245,000 249,702
8.96%, 6/17/98 Ba1 700,000 718,494
968,196
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
Tenneco Corp. gtd. extension euro
10 3/4%, 6/15/95 Baa2 170,000 170,765
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,138,961
MEDIA & LEISURE - 2.8%
BROADCASTING - 0.9%
Time Warner, Inc. 6.05%, 7/1/95 (c) Ba1 5,360,000 5,351,370
LEISURE DURABLES & TOYS - 0.3%
Brunswick Corp. 8 1/8%, 4/1/97 Baa1 925,000 930,060
Mattel, Inc. 6 7/8%, 8/1/97 Baa1 1,250,000 1,232,575
2,162,635
LODGING & GAMING - 0.0%
First Mexican Acceptance Corp. euro
10 3/4%, 9/15/96 - 500,000 138,600
PUBLISHING - 1.6%
News America Holdings, Inc. 12%, 12/15/01 Ba1 8,810,000 9,912,307
TOTAL MEDIA & LEISURE 17,564,912
NONDURABLES - 1.4%
TOBACCO - 1.4%
Philip Morris Companies, Inc.:
9.40%, 10/1/95 A2 800,000 808,160
8 7/8%, 7/1/96 A2 350,000 357,336
9.80%, 12/15/98 A2 2,480,000 2,526,277
RJR Nabisco, Inc. 9 1/4%, 5/1/95 Baa3 4,990,000 4,990,000
8,681,773
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
RETAIL & WHOLESALE - 1.8%
GENERAL MERCHANDISE STORES - 0.9%
Sears Roebuck & Co.:
9.41%, 4/3/96 A2 $ 600,000 $ 613,500
8.55%, 8/1/96 A2 500,000 509,290
8.95%, 11/27/96 A2 245,000 254,800
9.22%, 1/30/97 A2 1,700,000 1,765,960
7 3/4%, 2/27/97 A2 2,210,000 2,234,001
7.30%, 6/12/97 A2 245,000 245,615
5,623,166
GROCERY STORES - 0.9%
American Stores Co.:
8 1/4%, 4/21/98 Baa3 300,000 305,787
8.44%, 4/24/98 Baa3 300,000 307,290
Safeway, Inc. 6.05%, 6/1/95 (e) Ba2 4,000,000 3,995,800
Supervalu, Inc. 5 7/8%, 11/15/95 A3 900,000 896,751
5,505,628
TOTAL RETAIL & WHOLESALE 11,128,794
SERVICES - 0.1%
ADVERTISING - 0.1%
Valassis Inserts, Inc. 9 3/8%, 3/15/99 Ba2 725,000 743,125
TECHNOLOGY - 2.2%
COMPUTERS & OFFICE EQUIPMENT - 2.2%
Comdisco, Inc.:
8.95%, 5/15/95 Baa2 3,170,000 3,171,268
6.89%, 8/30/96 Baa2 2,480,000 2,473,800
9 3/4%, 1/15/97 Baa2 200,000 207,962
7 3/4%, 1/29/97 Baa2 800,000 805,712
7.73%, 2/18/97 Baa2 6,950,000 6,996,635
13,655,377
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 1.1%
AMR Corp.:
7 3/4%, 12/1/97 Baa3 4,710,000 4,732,278
9 1/2%, 7/15/98 Baa3 120,000 126,131
NONCONVERTIBLE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
TRANSPORTATION - CONTINUED
AIR TRANSPORTATION - CONTINUED
Delta Airlines, Inc. 9 7/8%, 1/1/98 Ba1 $ 2,000,000 $ 2,090,020
6,948,429
TRUCKING & FREIGHT - 0.2%
Federal Express Corp. 9 3/4%, 5/15/96 Baa2 1,000,000 1,026,700
TOTAL TRANSPORTATION 7,975,129
UTILITIES - 5.5%
ELECTRIC UTILITY - 3.0%
Commonwealth Edison Co. 5 1/2%, 7/15/95 Baa3 2,000,000 1,992,400
Gulf States Utilities Co. 9.72%, 7/1/98 Ba1 2,885,000 2,979,051
Long Island Lighting Co.:
8 3/4%, 5/1/96 Baa3 4,800,000 4,873,056
7.30%, 7/15/99 Ba1 1,630,000 1,540,122
Public Service Co. of New Hampshire 1st mtg.:
8 7/8%, 5/15/96 Baa3 450,000 456,255
9.17%, 5/15/98 Baa3 6,100,000 6,322,650
United Illuminating Co. 7 3/8%, 1/15/98 Baa3 450,000 446,387
18,609,921
GAS - 2.5%
ARKLA, Inc.:
9.45%, 10/15/95 Ba2 2,587,000 2,612,870
9.38%, 3/15/96 Ba2 1,500,000 1,524,000
9 7/8%, 4/15/97 Ba2 1,700,000 1,756,202
8 7/8%, 7/15/99 Ba2 1,500,000 1,545,000
Florida Gas 7 3/4%, 11/1/97 (c) Baa2 1,630,000 1,645,404
Panhandle Eastern Pipe Line Co. 9 7/8%,
10/15/96 Baa2 1,298,000 1,320,871
Transco Energy Co. 9 1/2%, 12/1/95 Baa2 3,250,000 3,292,705
Transcontinental Gas Pipe Line Corp. 9%,
11/15/96 Baa1 1,500,000 1,541,490
15,238,542
TOTAL UTILITIES 33,848,463
TOTAL NONCONVERTIBLE BONDS
(Cost $254,049,053) 249,920,482
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 51.4%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
U.S. TREASURY OBLIGATIONS - 44.3%
9 1/4%, 1/15/96 Aaa $ 38,400,000 $ 39,168,000
4 3/8%, 11/15/96 Aaa 115,000,000 111,424,650
8 1/2%, 5/15/97 Aaa 440,000 455,814
5 1/8%, 3/31/98 Aaa 58,990,000 56,501,212
5 3/8%, 5/31/98 Aaa 770,000 740,401
9 1/4%, 8/15/98 Aaa 7,010,000 7,511,636
6 3/4%, 6/30/99 Aaa 58,810,000 58,598,872
274,400,585
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.1%
Federal Home Loan Bank:
7.59% 12/23/96 Aaa 3,580,000 3,628,666
5.37% 12/7/98 (callable) Aaa 5,000,000 4,728,907
5.60%, 3/1/99 Aaa 1,710,000 1,617,019
Federal National Mortgage Association:
5.19%, 7/20/98 (callable) Aaa 2,940,000 2,781,402
5.30%, 8/25/98 (callable) Aaa 16,230,000 15,393,141
4.70%, 9/10/98 (callable) Aaa 2,310,000 2,148,120
4.94%, 10/30/98 (callable) Aaa 7,480,000 6,989,125
Government Trust Certificates Class 1-C
(assets of Trust guaranteed by U.S. government
through Defense Security Assistance Agency)
9 1/4%, 11/15/01 Aaa 790,000 848,041
State of Israel (guaranteed by U.S. Government
through Agency for International
Development):
5 1/4%, 3/15/98 Aaa 970,000 928,775
4 7/8%, 9/15/98 Aaa 2,050,000 1,920,594
6%, 2/15/99 Aaa 470,000 454,057
7 3/4%, 11/15/99 Aaa 735,000 751,170
Tennessee Valley Authority
8 1/4%, 11/15/96 Aaa 1,560,000 1,594,616
43,783,633
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $316,034,369) 318,184,218
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.3%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
PRIVATE SPONSOR - 0.3%
General Electric Capital Mortgage Services, Inc.
planned amortization class series 1993-18
Class A-5, 6%, 2/25/02 AAA $ 1,810,000 $ 1,789,638
Maryland National Bank pass thru Series 1990-1
Class A, 9 1/2%, 10/25/20 Aaa 23,681 23,588
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,807,047) 1,813,226
COMMERCIAL MORTGAGE SECURITIES - 6.8%
CS First Boston Mortgage Securities Corp.
commercial floater Series 1994-CFB1
Class A-1, 6.675%, 1/25/28 (d) Aaa 4,138,026 4,132,784
FDIC commercial Series 1994-C1:
Class II-A1, 6.30%, 9/25/25 Aaa 488,042 483,345
Class II-A2, 7.85%, 9/25/25 Aaa 4,600,000 4,638,094
Lennar Central Partner LP (c):
commercial floater Series 1994-1 Class B,
7 1/8%, 9/15/01 (d) - 4,943,000 4,943,000
commercial Series 1995-1 Class C,
7.55%, 5/15/03 - 1,200,000 1,181,061
Nomura Asset Securities Corp. commercial floater
Series 1994-MD-II Class A-6,
7.3275%, 7/4/03 (d) - 1,513,284 1,506,354
Resolution Trust Corp.:
commercial floater (d):
Series 1992-C3 Class A-2,
6.975%, 8/25/23 Aa2 1,073,344 1,074,518
Series 1993-C2 Class A-2,
6.995%, 3/25/25 AAA 4,236,126 4,221,388
Series 1994-C1 Class A-3,
6.675%, 6/25/26 AAA 3,154,636 3,119,152
commercial:
Series 1994-C1 Class A-4
7 1/4%, 6/25/26 AAA 1,310,270 1,304,537
Series 1994-C2 Class A-2,
7 3/4%, 4/25/25 AAA 690,798 692,093
Series 1994-C2 Class A-4,
7 1/2%, 4/25/25 AAA 1,329,195 1,332,518
Series 1994-C2 Class E, 8%, 4/25/25 BB 3,504,430 3,060,900
Series 1994-N2 Class 3,
7 1/2%, 12/15/04 (c) AAA 3,100,000 3,098,063
COMMERCIAL MORTGAGE SECURITIES - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
Ryland Mortgage Securities Corp.
commercial Series 1992-C3
Class A-2, 7 1/2%, 8/1/23 (d) Aaa $ 48,599 $ 47,075
SC Finance Corp. commercial floater
7.6125%, 8/1/04 (c)(d) - 4,100,000 4,079,500
SKW Real Estate LP commercial
6.45%, 4/15/02 (c) AA 1,600,000 1,599,200
Structured Asset Securities Corp.
commercial Series 1993-C1
Class A-1, 6.60%, 10/25/24 AA 1,549,149 1,504,611
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $41,739,248) 42,018,193
FOREIGN GOVERNMENT OBLIGATIONS (F)- 0.2%
Province of Chaco, Argentina
11 7/8%, 9/10/97 (b)
(Cost $1,112,975) - 1,083,334 1,060,692
MUNICIPAL SECURITIES - 0.6%
Louisiana Pub. Facs. Auth.
Rev. 9.95% 6/1/96 A3 2,095,000 2,159,317
Shreveport Louisiana Wtr. & Swr. Rev.
Rfdg. 0% 12/1/96 Aaa 1,500,000 1,342,500
TOTAL MUNICIPAL SECURITIES
(Cost $3,609,721) 3,501,817
REPURCHASE AGREEMENTS - 0.4%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.93%,
dated 4/28/95 due 5/1/95 $ 2,760,363 2,759,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $621,111,413) $ 619,257,628
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO BUY
2,583,868 AUD 6/6/95 $ 1,876,624 $ (67,349)
346,888 DEM 6/6/95 250,570 24,874
229,153 GBP 6/5/95 369,163 9,164
137,513,480 JPY 6/5/95 1,644,982 235,196
TOTAL CONTRACTS TO BUY
(Payable amount $3,939,454) $ 4,141,339 201,885
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.7%
CONTRACTS TO SELL
2,583,868 AUD 6/6/95 $ 1,876,624 88,576
346,888 DEM 6/6/95 250,570 (28,970)
229,153 GBP 6/5/95 369,163 (11,686)
137,513,480 JPY 6/5/95 1,644,982 (236,981)
TOTAL CONTRACTS TO SELL
(Receivable amount $3,952,278) $ 4,141,339 (189,061)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.7%
$ 12,824
CURRENCY ABBREVIATIONS
AUD - Australian dollar
GBP - British pound
DEM - German deutsche mark
JPY - Japanese yen
LEGEND
1. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
2. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Province of Chaco,
Argentina
11 7/8%, 9/10/97 3/9/94 $1,112,975
3. Security exempt from registration under
Rule 144A of the Securities Act of 1933. These securities may be resold in
trans- actions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $28,853,652 or 4.6% of net assets.
4. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
5. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due dates on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
6. Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 70.2% AAA, AA, A 69.7%
Baa 16.5% BBB 17.8%
Ba 7.4% BB 6.5%
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 2.1%.
INCOME TAX INFORMATION
At April 30, 1995, the aggregate cost of investment securities for income
tax purposes was $621,116,849. Net unrealized depreciation aggregated
$1,859,221 of which $4,312,836 related to appreciated investment securities
and $6,172,057 related to depreciated investment securities.
At October 31, 1994, the fund had a capital loss carryforward of
approximately $18,563,000 of which $1,000, $19,000, $128,000, $63,000,
$286,000, $38,000, $336,000 and $17,692,000 will expire on October 31,
1995, 1996, 1997, 1998, 1999, 2000, 2001 and 2002, respectively.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS APRIL 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 619,257,628
agreements of $2,759,000) (cost $621,111,413) -
See accompanying schedule
Cash 303,990
Receivable for investments sold 1,744,856
Unrealized appreciation on foreign currency contracts 357,810
Receivable for closed foreign currency contracts 671
Interest receivable 10,542,819
Other receivables 2,354
TOTAL ASSETS 632,210,128
LIABILITIES
Payable for investments purchased $ 6,050,046
Unrealized depreciation on foreign currency contracts 344,986
Payable for fund shares redeemed 182,113
Distributions payable 539,213
Accrued management fee 238,715
Other payables and accrued expenses 275,422
TOTAL LIABILITIES 7,630,495
NET ASSETS $ 624,579,633
Net Assets consist of:
Paid in capital $ 681,044,855
Distributions in excess of net investment income (3,734,249)
Accumulated undistributed net realized gain (loss) on (50,866,937)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on (1,864,036)
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 66,999,827 shares outstanding $ 624,579,633
NET ASSET VALUE, offering price and redemption price per $9.32
share ($624,579,633 (divided by) 66,999,827 shares)
Maximum offering per share $9.46
(100/98.50 of $9.32)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 24,139,368
Interest
EXPENSES
Management fee $ 1,560,140
Transfer agent fees 754,628
Distribution fees 513,954
Accounting fees and expenses 121,151
Non-interested trustees' compensation 1,874
Custodian fees and expenses 21,125
Registration fees 45,782
Audit 10,239
Legal 12,841
Reports to shareholders 25,242
Miscellaneous 4,216
TOTAL EXPENSES 3,071,192
NET INVESTMENT INCOME 21,068,176
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (33,531,562)
Foreign currency transactions 1,324,726 (32,206,836)
Change in net unrealized appreciation (depreciation) on:
Investment securities 18,101,537
Assets and liabilities in foreign currencies 444,922 18,546,459
NET GAIN (LOSS) (13,660,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 7,407,799
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,068,176 $ 47,704,156
Net investment income
Net realized gain (loss) (32,206,836) (26,191,734)
Change in net unrealized appreciation (depreciation) 18,546,459 (26,799,695)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 7,407,799 (5,287,273)
FROM OPERATIONS
Distributions to shareholders (21,028,441) (38,309,373)
From net investment income
In excess of net investment income - (3,559,742)
Return of capital - (6,458,279)
TOTAL DISTRIBUTIONS (21,028,441) (48,327,394)
Share transactions 114,768,892 719,576,625
Net proceeds from sales of shares
Reinvestment of distributions 16,881,192 37,895,194
Cost of shares redeemed (281,375,798) (570,132,837)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING (149,725,714) 187,338,982
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS (163,346,356) 133,724,315
NET ASSETS
Beginning of period 787,925,990 654,201,675
End of period (including distributions in excess of net $ 624,579,634 $ 787,925,990
investment income of $(3,734,249) and
$(3,773,984), respectively)
OTHER INFORMATION
Shares
Sold 12,311,130 72,835,096
Issued in reinvestment of distributions 1,816,131 3,897,323
Redeemed (30,201,694) (58,463,343)
Net increase (decrease) (16,074,433) 18,269,076
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED
APRIL 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 9.480 $ 10.090 $ 9.950 $ 9.870 $ 9.620 $ 9.950
beginning of period
Income from .275 .559 .732 .830 .848 .868
Investment
Operations
Net investment
income
Net realized and (.150) (.581) .146 .071 .270 (.330)
unrealized gain
(loss)
Total from .125 (.022) .878 .901 1.118 .538
investment
operations
Less Distributions (.285) (.464) (.738) (.821) (.868) (.868)
From net investment
income
In excess of net - (.044) - - - -
investment
income
Return of capital - (.080) - - - -
Total distributions (.285) (.588) (.738) (.821) (.868) (.868)
Net asset value, end $ 9.320 $ 9.480 $ 10.090 $ 9.950 $ 9.870 $ 9.620
of period
TOTAL RETURN B, C 1.37% (.22) 9.13% 9.44% 12.19% 5.59%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 624,580 $ 787,926 $ 654,202 $ 170,558 $ 25,244 $ 13,062
period (000 omitted)
Ratio of expenses to .90% .97% .95% .90% .90% .90%
average net assets A
Ratio of expenses to .90% .97% .95% 1.03% 1.74% 1.90%
average net assets A
before expense
reductions
Ratio of net 6.20% 5.91% 6.77% 7.59% 8.50% 8.86%
investment income A
to average net
assets
Portfolio turnover rate 157% 108% 58% 57% 127% 144%
A
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR DO NOT INCLUDE THE ONE
TIME SALES CHARGE AND ARE NOT ANNUALIZED.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Short-Fixed Income Fund (the fund) is a fund of Fidelity
Advisor Series II (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The 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 (including restricted securities) for
which market quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, market
discount, and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Distributions in excess of net investment
income and accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions may include temporary book
and tax basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract.These contracts involve market risk in
excess of the unrealized gain or loss reflected in the fund's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies the fund
has committed to buy or sell is shown in the schedule of investments under
the caption "Forward Foreign Currency Contracts." This amount represents
the aggregate exposure to each currency the fund has acquired or hedged
through currency contracts at period end. Losses may arise from changes in
the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date. Contracts that have been offset with different
counterparties are reflected as both a contract to buy and a contract to
sell in the schedule of investments under the caption "Forward Foreign
Currency Contracts."
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The fund may invest in indexed securities whose values
are linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices, or other underlying instruments. The
fund uses these securities to increase or decrease its exposure to
different underlying instruments and to gain exposure to markets that might
be difficult to invest in through conventional securities. Indexed
securities may be more volatile than their underlying instruments, but any
loss is limited to the amount of the original investment.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $1,060,692 or 0.2% of net assets.
3. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $551,357,183 and $403,461,275, respectively, of which U.S.
government and government agency obligations aggregated $427,408,776 and
$229,327,058, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1200% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
above rates, as they resulted in the same or a lower management fee. The
annual individual fund fee rate is .30%. For the period, the management fee
was equivalent to an annualized rate of .46% of average net assets.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, the
fund pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee that is based on an annual rate of .15% of its
average net assets. For the period, the fund paid FDC $513,954 of which
$495,000 was paid to securities dealers, banks and other financial
institutions for selling shares of the fund and providing shareholder
support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during the period.
SALES LOAD. FDC received sales charges for selling shares of the fund. The
sales charge rate is 1.5% based on purchase amounts of less than
$1,000,000. Purchase amounts of $1,000,000 or more are not charged a sales
load. For the period, FDC received $419,914 of which $332,285 was paid to
securities dealers, banks and other financial institutions.
TRANSFER AGENT FEES. State Street Bank and Trust Company (SSB) is the
transfer, dividend disbursing and shareholder servicing agent for the fund.
SSB has an arrangement for certain transfer, dividend disbursing and
shareholder servicing to be performed by Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR. During the period November
1, 1994 to December 31, 1994, the fund paid fees based on the type, size,
number of accounts and the number of transactions made by shareholders.
Effective January 1, 1995, the Board of Trustees approved a revised
transfer agent contract pursuant to which the fund pays account fees and
asset-based fees that vary according to account size and type of account.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund:
Money Market Portfolio
Daily Money Fund:
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
HIGH YIELD
FUND - CLASS A & CLASS B
SEMIANNUAL REPORT
APRIL 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 11 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 14 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 15 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 32 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 37 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND,
INCLUDING
CHARGES AND EXPENSES, CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE
PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been some positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR HIGH YIELD FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at the fund's
income to measure performance. If Fidelity had not reimbursed certain
expenses, the past 5 years and life of fund total return figures would have
been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor High Yield - Class A 6.75% 8.75% 127.14% 191.57%
Advisor High Yield - Class A
(incl. max. 4.75% sales charge) 1.68% 3.58% 116.35% 177.72%
Merrill Lynch High Yield Master 8.79% 10.57% 94.23% n/a
Index
Average High Current Yield Fund 5.73% 5.54% 84.57% n/a
Consumer Price Index 1.61% 3.05% 17.84% 37.47%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 5, 1987. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Class A's returns to those of
the Merrill Lynch High Yield Master Index - a broad gauge of the high yield
bond market. To measure how Class A's performance stacked up against its
peers, you can compare it to the average high current yield fund, which
reflects the performance of over 110 high current yield funds with similar
objectives tracked by Lipper Analytical Services over the past six months.
These benchmarks include reinvested dividends and capital gains, if any,
and exclude the effects of sales charges. Comparing Class A's performance
to the consumer price index (CPI) helps show how the class did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor High Yield - Class A 8.75% 17.83% 13.72%
Advisor High Yield - Class A
(incl. max. 4.75% sales charge) 3.58% 16.69% 13.06%
Merrill Lynch High Yield Master Index 10.57% 14.20% n/a
Average High Current Yield Fund 5.54% 12.96% n/a
Consumer Price Index 3.05% 3.34% 3.89%
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 LIFE OF FUND
Fidelity AdvisoHigh Yield Master
01/31/87 9525.00 10000.00
02/28/87 9705.32 10165.09
03/31/87 9803.64 10277.49
04/30/87 9598.00 10053.36
05/31/87 9494.90 10008.06
06/30/87 9646.08 10146.40
07/31/87 9679.15 10201.61
08/31/87 9775.10 10303.83
09/30/87 9419.82 10066.76
10/31/87 9024.99 9797.80
11/30/87 9354.00 10045.57
12/31/87 9521.53 10178.96
01/31/88 10020.18 10457.50
02/29/88 10341.50 10741.26
03/31/88 10274.39 10723.50
04/30/88 10245.08 10754.47
05/31/88 10278.29 10810.60
06/30/88 10685.15 11017.30
07/31/88 10839.30 11133.72
08/31/88 10786.36 11170.30
09/30/88 10900.56 11282.89
10/31/88 11023.57 11458.68
11/30/88 11056.00 11501.61
12/31/88 11163.52 11550.28
01/31/89 11465.79 11723.49
02/28/89 11545.93 11802.27
03/31/89 11433.29 11791.77
04/30/89 11306.60 11826.57
05/31/89 11592.25 12044.30
06/30/89 12006.07 12214.94
07/31/89 12071.63 12272.78
08/31/89 12193.72 12333.41
09/30/89 11835.88 12215.99
10/31/89 11391.49 12022.77
11/30/89 11424.71 12049.71
12/31/89 11569.35 12038.82
01/31/90 11401.50 11803.53
02/28/90 11340.98 11631.63
03/31/90 11540.75 11788.87
04/30/90 11679.50 11848.76
05/31/90 12071.77 12062.79
06/30/90 12416.33 12296.49
07/31/90 12705.20 12556.35
08/31/90 12393.31 12075.66
09/30/90 12079.98 11550.48
10/31/90 11798.78 11256.55
11/30/90 12167.16 11351.90
12/31/90 12414.04 11515.48
01/31/91 12699.65 11678.26
02/28/91 13428.44 12545.05
03/31/91 13932.20 13084.44
04/30/91 14356.45 13550.40
05/31/91 14509.37 13616.56
06/30/91 14898.90 13890.48
07/31/91 15437.13 14223.31
08/31/91 15637.51 14522.26
09/30/91 15848.66 14707.23
10/31/91 16479.79 15144.26
11/30/91 16670.04 15319.19
12/31/91 16752.07 15497.16
01/31/92 17519.97 16038.99
02/29/92 18245.21 16437.32
03/31/92 18762.40 16666.67
04/30/92 18933.14 16787.98
05/31/92 19139.71 17055.75
06/30/92 19428.62 17267.67
07/31/92 19778.92 17617.53
08/31/92 20144.65 17850.77
09/30/92 20360.40 18054.16
10/31/92 20098.82 17826.14
11/30/92 20318.45 18078.60
12/31/92 20620.05 18311.38
01/31/93 21171.21 18762.27
02/28/93 21634.96 19117.42
03/31/93 22136.96 19448.86
04/30/93 22263.05 19588.46
05/31/93 22565.83 19852.14
06/30/93 23116.50 20225.12
07/31/93 23420.02 20442.51
08/31/93 23602.41 20637.39
09/30/93 23647.38 20739.21
10/31/93 24212.56 21129.89
11/30/93 24387.99 21245.45
12/31/93 24836.75 21457.89
01/31/94 25550.38 21928.14
02/28/94 25445.47 21770.44
03/31/94 24669.73 21061.01
04/30/94 24394.93 20814.89
05/31/94 24546.37 20740.73
06/30/94 24501.09 21197.84
07/31/94 24595.92 21346.82
08/31/94 24771.90 21495.14
09/30/94 24897.81 21486.95
10/31/94 24852.29 21541.56
11/30/94 24454.75 21358.31
12/31/94 24465.76 21208.01
01/31/95 24676.14 21507.68
02/28/95 25470.57 22178.75
03/31/95 25699.84 22487.40
04/28/95 26529.21 23013.91
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor High Yield Fund - Class A on January 31, 1987, shortly after the
fund started, and paid the maximum 4.75% sales charge. As the chart shows,
by April 30, 1995, the value of your investment would have grown to $26,529
- - a 165.29% increase on your initial investment. For comparison, look at
how the Merrill Lynch High Yield Master Index did over the same period.
With dividends reinvested, the same $10,000 investment would have grown to
$23,001 -
a 130.01% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED OCTOBER 31,
MONTHS
ENDED
APRIL 30,
1995 1994 1993 1992 1991 1990
Dividend return 4.43% 7.15% 9.16% 12.57% 15.50% 12.72%
Capital appreciation 2.32% -4.51% 11.31% 9.39% 24.17% -9.14%
return
Total return 6.75% 2.64% 20.47% 21.96% 39.67% 3.58%
</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
PERIODS ENDED APRIL 30, 1995 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 7.11(cents) 47.02(cents) 83.10(cents)
Annualized dividend rate 7.61% 8.57% 7.43%
30-day annualized yield 9.04% - -
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 $11.36 over the past month, $11.06
over the past six months and $11.18 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. The
offering share price used in the calculation of the yield includes the
effect of Class A's maximum 4.75% sales charge.
ADVISOR HIGH YIELD FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells
securities that have grown in value). You can also look at 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
Class A 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. Also, if
Fidelity had not reimbursed certain Class A expenses, the past 5 years and
life of fund total return figures would have been lower. Class B's
contingent deferred sales charges included in the past 6 months, past 1
year, past 5 years and life of fund total return figures are 4%, 4%, 1% and
0%, respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor High Yield - Class B 6.25% 7.71% 124.98% 188.79%
Advisor High Yield - Class B
(incl. contingent deferred sales 2.25% 3.71% 123.98% 188.79%
charge)
Merrill Lynch High Yield Master Index 8.79% 10.57% 94.23% n/a
Average High Current Yield Fund 5.73% 5.54% 84.57% n/a
Consumer Price Index 1.61% 3.05% 17.84% 37.47%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 5, 1987. For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Class B's returns to those of
the Merrill Lynch High Yield Master Index - a broad gauge of the high yield
bond market. To measure how Class B's performance stacked up against its
peers, you can compare it to the average high current yield fund, which
reflects the performance of over 110 high current yield funds with similar
objectives tracked by Lipper Analytical Services over the past six months.
These benchmarks include reinvested dividends and capital gains, if any,
and exclude the effects of sales charges. Comparing Class B's performance
to the consumer price index (CPI) helps show how the class did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor High Yield - Class B 7.71% 17.61% 13.59%
Advisor High Yield - Class B
(incl. contingent deferred sales charge) 3.71% 17.50% 13.59%
Merrill Lynch High Yield Master Index 10.57% 14.20% n/a
Average High Current Yield Fund 5.54% 12.96% n/a
Consumer Price Index 3.05% 3.34% 3.89%
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 LIFE OF FUND
Fidelity AdvisorHigh Yield Master
01/31/87 10000.00 10000.00
02/28/87 10189.32 10165.09
03/31/87 10292.54 10277.49
04/30/87 10076.64 10053.36
05/31/87 9968.41 10008.06
06/30/87 10127.12 10146.40
07/31/87 10161.83 10201.61
08/31/87 10262.58 10303.83
09/30/87 9889.58 10066.76
10/31/87 9475.05 9797.80
11/30/87 9820.46 10045.57
12/31/87 9996.35 10178.96
01/31/88 10519.86 10457.50
02/29/88 10857.20 10741.26
03/31/88 10786.74 10723.50
04/30/88 10755.96 10754.47
05/31/88 10790.82 10810.60
06/30/88 11217.96 11017.30
07/31/88 11379.80 11133.72
08/31/88 11324.21 11170.30
09/30/88 11444.11 11282.89
10/31/88 11573.25 11458.68
11/30/88 11607.31 11501.61
12/31/88 11720.19 11550.28
01/31/89 12037.53 11723.49
02/28/89 12121.67 11802.27
03/31/89 12003.41 11791.77
04/30/89 11870.39 11826.57
05/31/89 12170.30 12044.30
06/30/89 12604.76 12214.94
07/31/89 12673.59 12272.78
08/31/89 12801.77 12333.41
09/30/89 12426.08 12215.99
10/31/89 11959.52 12022.77
11/30/89 11994.39 12049.71
12/31/89 12146.25 12038.82
01/31/90 11970.04 11803.53
02/28/90 11906.49 11631.63
03/31/90 12116.22 11788.87
04/30/90 12261.90 11848.76
05/31/90 12673.73 12062.79
06/30/90 13035.46 12296.49
07/31/90 13338.73 12556.35
08/31/90 13011.29 12075.66
09/30/90 12682.34 11550.48
10/31/90 12387.12 11256.55
11/30/90 12773.87 11351.90
12/31/90 13033.06 11515.48
01/31/91 13332.90 11678.26
02/28/91 14098.03 12545.05
03/31/91 14626.92 13084.44
04/30/91 15072.32 13550.40
05/31/91 15232.87 13616.56
06/30/91 15641.83 13890.48
07/31/91 16206.89 14223.31
08/31/91 16417.25 14522.26
09/30/91 16638.94 14707.23
10/31/91 17301.54 15144.26
11/30/91 17501.27 15319.19
12/31/91 17587.39 15497.16
01/31/92 18393.59 16038.99
02/29/92 19155.00 16437.32
03/31/92 19697.97 16666.67
04/30/92 19877.23 16787.98
05/31/92 20094.10 17055.75
06/30/92 20397.42 17267.67
07/31/92 20765.19 17617.53
08/31/92 21149.15 17850.77
09/30/92 21375.66 18054.16
10/31/92 21101.05 17826.14
11/30/92 21331.61 18078.60
12/31/92 21648.25 18311.38
01/31/93 22226.90 18762.27
02/28/93 22713.76 19117.42
03/31/93 23240.80 19448.86
04/30/93 23373.17 19588.46
05/31/93 23691.05 19852.14
06/30/93 24269.18 20225.12
07/31/93 24587.83 20442.51
08/31/93 24779.31 20637.39
09/30/93 24826.52 20739.21
10/31/93 25419.87 21129.89
11/30/93 25604.06 21245.45
12/31/93 26075.20 21457.89
01/31/94 26824.42 21928.14
02/28/94 26714.26 21770.44
03/31/94 25899.86 21061.01
04/30/94 25611.35 20814.89
05/31/94 25770.34 20740.73
06/30/94 25722.79 21197.84
07/31/94 25779.15 21346.82
08/31/94 25940.46 21495.14
09/30/94 26052.10 21486.95
10/31/94 25963.28 21541.56
11/30/94 25553.69 21358.31
12/31/94 25524.45 21208.01
01/31/95 25727.82 21507.68
02/28/95 26540.38 22178.75
03/31/95 26763.01 22487.40
04/28/95 27586.78 23013.91
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor High Yield Fund - Class B on January 31, 1987, shortly after the
fund started. As the chart shows, by April 30, 1995, the value of your
investment would have grown to $27,587 - a 175.87% increase on your initial
investment. For comparison, look at how the Merrill Lynch High Yield Master
Index did over the same period. With dividends reinvested, the same $10,000
investment would have grown to $23,001 - a 130.01% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can ride
out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED OCTOBER 31,
MONTHS
ENDED
APRIL 30,
1995 1994 1993 1992 1991 1990
Dividend return 4.02% 6.73% 9.16% 12.57% 15.50% 12.72%
Capital appreciation 2.23% -4.59% 11.31% 9.39% 24.17% -9.14%
return
Total return 6.25% 2.14% 20.47% 21.96% 39.67% 3.58%
</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
PERIODS ENDED APRIL 30, 1995 PAST PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 6.41(cents) 42.75(cents) 62.30(cents)
Annualized dividend rate 6.88% 7.79% 6.69%
30-day annualized yield 8.75% - -
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 $11.34 over the past month, $11.06
over the past six months, and $11.14 over the life of Class, you can
compare the Class' income over these three periods. The 30-day annualized
YIELD is a standard formula for all bond funds based on the yields of the
bonds in the fund, averaged over the past 30 days. This figure shows you
the yield characteristics of the fund's investments at the end of the
period. It also helps you compare funds from different companies on an
equal basis. The offering share price used in the calculation of the yield
excludes the effect of Class B's contingent deferred sales charge.
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Margaret Eagle, Portfolio Manager of Fidelity Advisor
High Yield Fund
Q. MARGARET, HOW DID THE FUND DO?
A. For the six months ended April 30, 1995, the fund's Class A shares and
Class B shares had total returns of 6.75% and 6.25%, respectively. For the
year ended April 30, 1995, the fund's Class A and Class B shares returned
8.75% and 7.71%, respectively. During the same periods, the average
high-yield fund returned 5.73% and 5.54%, respectively, as tracked by
Lipper Analytical Services.
Q. HOW WOULD YOU CHARACTERIZE THE ENVIRONMENT FOR THE HIGH YIELD BOND
MARKET?
A. The most recent six-month period got off to a rocky start in November.
Investors worried about higher interest rates and the possibility that
there would be deterioration of the credit quality for some high yield
issues. The Federal Reserve Board raised interest rates seven times during
1994, triggering heavy selling of all bonds - including the high-yield
variety - throughout most of last year. In addition, there were a couple of
high-profile bankruptcies in the supermarket sector, which traditionally
had been viewed as a more stable industry and a safe haven for investors.
Fears of further bankruptcies in the supermarket and other industries
caused credit spreads - the difference in yields among securities with
various credit qualities - to widen. In effect, investors were saying that
they required a lot more compensation for taking on additional credit risk.
Because of these problems, demand for high-yield bonds was very poor by the
end of 1994.
Q. WHAT CHANGED IN 1995?
A. The economy showed some signs of slowing, and investors' fears that the
Federal Reserve would raise interest rates higher in 1995 began to wane.
From January through the end of April, the bond market rallied. Meanwhile,
corporate earnings soared, and confidence in credit quality was generally
restored. Finally, supply and demand factors turned more positive. There
was very little new issuance as companies turned to banks and the equity
market to meet their financing needs. A combination of investors coming
back to the bond market in general, and to the high-yield sector in
particular, strengthened demand for high-yield bonds.
Q. WHICH ISSUES IN PARTICULAR HELPED THE FUND'S PERFORMANCE?
A. After experiencing their share of trouble in 1994, Nextel and Echo Star
proved to be winners so far in 1995 and helped the fund's performance. Last
fall, a proposed partnership deal between Nextel and MCI failed to
materialize and the bonds traded down. However, a recent government auction
of spectrum - used to transmit mobile radio wireless communications -
confirmed the value of the spectrum Nextel already owned. Also, Craig
McCaw, a well-known communications investor with a successful track record,
made a significant investment in the company. The direct broadcaster Echo
Star suffered when the Chinese company it planned to use to launch its
satellite experienced difficulty launching a similar model. But the company
recently announced an equity initial public offering which will give it the
necessary capital to provide for a successful launch.
Q. DID VIACOM, ONE OF THE FUND'S TOP FIVE HOLDINGS, ALSO IMPROVE OVER THE
PAST SIX MONTHS?
A. Yes, Viacom did fairly well. The Viacom issue I own was created out of
the transaction resulting from its purchase of Paramount. These securities
continued to rise as interest rates stabilized, and as it became clearer to
the market that Viacom was successfully consolidating its operations.
Viacom has been selling assets to finance debt reduction, which has
improved the outlook for the company.
Q. WHAT'S THE ATTRACTION TO GPA GROUP - THE FUND'S LARGEST HOLDING AT 6.7%
OF INVESTMENTS AT THE END OF THE PERIOD?
A. Ireland-based GPA is one of the world's largest aircraft leasing
companies and has been a strong performer for the fund. I like it, in part,
because leasing rates firmed as the economy strengthened. That helped
improve the company's credit quality. What's more, last year GPA completed
an equipment leasing financing which provided it with enough cash to meet
all its debt requirements until September 1996. Another factor which makes
it attractive is that General Electric bought a large portion of GPA's
aircraft, took over management of GPA's leasing business and has an option
to buy 67% of the company. Even if GE doesn't pick up the option, GPA is
making diligent efforts to refinance its capital structure.
Q. EVEN THOUGH THE FUND ENJOYED RELATIVELY STRONG PERFORMANCE, THERE MUST
HAVE BEEN SOME DISAPPOINTMENTS . . .
A. Sure, some zero coupon bonds detracted from performance. These bonds
make no periodic interest payments. Rather, they are sold at a discount to
their face value and the buyer receives the rate of return by gradual
appreciation of the security. When the value of these bonds fell as
interest rates were rising, zeros had no income to cushion their fall.
Q. WHAT'S AHEAD FOR THE FUND OVER THE NEXT SIX MONTHS?
A. I've used some of the market's recent strength as an opportunity to
reposition the fund more conservatively, a strategy I'll most likely
continue. The bond market is not commanding a huge premium for being in
riskier securities, so now is an opportune time to replace higher-risk
securities with less risky issues. Because yield spreads are relatively
tight, I don't have to give up much in the way of additional income to
improve the risk profile of the fund. Going forward, I'll probably use any
new money coming into the fund to buy current coupon bonds rather than zero
coupon bonds. That way, if interest rates do rise, I'll hopefully have more
income to cushion the decline.
FUND FACTS
GOAL: to provide a high level
of income and the potential
for capital gains by investing
primarily in high-yield bonds
START DATE: January 5, 1987
SIZE: as of April 30, 1995,
more than $982 million
MANAGER: Margaret Eagle,
since 1987; joined Fidelity
in 1980
(checkmark)
MARGARET EAGLE ON SUPPLY AND
DEMAND IN THE HIGH YIELD
MARKET:
"By the end of the period,
issuance of high-yield bonds
was about $4 billion. That is
significantly below the level
we saw in 1993 and 1994,
when new issuance was
roughly $46 billion and $22
billion, respectively. Supply has
dwindled for two reasons.
First, companies are turning to
banks and the equity market,
rather than the bond market, to
meet their financing needs.
Second, as interest rates rose,
fewer companies called away,
or redeemed early, their debt
issues.
"At the same time, demand
has strengthened. Because of
their attractive yields,
high-yield bonds are catching
the attention of many
investors. And as fears about
the economy overheating
subsided, investors came
back into the bond market. If
merger and acquisition
activity increases, we could
see the supply of high yield
bonds increase. A favorable
supply and demand balance
could help the high yield bond
market going forward."
INVESTMENT CHANGES
TOP FIVE HOLDINGS AS OF APRIL 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE % OF FUND'S % OF FUND'S
AGREEMENTS) INVESTMENTS INVESTMENTS
6 MONTHS AGO
GPA Group PLC (various issues) 6.7 4.6
Stone Container Corp. (various issues) 3.3 2.7
Columbia Gas Systems, Inc. (various 2.5 2.3
issues)
Viacom, Inc. 8%, 7/7/06 2.3 1.7
Tjiwi Kimia International Finance Co.
13 1/4%, 8/1/01 2.1 1.0
TOP FIVE MARKET SECTORS AS OF APRIL 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Media & Leisure 20.0 14.9
Basic Industries 14.1 12.6
Utilities 9.4 5.4
Retail & Wholesale 7.9 5.8
Services 6.1 5.1
QUALITY DIVERSIFICATION AS OF APRIL 30, 1995
(MOODY'S RATINGS) % OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
6 MONTHS AGO
Aaa, Aa, A 0.0 0.0
Baa 0.0 0.0
Ba 1.9 1.0
B 57.3 40.0
Caa, Ca, C 11.7 9.8
Nonrated 15.0 23.8
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT APRIL 30, 1995 AND OCTOBER 31, 1994, ACCOUNT
FOR 15.0% AND 23.8%, RESPECTIVELY, OF THE FUND'S INVESTMENTS.
ASSET ALLOCATION
AS OF APRIL 30, 1995 * AS OF OCTOBER 31, 1994 **
Nonconvertible
bonds 67.4%
Convertible bonds,
preferred stocks 7.5%
Common stocks 3.2%
Short-term
investments 14.8%
Other 7.1%
FOREIGN
INVESTMENTS 9.0%
Nonconvertible
bonds 78.9%
Convertible bonds,
preferred stocks 7.3%
Common stocks 3.0%
Short-term
investments 4.2%
Other 6.6%
FOREIGN
INVESTMENTS 7.1%
78.
Row: 1, Col: 1, Value: 6.6
Row: 1, Col: 2, Value: 4.2
Row: 1, Col: 3, Value: 3.0
Row: 1, Col: 4, Value: 7.3
Row: 1, Col: 5, Value: 48.9
Row: 1, Col: 6, Value: 30.0
Row: 1, Col: 1, Value: 14.8
Row: 1, Col: 2, Value: 7.1
Row: 1, Col: 3, Value: 3.2
Row: 1, Col: 4, Value: 7.5
Row: 1, Col: 5, Value: 37.4
Row: 1, Col: 6, Value: 30.0
*
**
INVESTMENTS APRIL 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 79.3%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
CONVERTIBLE BONDS - 0.4%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., Series C, 0%, 6/30/97 - $ 428,000 $ 249,952
MEDIA & LEISURE - 0.4%
LODGING & GAMING - 0.4%
Argosy Gaming Co. 12%, 6/1/01 B3 3,110,000 3,094,450
Bally Entertainment Corp. 10%, 12/15/06 Caa 750,000 641,250
3,735,700
TOTAL CONVERTIBLE BONDS 3,985,652
NONCONVERTIBLE BONDS - 78.9%
AEROSPACE & DEFENSE - 0.1%
Fairchild Corp.:
12%, 10/15/01 B3 260,000 223,600
12 1/4%, 3/15/06 B3 375,000 300,000
523,600
BASIC INDUSTRIES - 13.4%
CHEMICALS & PLASTICS - 4.4%
American Pacific Corp. 11%, 12/15/02 (f) - 450,000 427,500
Dow Corning Corp. 9 3/8%, 2/1/98 B1 5,000,000 3,225,000
G-I Holdings, Inc., Series B, 0%, 10/1/98 Ba3 7,290,000 4,957,200
NL Industires, Inc.:
11 3/4%, 10/15/03 B1 12,830,000 13,631,875
0%, 10/15/05 (d) B2 3,840,000 2,712,000
Pioneer Americas Acquisition Corp.
13 3/8%, 4/1/05 B2 15,000,000 15,450,000
Trans Resources, Inc.:
14 1/2%, 9/1/96 B2 340,000 343,400
11 7/8%, 7/1/02 (f) B2 440,000 396,000
41,142,975
IRON & STEEL - 0.3%
Gulf States Steel Acquis Corp. 13 1/2%,
4/15/03 B1 3,000,000 3,067,500
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.9%
Kaiser Aluminum & Chemical Corp.
12 3/4%, 2/1/03 B2 $ 4,160,000 $ 4,420,000
Renco Metals, Inc. 12%, 7/15/00 B3 4,500,000 4,455,000
8,875,000
PACKAGING & CONTAINERS - 1.1%
Crown Packaging Holdings Ltd. 0%, 11/1/03 (d) Caa 2,010,000 959,775
Gaylord Container Corp.:
11 1/2%, 5/15/01 B3 1,130,000 1,194,975
0%, 5/15/05 (d) Caa 8,550,000 8,218,688
10,373,438
PAPER & FOREST PRODUCTS - 6.7%
Mail-Well Holdings, Inc 0%, 2/15/06 (d) - 1,790,000 769,700
Repap Enterprises, Inc. euro 9 1/8%,
7/21/97 (g) - 5,507,306 5,452,233
Repap New Brunswick, Inc.
yankee 10 5/8%, 4/15/05 B2 6,330,000 6,424,950
Stone Container Corp.:
11%, 8/15/99 B2 4,950,000 5,061,375
9 7/8%, 2/1/01 B1 4,900,000 4,869,375
10 3/4%, 4/1/02 B2 3,810,000 3,895,725
11 1/2%,10/1/04 B1 16,450,000 17,560,375
Tjiwi Kimia International Finance Co.
13 1/4%, 8/1/01 B1 19,010,000 19,627,825
63,661,558
TOTAL BASIC INDUSTRIES 127,120,471
CONSTRUCTION & REAL ESTATE - 2.3%
BUILDING MATERIALS - 1.2%
Adience, Inc. 11%, 6/15/02 - 486,470 352,691
MVE, Inc. unit 12 1/2%, 2/15/02 B3 10,380,000 10,847,100
USG Corp., Series B, 9 1/4%, 9/15/01 B1 80,000 79,300
11,279,091
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.8%
Hillsborough/Jim Walter Corp. pay-in-kind
16 5/8%, 1/1/96 (d) - $ 2,620,000 $ 2,626,550
Peters (J.M.), Inc. 12 3/4%, 5/1/02 B3 2,640,000 2,151,600
UDC Homes 11 3/4%, 4/30/03 (b) B2 5,210,000 2,605,000
7,383,150
REAL ESTATE - 0.3%
Littlefield Co. 10%, 12/31/95 (e) - 3,300,000 3,300,000
TOTAL CONSTRUCTION & REAL ESTATE 21,962,241
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES - 1.5%
Aftermarket Technology Corp.
Series B, 12%, 8/1/04 B3 3,790,000 4,017,400
Amerigas Partners LP 10 1/8%, 4/15/07 - 5,000,000 5,087,500
Harvard Industries, Inc. 12%, 7/15/04 B2 4,670,000 4,903,500
14,008,400
TEXTILES & APPAREL - 0.3%
Forstmann Textiles, Inc. 14 3/4%, 4/15/99 B3 720,000 748,800
Hat Brands, Inc.:
12 5/8%, 9/15/02 - 710,000 747,275
Series D, 12 5/8%, 9/15/02 - 820,000 863,050
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 450,880 261,510
10.54%, 1/15/02 - 407,569 195,633
2,816,268
TOTAL DURABLES 16,824,668
ENERGY - 3.0%
ENERGY SERVICES - 0.3%
Falcon Drilling, Inc. 9 3/4%, 1/15/01 B2 1,790,000 1,700,500
TransTexas Gas Corp. 10 1/2%, 9/1/00 B1 1,000,000 1,055,000
2,755,500
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
ENERGY - CONTINUED
OIL & GAS - 2.7%
Flores & Rucks, Inc. 13 1/2%, 12/1/04 B3 $ 13,900,000 $ 15,116,250
Plains Resources, Inc., 12%, 8/15/99 B3 1,450,000 1,493,500
Transamerican Refining Corp. 16 1/2%,
2/15/02 (g) Caa 8,760,000 9,219,900
25,829,650
TOTAL ENERGY 28,585,150
FINANCE - 2.4%
CREDIT & OTHER FINANCE - 0.5%
Mesa Capital Corp. secured 0%, 6/30/98 (d) Caa 4,640,000 4,454,400
INSURANCE - 1.9%
American Financial Corp. 9 3/4%, 4/20/04 B+ 7,210,000 7,065,800
Nacolah, Inc. 9 1/2%, 12/1/03 B1 11,800,000 10,885,500
17,951,300
SECURITIES INDUSTRY - 0.0%
ECM Corp. extendible 14%, 6/1/02 (f) - 221,759 243,934
TOTAL FINANCE 22,649,634
HOLDING COMPANIES - 0.1%
New Street Capital Corp. unit 12%, 2/28/98 (e) - 1,404,500 1,377,351
INDUSTRIAL MACHINERY & EQUIPMENT - 4.5%
ELECTRICAL EQUIPMENT - 0.7%
Panamsat LP/Panamasat Capital Corp.:
secured 9 3/4%, 8/1/00 Ba3 2,400,000 2,430,000
0%, 8/1/03 B3 6,520,000 4,515,100
6,945,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Exide Corp. 10%, 4/15/05 (f) B1 $ 3,770,000 $ 3,826,550
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 70,000 67,900
11 7/8%, 3/1/99 (e) - 180,000 174,150
Specialty Equipment Cos., Inc. 11 3/8%,
12/1/03 B3 7,050,000 7,050,000
Terex Corp. 13%, 8/1/96 (f) - 1,622,000 1,666,605
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 - 565,000 542,400
10 3/4%, 11/1/03 - 1,938,000 1,889,550
UCAR Global Enterprises, Inc.
12%, 1/15/05 (f) B2 3,450,000 3,708,750
18,925,905
POLLUTION CONTROL - 1.8%
Allied Waste Industries, Inc. 10 3/4%, 2/1/04 B3 10,630,000 10,842,600
Envirosource, Inc. 9 3/4%, 6/15/03 B3 6,805,000 6,056,450
16,899,050
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 42,770,055
MEDIA & LEISURE - 18.1%
BROADCASTING - 8.2%
Allbritton Communications Co.
11 1/2%, 8/15/04 B3 2,370,000 2,441,100
Chancellor Broadcasting 12 1/2%, 10/1/04 B3 5,770,000 5,798,850
Citicasters, Inc. 9 3/4%, 2/15/04 B- 8,125,000 8,003,125
Diamond Cable Communications PLC
0%, 9/30/04 (d) B3 11,950,000 7,170,000
Heartland Wireless Communications, Inc.
13%, 4/15/03 (f) B3 3,300,000 3,399,000
New City 11 3/8%, 11/1/03 B3 4,270,000 3,992,450
PTI Holdings, Inc. 7%, 12/17/02 - 1,774,755 1,047,105
Robin Media Group, Inc. 11 1/8%, 4/1/97 - 12,270,000 12,085,950
SCI Television, Inc. secured 11%, 6/30/05 B3 4,390,000 4,565,600
Univision Network Holding LP 7%, 12/17/02 - 12,505,225 7,378,083
Viacom, Inc. 8%, 7/7/06 B1 23,310,000 21,561,750
77,443,013
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.9%
Live Entertainment, Inc. 10%, 9/1/98 - $ 1,244,400 $ 902,190
Players International, Inc. 10 7/8%, 4/15/05 (f) Ba3 5,340,000 5,380,050
Stratosphere Corp. 14 1/4%, 5/15/02 B2 2,620,000 2,672,400
8,954,640
LEISURE DURABLES & TOYS - 0.2%
IHF CAP, Inc. 13%, 7/15/02 (f) B3 1,460,000 1,562,200
LODGING & GAMING - 7.4%
Bally's Park Place Funding, Inc.
9 1/4%, 3/15/04 B1 2,450,000 2,217,250
Boyd Gaming Corp. 10 3/4%, 9/3/03 B2 6,000,000 6,045,000
GNF Corp. Series B, 10 5/8%, 4/1/03 B2 9,450,000 7,725,375
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,720,000 2,849,200
Hammons (John Q.) Hotels LP/Hammons Hotels
Finance Corp. 1st mtg. 8 7/8%, 2/15/04 B1 2,340,000 2,199,600
Harrah's Jazz Co. 14 1/4%, 11/15/01 B1 15,730,000 17,145,700
Host Marriott Corp.:
10 1/2%, 5/1/06 B1 9,068,000 9,226,690
11%, 5/1/06 B1 2,476,000 2,525,520
Motels of America, Inc. 12%, 4/15/04 B3 8,000,000 8,040,000
President Riverboat Casinos 13%, 9/15/01 B 7,770,000 7,264,950
Red Roof Inns, Inc. 9 5/8%, 12/15/03 B3 5,180,000 4,985,750
70,225,035
RESTAURANTS - 1.4%
Flagstar Corp.:
10 7/8%, 12/1/02 B2 1,670,000 1,565,625
11 1/4%, 11/1/04 Caa 14,086,000 11,409,660
12,975,285
TOTAL MEDIA & LEISURE 171,160,173
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 5.0%
FOODS - 0.3%
Chiquita Brands International, Inc.
11 1/2%, 6/1/01 B3 $ 1,725,000 $ 1,742,250
Specialty Foods Corp. 11 1/4%, 8/15/03 Caa 1,260,000 1,241,100
2,983,350
HOUSEHOLD PRODUCTS - 4.7%
McAndrews & Forbes Group, Inc.
12 1/4%, 7/1/96 - 4,610,000 4,610,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,400,000 7,104,000
Revlon Worldwide Corp. secured 0%, 3/15/98 B3 51,950,000 32,988,250
44,702,250
TOTAL NONDURABLES 47,685,600
RETAIL & WHOLESALE - 7.0%
APPAREL STORES - 0.4%
Apparel Retailers, Inc. 12 3/4%, 8/15/05 Caa 4,530,000 2,763,300
Lamonts Apparel Corp. 10 1/4%,
11/1/99 (b)(f) - 2,201,000 1,133,515
3,896,815
DRUG STORES - 0.9%
Thrifty Payless, Inc. 12 1/4%, 4/15/04 B3 7,860,000 8,095,800
GENERAL MERCHANDISE STORES - 0.3%
Pantry, Inc., Series B, 12%, 11/15/00 B3 2,470,000 2,420,600
GROCERY STORES - 4.5%
Dominicks Fine Foods 10 7/8%,
5/1/05 (f) B3 4,630,000 4,676,300
Pathmark Stores, Inc.:
9 5/8%, 5/1/03 B2 12,980,000 12,460,800
0%, 11/1/03 (d) B3 320,000 180,800
Ralph's Grocery Co. 9%, 4/1/03 B2 3,200,000 3,152,000
Specialty Foods Acquisition Corp.
0%, 8/15/05 (d) Ca 13,450,000 7,128,500
Star Markets, Inc. 13%, 11/1/04 B3 13,940,000 14,776,400
42,374,800
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 0.9%
Finlay Fine Jewelry Corp. 10 5/8%, 5/1/03 B1 $ 8,570,000 $ 8,184,350
Town & Country Corp.:
11 1/2%, 9/15/97 B1 268,000 151,420
13%, 5/31/98 B3 798,242 303,955
8,639,725
TOTAL RETAIL & WHOLESALE 65,427,740
SERVICES - 6.1%
ADVERTISING - 1.0%
Outdoor Systems, Inc. 10 3/4%, 8/15/03 B2 10,400,000 9,880,000
LEASING & RENTAL - 4.0%
Acme Holdings, Inc. 11 3/4%, 6/1/00 Ca 4,560,000 1,641,600
GPA Delaware, Inc.:
8 1/2%, 3/3/97 - 6,800,000 5,967,000
gtd. notes 8 3/4%, 12/15/98 Caa 11,660,000 9,240,550
8 5/8%, 1/15/99 - 3,200,000 2,352,000
GPA Group:
8.28%, 2/13/97 (f) - 1,400,000 1,225,000
8.58%, 2/21/97 - 250,000 218,750
9.12%, 2/24/99 - 750,000 555,000
9%, 8/16/99 - 3,250,000 2,340,000
GPA Holland B.V.:
9 3/4%, 6/10/96 (f) Caa 2,250,000 2,143,125
9 3/4%, 7/22/96 Caa 500,000 475,000
8.48%, 2/21/97 (f) B1 2,250,000 1,974,375
GPA Leasing USA I, Inc. 9 1/8%,
9/02/96 B3 3,569,403 3,319,723
GPA Leasing USA Sub. I, Inc. 9 1/8%,
12/02/96 B3 2,776,253 2,550,683
Scotsman Group, Inc. 9 1/2%, 12/15/00 B1 2,140,000 2,049,050
Scotsman Holdings, Inc. pay-in-kind
11%, 3/1/04 - 2,459,071 2,086,596
38,138,452
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
SERVICES - CONTINUED
PRINTING - 1.1%
Big Flower Press:
10 3/4%, 8/1/03 B3 $ 3,140,000 $ 3,061,500
10 3/4%, 8/1/03, Class A B3 3,220,000 3,139,500
10 3/4%, 8/1/03, Class B B3 1,000,000 975,000
Sullivan Graphics, Inc. 15%, 2/1/00 Ca 2,900,000 3,070,375
10,246,375
TOTAL SERVICES 58,264,827
TECHNOLOGY - 2.4%
COMMUNICATIONS EQUIPMENT - 1.5%
Echostar Communications Corp. unit 0%,
6/1/04 (d) Caa 26,860,000 13,967,200
COMPUTERS & OFFICE EQUIPMENT - 0.5%
Alpine Group, Inc. 13 1/2%, 1/5/96 (e) Caa 80,000 79,600
Bell & Howell Holdings Co. 0%, 3/1/05 (d) B3 7,800,000 4,348,500
4,428,100
ELECTRONICS - 0.4%
Berg Electronics, Inc. 11 3/8%, 5/1/03 B3 3,960,000 4,138,200
TOTAL TECHNOLOGY 22,533,500
TRANSPORTATION - 3.3%
AIR TRANSPORTATION - 3.3%
CHC Helicopter Corp. 11 1/2%, 7/15/02 B3 560,000 456,400
Continental Airlines, Inc. 2nd priority secured
equipment certificate 11%, 3/15/00 (b) Caa 190,000 19
NWA, Inc. 8 5/8%, 8/1/96 B2 6,120,000 6,089,400
US Air, Inc.:
9 5/8%, 2/1/01 B2 7,070,000 5,797,400
10%, 7/1/03 B3 19,580,000 15,908,750
9 5/8%, 9/1/03 B2 3,140,000 2,849,550
31,101,519
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - 9.4%
CELLULAR - 5.8%
Cencall Communications Corp. 0%,
1/15/04 (d) Caa $ 15,020,000 $ 7,322,250
Comcast Cellular Corp. sr. part., Series B,
0%, 3/5/00 B2 6,520,000 4,661,800
Dial Call Communications, Inc.:
0%, 4/15/04 (d) Caa 9,050,000 4,434,500
0%, 12/15/05 (d) Caa 3,560,000 1,602,000
Dial Page, Inc. 12 1/4%, 2/15/00 Caa 9,085,000 9,221,275
Mobilmedia Communications, Inc.
0%, 12/1/03 (d) B3 2,490,000 1,456,650
Nextel Communications, Inc.:
0%, 9/1/03 (d)(g) B3 17,810,000 9,884,550
0%, 8/15/04 (d) B3 33,650,000 16,572,625
55,155,650
ELECTRIC UTILITY - 1.1%
Del Norte Funding Corp. secured
leasing oblig. 11 1/4%, 1/2/14 (b) Ca 8,460,000 5,160,600
El Paso Funding Corp. lease oblig. (b):
9 3/8%, 10/1/96 Ca 1,800,000 1,111,500
9 1/5%, 7/2/97 Ca 930,000 576,600
10 3/4%, 4/1/13 Ca 5,560,000 3,433,300
10,282,000
GAS - 2.5%
Columbia Gas Systems, Inc. (b):
8 3/4%, 4/01/95 D 500,000 685,000
9%, 8/1/95 Caa 170,000 235,450
10 1/8%, 11/1/95 B3 180,000 249,300
9 1/8%, 5/1/96 B3 400,000 544,000
9.30%, 9/02/99 Caa 190,000 268,375
9.07%, 1/12/00 - 750,000 1,050,000
10 1/4%, 8/1/11 B3 6,980,000 10,400,200
10 1/2%, 6/1/12 B3 6,460,000 9,399,300
10.15%, 11/1/13 B3 90,000 129,600
tranche #13, 9 1/4%, 9/30/04 Caa 500,000 705,000
23,666,225
TOTAL UTILITIES 89,103,875
TOTAL NONCONVERTIBLE BONDS 747,090,404
TOTAL CORPORATE BONDS
(Cost $726,017,958) 751,076,056
COMMERCIAL MORTGAGE SECURITIES - 2.9%
MOODY'S RATINGS (B) PRINCIPAL VALUE (NOTE 1)
AMOUNT (C) (000S) (000S)
Bardell Associates Note Trust
12 1/2%, 11/1/08 (e) - $ 1,948,021 $ 1,979,509
CBA Mortgage Corp. commercial Series
1993-C1 Class E, 7.158%, 12/25/03 (f) Ba2 3,000,000 2,467,500
La Salle National Trust NA, Trust No. 118501
Mortgage Note 11 3/4%, 12/29/08 (e) - 1,962,497 1,962,497
Resolution Trust Corp. commercial Series :
1994-C2 Class G, 8%, 4/25/25 B 3,893,031 3,036,564
1994-C1 Class E, 8%, 6/25/26 BB 5,807,500 4,604,259
1994-N2 Class 5-A, 10 5/8%, 12/15/04 (f) B2 2,400,000 2,371,500
SKW Real Estate LP commercial Series II
Class E, 11%, 4/15/05 (f) B 5,960,000 5,954,040
SML, Inc. commercial Series
1994-C1 Class C, 9.28%, 9/18/99 (e) - 2,950,000 1,948,844
Structured Asset Securities Corp. commercial
Series 1995-C1 Class E, 7 3/8%, 9/25/24 (f) BB 4,000,000 2,763,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $26,588,342) 27,088,463
COMMON STOCKS - 3.0%
SHARES
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.4%
Atlantis Group, Inc. (Trivest/Winston) (a)(e) 8,825 50,744
Nu-West Industries, Inc. Class A (rights) (a)(e) 36,540 3,544,380
3,595,124
PACKAGING & CONTAINERS - 0.0%
Crown Packaging Holdings Ltd. (warrants) (a) 2,010 58,290
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 11,000 66,000
TOTAL BASIC INDUSTRIES 3,719,414
CONSTRUCTION & REAL ESTATE - 0.4%
BUILDING MATERIALS - 0.0%
Southdown, Inc. (warrants) (a) 3,000 10,500
CONSTRUCTION - 0.4%
NVR, Inc. (a) 368,706 2,488,766
NVR, Inc. (warrants) (a) 30,857 30,857
Peters J M, Inc. (warrants) (a) 24,095 6,024
Walter Industries, Inc. 151,442 1,628,002
4,153,649
TOTAL CONSTRUCTION & REAL ESTATE 4,164,149
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 7,229 $ 79,516
HM/Hat Brands Trust Class I units (a)(e)(i) 410,000 410,000
489,516
FINANCE - 0.0%
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 900 90,000
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
XRC Corp. (a) 84,961 21,240
HOLDING COMPANIES - 0.6%
SDW Holdings Corp. (f) 156,680 5,248,780
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. (a):
Class A 7,557 14,169
Class A (warrants) 31,141 58,389
Class C 84,758 158,921
Telex Communications Group (warrants) (a)(e) 160 9,920
241,399
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
Exide Corp. 141,700 5,313,750
Terex Corp. (rights) (a) 8,130 4,065
Thermadyne Holdings Corp. (a) 14,084 184,853
5,502,668
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 5,744,067
MEDIA & LEISURE - 0.1%
LODGING & GAMING - 0.1%
Bally's Grand, Inc. (warrants) (a) 1,743 10,894
Bally's Gaming International, Inc. (a) 11,947 116,483
Sun International Hotels Ltd. (a) 7,038 246,330
Sun Internaitonal Hotels Ltd. Class B (a) 1,477 46,562
420,269
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 0.8%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 $ 11,209
(warrants) 66,214 1
11,210
DRUG STORES - 0.0%
Thrifty Payless Holdings, Inc. Class C (a) 92,150 368,600
GENERAL MERCHANDISE STORES - 0.8%
Carson Pirie Scott & Co. (a) 447,531 7,216,437
Federated Department Stores, Inc. (a) 8,383 177,091
7,393,528
GROCERY STORES - 0.0%
FF Holdings Corp. (a)(e) 2,600 5,200
Grand Union Co. (warrants) (a) 238 -
Grand Union Capital Corp. Class B (a) 452 -
5,200
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Finlay Enterprises, Inc. (a) 2,533 35,462
TOTAL RETAIL & WHOLESALE 7,814,000
SERVICES - 0.0%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 18,059 236,212
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 25,680 128,400
TRANSPORTATION - 0.0%
AIR TRANSPORTATION - 0.0%
CHC Helicopter Corp. (warrants) (a) 5,520 -
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 5,494 $ 7,142
GAS - 0.0%
UGI Corp. (warrants) (a) 34,867 5,230
TOTAL UTILITIES 12,372
TOTAL COMMON STOCKS
(Cost $26,922,488) 28,088,419
PREFERRED STOCKS - 6.9%
CONVERTIBLE PREFERRED STOCKS - 0.9%
CONSTRUCTION & REAL ESTATE - 0.3%
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Prime Retail, Inc. ,Series B, 2 1/8%, 160,000 2,720,000
MEDIA & LEISURE - 0.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc., Series B, pay-in-kind 76,629 373,566
NONDURABLES - 0.5%
HOUSEHOLD PRODUCTS - 0.1%
Revlon Group, Inc., Series B, exchangeable
pay-in-kind $14.875 5,833 583,300
TOBACCO - 0.4%
RJR Nabisco Holdings Corp. depositary shares
representing 1/10, Series C 684,900 4,109,400
TOTAL NONDURABLES 4,692,700
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 33,480 870,480
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Alpine Group, Inc. cumulative 8% (a) 544 $ 24,480
TOTAL CONVERTIBLE PREFERRED STOCKS 8,681,226
NONCONVERTIBLE PREFERRED STOCKS - 6.0%
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.3%
Nu-West Industries, Inc. Class A $11 (a) 20,000 2,795,000
ENERGY - 0.7%
OIL & GAS - 0.7%
Gulf Canada Resources Ltd. (a)(e) 33,881 97,408
Gulf Canada Resources Ltd., Series 1, adj. rate 2,229,785 6,271,270
6,368,678
FINANCE - 2.4%
SAVINGS & LOANS - 2.4%
First Nationwide Bank 11 1/2% 59,825 6,281,625
Greater New York Savings Bank Series B, 12% 620,188 16,745,076
23,026,701
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. 8% (a)(e) 584 321,930
MEDIA & LEISURE - 1.4%
BROADCASTING - 1.4%
Panamsat Corp. 12 3/4% (a) 12,579 12,767,685
TECHNOLOGY - 1.2%
ELECTRONICS - 1.2%
Berg Electronics Holding Corp., Series E, $3.4687 424,144 11,663,960
TOTAL NONCONVERTIBLE PREFERRED STOCKS 56,943,954
TOTAL PREFERRED STOCKS
(Cost $63,957,850) 65,625,180
PURCHASED BANK DEBT - 3.7%
PRINCIPAL VALUE (NOTE 1)
AMOUNT
El Paso Electric Co. (b):
secured loan $ 1,085,299 $ 1,052,740
term loan 920,000 892,400
unsecured term loan 730,279 449,122
GPA Group PLC:
revolving loan 16,997,240 14,739,759
term loan 18,789,024 16,213,963
Leslie Fay Cos., Inc. (b):
revolving loan 457,237 265,198
term loan 518,400 300,672
Trivest 1992 Special Fund Ltd. 3.0 (h) 772,799
TOTAL PURCHASED BANK DEBT
(Cost $38,652,250) 34,686,653
REPURCHASE AGREEMENTS - 4.2%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.93%,
dated 4/28/95 due 5/1/95 $ 40,133,823 40,114,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $922,252,888) $ 946,678,771
LEGEND
5. Non-income producing
6. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
7. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
8. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
9. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group
13 1/2% 1/5/96 1/4/95 $ 78,632
Ampex Corp. 8% 2/16/95 306,600
Atlantis Group, Inc.
(Trivest/Winston) 4/6/93 10,328
Bardell Associates
Note Trust
12 1/2%, 11/1/08 4/19/94 1,980,021
FF Holdings Corp. 10/2/92
to 1/14/94 10,412
Gulf Canada
Resources Ltd. 10/15/93 85,118
ACQUISITION ACQUISITION
SECURITY DATE COST
HM/Hat BrandsTrust
Class 1 units 2/22/94 $ 410,000
Hat Brands, Inc.
(warrants) 9/2/92
to 2/23/94 -
La Salle National Trust
NA, Trust No. 118501
Mortgage Note 11 3/4%,
12/29/08 12/29/93 1,962,522
Leslie Fay Companies, Inc.:
9.53%, 1/15/00 7/19/93 341,542
10.54%, 1/15/02 7/19/93
to 11/11/93 270,069
Littlefield Co. 10%
12/31/95 2/28/94 3,300,000
New Street Capital
Corp. unit 12%,
2/28/98 2/25/94
to 2/15/95 1,404,500
Nu-West Industries
Class A (Rights) 2/17/94 3,178,980
RHI Holdings 11 7/8%
3/1/99 10/15/92 162,000
SML, Inc commercial
Series 1994-C1
Class C, 9.28%,
9/18/99 8/11/94 1,918,238
Telex Communications
Group (warrants) 4/15/92 3,200
10. 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 $50,786,874 or 5.2% of net
assets.
11. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
12. Represents number of units held.
13. Affiliated company (see Note 8 of Notes to Financial Statements).
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 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.3%
Ba 1.9% BB 10.2%
B 57.3% B 49.5%
Caa 9.4% CCC 8.3%
Ca, C 2.3% 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 11.6% including long-term debt
categorized as other securities. FMR has determined that unrated debt
securities that are lower quality account for 8.2% of the total value of
investment in securities.
INCOME TAX INFORMATION
At April 30, 1995, the aggregate cost of investment securities for income
tax purposes was $922,369,116. Net unrealized appreciation aggregated
$24,309,655, of which $46,142,112 related to appreciated investment
securities and $21,832,457 related to depreciated investment securities.
At October 31, 1994, the fund had a capital loss carryforward of
approximately $9,672,000 which will expire on October 31, 2002.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS APRIL 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 946,678,771
agreements of $40,114,000) (cost $922,252,888) -
See accompanying schedule
Cash 22,823,437
Receivable for investments sold 54,745,619
Dividends receivable 605,282
Interest receivable 17,688,265
TOTAL ASSETS 1,042,541,374
LIABILITIES
Payable for investments purchased $ 57,640,086
Distributions payable 1,397,288
Accrued management fee 466,152
Distribution fees payable 230,614
Other payables and accrued expenses 215,980
TOTAL LIABILITIES 59,950,120
NET ASSETS $ 982,591,254
Net Assets consist of:
Paid in capital $ 968,296,140
Undistributed net investment income 1,541,890
Accumulated undistributed net realized gain (loss) on (11,721,782)
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 24,475,006
investments and assets and liabilities in foreign
currencies
NET ASSETS $ 982,591,254
CALCULATION OF MAXIMUM OFFERING PRICE $11.48
CLASS A:
NET ASSET VALUE, and redemption price per share
($915,343,999 (divided by) 79,761,436 shares)
Maximum offering price per share (100/95.25 of $11.48) $12.05
CLASS B: $11.46
NET ASSET VALUE, and offering price per share
($67,247,255 (divided by) 5,867,419 shares) A
</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>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,207,439
Dividends
Interest 32,943,630
TOTAL INCOME 35,151,069
EXPENSES
Management fee $ 2,364,510
Transfer agent fees 865,249
Class A
Class B 47,215
Distribution fees - Class A 932,437
Distribution fees - Class B 177,236
Accounting fees and expenses 131,114
Non-interested trustees' compensation 1,845
Custodian fees and expenses 23,063
Registration fees - Class A 55,017
Registration fees - Class B 27,087
Audit 16,840
Legal 16,564
Interest 2,684
Reports to shareholders 2,911
Miscellaneous 3,446
Total expenses before reductions 4,667,218
Expense reductions (9,846) 4,657,372
NET INVESTMENT INCOME 30,493,697
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (1,837,573)
Foreign currency transactions 1,002 (1,836,571)
Change in net unrealized appreciation (depreciation) on:
Investment securities 29,229,155
Assets and liabilities in foreign currencies 4,155 29,233,310
NET GAIN (LOSS) 27,396,739
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 57,890,436
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 30,493,697 $ 42,383,788
Net investment income
Net realized gain (loss) (1,836,571) (7,075,135)
Change in net unrealized appreciation (depreciation) 29,233,310 (21,974,620)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 57,890,436 13,334,033
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (31,434,285) (43,822,276)
Class B (1,306,729) (137,043)
Net realized gain class A - (10,720,885)
TOTAL DISTRIBUTIONS (32,741,014) (54,680,204)
Share transactions - net increase (decrease) 260,860,151 252,369,016
TOTAL INCREASE (DECREASE) IN NET ASSETS 286,009,573 211,022,845
NET ASSETS
Beginning of period 696,581,681 485,558,836
End of period (including undistributed net investment $ 982,591,254 $ 696,581,681
income of $1,541,890 and $3,789,207, respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED
APRIL 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 11.220 $ 12.010 $ 11.070 $ 10.120 $ 8.150 $ 8.970
beginning of period
Income from
Investment
Operations
Net investment .428 .848 .980 1.146 1.115 1.144
income
Net realized and .302 (.537) 1.153 .975 1.948 (.820)
unrealized gain
(loss) on
investments
Total from investment .730 .311 2.133 2.121 3.063 .324
operations
Less Distributions
From net investment (.470) (.851) (.963) (1.171) (1.093) (1.144)
income D
From net realized - (.250) (.230) - - -
gain D
Total distributions (.470) (1.101) (1.193) (1.171) (1.093) (1.144)
Net asset value, end of $ 11.480 $ 11.220 $ 12.010 $ 11.070 $ 10.120 $ 8.150
period
TOTAL RETURN B, C 6.75% 2.64% 20.47% 21.96 39.67 3.58
% % %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 915 $ 680 $ 486 $ 136 $ 39 $ 15
period (in millions)
Ratio of expenses to 1.16% A 1.20% 1.11% 1.10 1.10 1.10
average net assets % % %
Ratio of expenses to 1.16% A 1.20% 1.11% 1.16 1.76 2.04
average net assets % % %
before expense
reductions
Ratio of net investment 7.92% A 6.92% 8.09% 9.95 12.20 12.72
income to average % % %
net assets
Portfolio turnover 97% A 118% 79% 100 103 90
% % %
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS PERIOD ENDED
ENDED APRIL 30, OCTOBER 31,
1995
(UNAUDITED) 1994 B
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.210 $ 11.300
Income from Investment Operations
Net investment income .393 .223
Net realized and unrealized gain (loss) on investments .285 (.118)
Total from investment operations .678 .105
Less Distributions
From net investment income (.428) (.195)
Net asset value, end of period $ 11.460 $ 11.210
TOTAL RETURN C, D 6.25% .93%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 67 $ 17
Ratio of expenses to average net assets 2.09% A 2.20%
A
Ratio of expenses to average net assets before 2.10% A 2.20%
expense reductions A
Ratio of net investment income to average net assets 6.99% A 5.92%
A
Portfolio turnover 97% A 118%
</TABLE>
A ANNUALIZED
B FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
OCTOBER 31, 1994.
C THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
D TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1995 (Unaudited)
14. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor High Yield Fund (the fund) is a fund of Fidelity Advisor
Series II (the trust) and is authorized to issue an unlimited number of
shares. The trust is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust.
The fund offers Class A and Class B 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 funds:
SECURITY VALUATION. Securities for which quotations are readily available
are valued by a pricing service at their market values as determined by
their most recent bid prices in the principal market (sales prices if the
principal market is an exchange) in which such securities are normally
traded. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange at period end. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
INCOME TAXES - CONTINUED
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 and dividend income is recorded on the
ex-dividend date. The fund may place a debt obligation on non-accrual
status and reduce related interest income by ceasing current accruals and
writing off interest receivables when the collection of all or a portion of
interest has become doubtful based on consistently applied procedures,
under the general supervision of the Board of Trustees of the fund. A debt
obligation is removed from non-accrual status when the issuer resumes
interest payments or when collectibility of interest is reasonably assured.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, foreign currency transactions, market
discount, partnerships, capital loss carryforwards and losses deferred due
to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain loss. Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
15. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts
2. OPERATING POLICIES -
CONTINUED
to buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the fund's investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the
SEC, the fund, along with other registered investment companies having
management contracts with FMR, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
fund to borrow from, or lend money to, other participating funds.
LOANS AND OTHER DIRECT DEBT
INSTRUMENTS. The fund is permitted to invest in loans and loan
participations, trade claims or other receivables. These investments may
include standby financing commitments that obligate the fund to supply
additional cash to the borrower on demand. Loan participations involve a
risk of insolvency of the lending bank or other financial intermediary. At
the end of the period, these investments amounted to $34,686,653 or 3.5% of
net assets.
RESTRICTED SECURITIES. The fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the
end of the period, restricted securities (excluding 144A issues) amounted
to $15,798,192 or 1.6% of net assets.
16. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $591,145,035 and $346,294,596, respectively, of which U.S.
government and government agency obligations aggregated $17,837,342 and
$4,243,152, respectively.
17. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1200% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .45%. For
the period, the management fee was equivalent to an annualized rate of .61%
of average net assets.
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 $932,437 and $177,236 under the Class A Plan and
Class B Plan, respectively, of which $898,652 and $44,409 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 $3,185,001 on sales of Class A shares of the fund, of which
$2,714,979 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
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
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 $13,581 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 aremade.
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 shares. During the period May 1, 1994 to December 31, 1994, the
Transfer Agents received fees based on the type, size, number of accounts
and the number of transactions made by shareholders of the respective
classes of the fund. Effective January 1, 1995, the Board of Trustees
approved a revised transfer agent contract pursuant to which the Transfer
Agents receive account fees and asset-based fees that vary according to the
account size and type of account of the shareholders of the respective
classes of the fund. With respect to the Class A shares, State Street has
delegated certain transfer, dividend paying, and shareholder services to
FIIOC for which FIIOC receives its allocable share of all such fees. FIIOC
pays for typesetting, printing and mailing of all shareholder reports,
except proxy statements.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $3,958 for the period.
18. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. The
maximum loan and the average daily loan balances during the periods for
which loans were outstanding amounted to $5,004,000. The weighted average
interest rate was 6.44%. Interest expense includes $2,684 paid under the
bank borrowing program.
19. EXPENSE REDUCTIONS.
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
$9,846 under this arrangement.
20. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
1995 1994 A 1995 1994 A
CLASS A
Shares sold 31,355,015 51,111,011 $ 347,991,633 $ 591,939,008
Reinvestment of distributions 1,992,661 3,136,354 22,057,199 36,406,934
shares redeemed (14,184,168) (34,071,719) (157,498,430) (392,991,729)
Net increase (decrease) 19,163,508 20,175,646 $ 212,550,402 $ 235,354,213
CLASS B
Shares sold 4,646,653 2,044,546 $ 51,535,316 $ 22,993,859
Reinvestment of distributions 81,157 7,632 902,372 85,963
Shares redeemed (372,749) (539,820) (4,127,939) (6,065,019)
Net increase (decrease) 4,355,061 1,512,358 $ 48,309,749 $ 17,014,803
A Share transactions for Class B are for the period June 30, 1994 to
October 31, 1994.
21. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
HM/Hat Brands Trust
Class I units (a) $ - $ - $ - $ 410,000
22. Non-income producing
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Robert A. Lawrence, Vice President
Margaret L. Eagle, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA - Class A
Fidelity Investments Institutional
Operations Company
Boston, MA - Class B
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
GROWTH OPPORTUNITIES
FUND - CLASS A
SEMIANNUAL REPORT
APRIL 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 6 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 9 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 10 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 21 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 25 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND,
INCLUDING
CHARGES AND EXPENSES, PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR A
FREE
PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been some positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
If you can leave your money invested over the long term, you can avoid the
results of the volatility that generally accompanies the stock market in
the short term, as we witnessed last year. You also can help to manage some
of the risks of investing through diversification. A stock fund is already
diversified because it invests in many issues. You can diversify even
further by placing some of your money in several different types of stock
funds or in other investment categories, such as bonds.
If you have a short investment time horizon, you might want to consider
moving some of your investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
Finally, no matter what your investment horizon or portfolio diversity, it
makes good sense to follow a regular investment plan - investing a certain
amount of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Each performance figure
includes changes in share price, plus reinvestment of any dividends (or
income) and capital gains (the profits the fund earns when it sells stocks
that have grown in value).
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor Growth Opportunities - Class A 6.89% 10.89% 136.94% 297.67%
Advisor Growth Opportunities - Class A
(incl. max. 4.75% sales charge) 1.81% 5.62% 125.68% 278.78%
S&P 500(registered trademark) 10.47% 17.47% 81.29% 168.83%
Average Growth Fund 6.53% 10.75% 75.67% n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on November 18, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Standard & Poor's Composite Index of 500 Stocks - a
common proxy for the U.S. stock market. To measure how the fund's
performance stacked up against its peers, you can compare it to the average
growth fund, which reflects the performance of over 564 growth funds with
similar objectives tracked by Lipper Analytical Services over the past six
months. Both benchmarks include reinvested dividends and capital gains, if
any, and exclude the effects of sales charges.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor Growth Opportunities - Class A 10.89% 18.83% 20.34%
Advisor Growth Opportunities - Class A
(incl. max. 4.75% sales charge) 5.62% 17.68% 19.56%
S&P 500(registered trademark) 17.47% 12.64% 14.19%
Average Growth Fund 10.75% 11.63% n/a
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had performed at a
constant rate each year.
$10,000 OVER LIFE OF FUND
Fidelity Advisor GStandard & Poor's 5
11/18/87 9525.00 10000.00
11/30/87 8972.55 9489.05
12/31/87 10248.90 10211.16
01/31/88 10687.05 10641.05
02/29/88 11896.73 11136.92
03/31/88 12115.80 10792.79
04/30/88 12477.75 10912.59
05/31/88 12363.45 11007.53
06/30/88 13458.83 11512.78
07/31/88 13430.25 11469.03
08/31/88 12973.05 11079.08
09/30/88 13496.93 11551.05
10/31/88 13592.18 11872.17
11/30/88 13154.03 11702.40
12/31/88 13659.46 11907.19
01/31/89 14829.70 12778.80
02/28/89 14547.23 12460.61
03/31/89 14688.46 12750.94
04/30/89 15636.76 13412.71
05/31/89 16685.93 13955.93
06/30/89 15969.67 13876.38
07/31/89 16867.52 15129.41
08/31/89 17492.99 15425.95
09/30/89 17321.49 15362.70
10/31/89 16675.84 15006.29
11/30/89 16786.81 15312.42
12/31/89 16957.17 15679.92
01/31/90 15735.81 14627.79
02/28/90 16117.49 14816.49
03/31/90 16531.87 15209.13
04/30/90 15986.63 14828.90
05/31/90 17894.99 16274.72
06/30/90 17993.13 16164.05
07/31/90 17338.84 16112.33
08/31/90 15430.48 14655.77
09/30/90 14230.93 13942.04
10/31/90 14165.50 13882.08
11/30/90 15670.38 14778.87
12/31/90 16677.90 15191.20
01/31/91 18674.40 15853.53
02/28/91 20351.01 16987.06
03/31/91 20913.56 17398.15
04/30/91 21343.75 17439.90
05/31/91 22512.96 18193.31
06/30/91 20924.59 17360.05
07/31/91 22391.63 18169.03
08/31/91 23263.03 18599.64
09/30/91 22733.57 18289.03
10/31/91 22700.48 18534.10
11/30/91 21354.78 17787.17
12/31/91 23796.18 19822.03
01/31/92 24482.26 19453.34
02/29/92 25589.62 19706.23
03/31/92 24735.03 19321.96
04/30/92 25409.07 19890.02
05/31/92 25770.17 19987.49
06/30/92 25180.38 19689.67
07/31/92 26047.01 20494.98
08/31/92 25324.82 20074.83
09/30/92 25397.04 20311.72
10/31/92 25445.18 20382.81
11/30/92 26672.91 21077.86
12/31/92 27371.81 21337.12
01/31/93 28206.32 21516.35
02/28/93 28283.35 21808.97
03/31/93 29336.11 22269.14
04/30/93 29387.46 21730.23
05/31/93 30209.13 22312.60
06/30/93 30324.68 22377.30
07/31/93 30530.10 22287.80
08/31/93 31467.31 23132.50
09/30/93 31582.86 22954.38
10/31/93 32597.10 23429.54
11/30/93 32443.04 23206.96
12/31/93 33441.05 23487.76
01/31/94 35291.49 24286.35
02/28/94 34758.99 23628.19
03/31/94 33281.30 22598.00
04/30/94 34159.93 22887.25
05/31/94 34346.30 23262.60
06/30/94 33414.43 22692.67
07/31/94 34359.61 23436.99
08/31/94 35810.68 24397.90
09/30/94 34732.36 23800.16
10/31/94 35437.93 24335.66
11/30/94 34306.36 23449.35
12/31/94 34396.44 23797.11
01/31/95 34664.28 24414.17
02/28/95 35721.54 25365.59
03/31/95 36637.84 26114.13
04/28/95 37878.37 26883.19
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor Growth Opportunities Fund - Class A on November 18, 1987, when the
fund started, and paid the maximum 4.75% sales charge. As the chart shows,
by April 30, 1995, the value of your investment would have grown to $37,878
- - a 278.78% increase on your initial investment. For comparison, look at
how the S&P 500 did over the same period. With dividends reinvested, the
same $10,000 investment would have grown to $26,883 - a 168.83% increase.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is no
guarantee of how it will do
tomorrow. The stock market,
for example, has a history of
growth in the long run and
volatility in the short run. In turn,
the share price and return of a
fund that invests in stocks 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)
FUND TALK: THE MANAGER'S OVERVIEW
An interview with George A.
Vanderheiden, Portfolio Manager of Fidelity Advisor Growth Opportunities
Fund
Q. GEORGE, HOW HAS THE FUND PERFORMED?
A. The fund was up 6.89% and 10.89% for the six- and 12-month periods ended
April 30, 1995. During the same time periods, the average growth fund's
total return was 6.53% and 10.75%, respectively, according to Lipper
Analytical Services.
Q. IN WHAT TYPE OF INVESTING ENVIRONMENT DID YOU FIND YOURSELF?
A. It's been an environment of declining market breadth. Market breadth
measures the number of stocks advancing versus those falling. Declining
market breadth occurs when more stocks are declining than advancing.
Although market breadth declined over the past six months, it wasn't
obvious to the casual observer because the major market averages such as
the Dow Jones and the S&P 500 rose. Rising interest rates and recent
financial crises caused portfolio managers to take shelter in larger,
liquid, high-quality stocks and sell everything else. I call it an iceberg
market. The portion that's clearly visible bears little resemblance to the
remainder. Advisor Growth Opportunities consists of over 200 stocks. When
the market is being led by a small number of stocks while the majority are
not keeping up, the fund typically underperforms. Fortunately, periods of
declining market breadth aren't prolonged affairs and I expect breadth to
improve this year.
Q. WHAT ARE SOME OF THE FUND'S GROWTH POSITIONS?
A. In the technology sector the fund has important positions in personal
computer stocks including Compaq, Intel and Microsoft. Compaq is among the
lowest cost manufacturers of personal computers, and has rapidly grown
market share over the past few years. It has a debt-free balance sheet and
is selling at a modest price-earnings ratio of 11 times trailing earnings
versus the S&P 500 ratio of 17 times earnings. While Compaq assembles the
PC, Intel makes the brains of the machine - the microprocessor. Intel is
now distributing its fifth generation of microprocessors, the Pentium, and
it should provide a boost to earnings. As Intel is the dominant supplier of
microprocessors, Microsoft is the dominant supplier of PC software. Other
important growth positions include Fannie Mae, which I've talked about in
prior reports; Vodafone, the largest cellular phone company outside North
America; Motorola, the largest supplier of cellular equipment; and
Wal-Mart.
Q. WHAT OTHER OPPORTUNITIES HAVE
YOU FOUND?
A. I lately have re-acquired a large position in two auto stocks, GM and
Chrysler. The stocks have declined by 40% over the past year and are
already anticipating a decline in auto sales. If this economic cycle does
in fact turn into an extended cycle like I think it will, auto sales will
plateau at a high level and the autos should be able to generate
substantial excess cash flow over the next two years. They may use this
cash to increase dividends and repurchase stock.
Q. WHY HAVE YOU INCREASED YOUR POSITION IN TREASURY AND AGENCY OBLIGATIONS?
A. I put more than 9% of the fund's assets into Treasuries and zero coupon
bonds as yields got close to 8% and kept buying as they went up through 8%.
I believe the economy is clearly on the cusp of a slowdown with housing
turning down, auto sales soft, and retail sales sputtering. Falling
interest rates usually accompany a slowing economy and falling interest
rates lead to higher bond prices.
Q. WAS THE FUND HURT BY THE SHARP CORRECTION IN LATIN AMERICAN STOCKS?
A. Fortunately, the fund did not own any Latin American securities when the
Mexican crisis unfolded, as I felt the valuation levels of those markets
were too high. After the stocks suffered declines of 50%-60%, I became
interested and initiated positions in Telefonos de Mexico, Telefonica de
Argentina, Telecom Argentina and Telebras, which are the dominant telephone
companies of Mexico, Argentina and Brazil. If the stock prices remain low,
I may continue to add to them.
Q. SOME MARKET COMMENTATORS SAY THAT THE MARKET IS DANGEROUSLY HIGH,
SELLING AT 37 TIMES DIVIDENDS. THE ONLY OTHER TIME THIS HAPPENED WAS IN
1973 AND 1987, AND WAS FOLLOWED BY LARGE DECLINES. HOW DO YOU FEEL ABOUT
THIS AND WHAT'S YOUR OUTLOOK?
A. I admit dividend yields are low and this is troublesome - troublesome if
you only look at dividend yields. The truth of the matter is that dividends
are paid out of earnings and earnings are very healthy. Over the past 70
years, U.S. companies have paid out 40%-60% of their earnings in dividends,
averaging about 55% in recent years. The current dividend payout rate is
about 41% - at the bottom of the range. The other two periods when the
dividend yield was low, 1973 and 1987, payout ratios were over 50% and are
not comparable to current payout ratios. Instead of using excess earnings
to reward shareholders with larger dividends, corporations are using the
cash to enhance shareholder value by repurchasing their stocks. Yes,
dividend yields are low, but price/earnings ratios are also low. As long as
earnings continue to grow, I'm not overly worried about the dividend yield.
Remember, it's a market of stocks, and opportunities are always available
as long as one chooses to seek them out.
FUND FACTS
GOAL: to increase the value
of the fund's shares by
investing primarily in
common stocks with
long-term growth potential
START DATE: November 18, 1987
SIZE: as of April 30, 1995,
more than $6.5 billion
MANAGER: George
Vanderheiden, since 1987;
also manages Destiny I and
Destiny II funds; joined
Fidelity in 1971
(checkmark)
GEORGE VANDERHEIDEN ON
CAPITAL SPENDING:
"Something's happening to
corporate income statements
and balance sheets that was
not fully anticipated; cash flow
is going through the roof. As a
result of two trends - namely
right-sizing factories during the
past recession and better
working capital management
- -corporate earnings and cash
flow have exploded in this
recovery. The three U.S. auto
companies, for example, had
total cash, after subtracting
debt, of $14 billion at the end of
March.
"Cash continues to pile up and
the auto companies' goal is to
have net cash of $33 billion by
the next downturn. This
liquidity pile up is not just
happening in autos - it's also
occurring in other
manufacturing industries and
in companies such as Intel,
Caterpillar, and John Deere.
"Liquidity also is surging in
banks. In fact, the banks used
their excess liquidity to make
record share repurchases last
year. There were 134
buyback announcements for
a total of $9.4 billion in stock.
"This is why I think the capital
spending theme is not
over. Companies have lots of
cash and instead of letting it
pile up on the balance sheet
and attract unwanted
attention, they will
increasingly be inclined to use it
to buy back shares and to
expand capacity. I continue to
think that this is the decade that
capital goods stocks will excel
at the expense of consumer
goods stocks."
INVESTMENT CHANGES
TOP TEN STOCKS AS OF APRIL 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE STOCKS
6 MONTHS AGO
Federal National Mortgage 5.2 4.8
Association
Intel Corp. 4.0 2.1
Philip Morris Companies, Inc. 3.7 3.9
General Motors Corp. 3.4 0.8
Compaq Computer Corp. 3.3 2.4
Chrysler Corp. 2.5 2.4
International Business Machines Corp. 2.4 1.6
Vodafone Group PLC sponsored ADR 2.1 1.4
Fleet Financial Group, Inc. 2.0 0.3
Shawmut National Corp. 1.2 1.0
TOP FIVE MARKET SECTORS AS OF APRIL 30, 1995
% OF FUND'S % OF FUND'S
INVESTMENTS INVESTMENTS
IN THESE MARKET
SECTORS
6 MONTHS AGO
Finance 16.3 16.4
Technology 14.9 14.6
Durables 7.5 3.9
Energy 7.2 8.7
Utilities 7.0 7.2
ASSET ALLOCATION
AS OF APRIL 30, 1995 AS OF OCTOBER 31, 1994
Row: 1, Col: 1, Value: 12.3
Row: 1, Col: 2, Value: 8.9
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 38.8
Row: 1, Col: 1, Value: 12.2
Row: 1, Col: 2, Value: 8.300000000000001
Row: 1, Col: 3, Value: 40.0
Row: 1, Col: 4, Value: 39.5
Stocks 78.8%
Bonds 8.9%
Short-term
Investments 12.3%
Stocks 79.5%
Bonds 8.3%
Short-term
Investments 12.2%
INVESTMENTS APRIL 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 78.8%
SHARES VALUE (NOTE 1)
(000S)
AEROSPACE & DEFENSE - 1.8%
AEROSPACE & DEFENSE - 0.8%
Boeing Co. 949,400 $ 52,217
DEFENSE ELECTRONICS - 1.0%
Loral Corp. 356,500 16,756
Raytheon Co. 651,200 47,375
64,131
TOTAL AEROSPACE & DEFENSE 116,348
BASIC INDUSTRIES - 1.7%
CHEMICALS & PLASTICS - 0.4%
Raychem Corp. 680,400 24,239
IRON & STEEL - 0.1%
Nucor Corp. 159,200 7,642
METALS & MINING - 0.7%
Aluminum Co. of America 39,400 1,768
Reynolds Metals Co. 868,173 43,734
45,502
PACKAGING & CONTAINERS - 0.4%
Owens-Illinois, Inc. (a) 2,424,200 28,787
PAPER & FOREST PRODUCTS - 0.1%
Kimberly-Clark Corp. 42,000 2,378
Stone Consolidated Corp. (a) 152,000 1,906
4,284
TOTAL BASIC INDUSTRIES 110,454
CONSTRUCTION & REAL ESTATE - 1.7%
BUILDING MATERIALS - 0.9%
Armstrong World Industries, Inc. 598,100 27,213
Masco Corp. 316,300 8,066
Owens-Corning Fiberglas Corp. (a) 134,000 4,908
Tecumseh Products Co. Class A 378,900 19,040
T.J. International, Inc. 10,000 170
59,397
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
CONSTRUCTION & REAL ESTATE - CONTINUED
CONSTRUCTION - 0.6%
Beazer Homes USA, Inc. (a) (b) 678,300 $ 9,666
Kaufman & Broad Home Corp. 1,368,100 17,956
Ryland Group, Inc. 617,300 9,028
Schuler Homes, Inc. (a) 217,100 2,144
Toll Brothers, Inc. (a) 134,900 1,602
40,396
ENGINEERING - 0.2%
Fluor Corp. 273,000 14,059
TOTAL CONSTRUCTION & REAL ESTATE 113,852
DURABLES - 7.5%
AUTOS, TIRES, & ACCESSORIES - 7.2%
Automotive Industries Holding, Inc. (a) 371,300 9,932
Autozone, Inc. (a) 219,200 5,069
Chrysler Corp. 3,850,100 166,036
Cummins Engine Co., Inc. 100,900 4,515
Dana Corp. 688,800 17,737
Discount Auto Parts, Inc. (a) 403,600 9,737
Eaton Corp. 311,200 17,855
General Motors Corp. 4,979,107 224,682
Magna International, Inc. Class A 496,800 17,174
472,737
CONSUMER ELECTRONICS - 0.1%
Black & Decker Corp. 352,800 10,584
TEXTILES & APPAREL - 0.2%
Burlington Industries, Inc. (a) 1,128,100 12,409
Fruit of the Loom, Inc. Class A (a) 31,200 811
13,220
TOTAL DURABLES 496,541
ENERGY - 7.2%
ENERGY SERVICES - 1.1%
Baker Hughes, Inc. 714,700 16,081
Halliburton Co. 115,400 4,428
Schlumberger Ltd. 824,400 51,834
72,343
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
ENERGY - CONTINUED
OIL & GAS - 6.1%
Amerada Hess Corp. 613,300 $ 31,048
Amoco Corp. 273,500 17,948
Apache Corp. 294,500 7,952
Atlantic Richfield Co. 431,600 49,418
British Petroleum PLC ADR 898,401 77,375
Burlington Resources, Inc. 1,162,000 45,463
Canada Occidental Petroleum Ltd. 366,700 10,750
Elf Aquitaine sponsored ADR 181,000 7,195
Kerr-McGee Corp. 206,900 10,733
Louisiana Land & Exploration Co. 443,100 16,229
Mobil Corp. 93,200 8,842
Murphy Oil Corp. 79,300 3,469
Noble Affiliates, Inc. 262,100 7,077
Santa Fe Energy Resources, Inc. (a) 108,300 1,015
Texaco, Inc. 628,700 42,987
Tosco Corp. 837,800 28,695
Unocal Corp. 1,001,534 28,794
YPF Sociedad Anonima sponsored ADR representing
Class D shares 433,200 8,772
403,762
TOTAL ENERGY 476,105
FINANCE - 16.3%
BANKS - 5.8%
AmSouth Bancorporation 192,600 6,019
Bank of Boston Corp. 866,030 29,012
Barnett Banks, Inc. 416,300 19,462
Comerica, Inc. 365,000 10,494
First Union Corp. 814,740 36,867
Fleet Financial Group, Inc. 4,111,445 134,650
Keycorp 744,766 19,923
NationsBank Corp. 677,825 33,891
Shawmut National Corp. 3,085,339 81,761
State Street Boston Corp. 291,600 9,258
381,337
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 6.3%
Federal Home Loan Mortgage Corporation 1,114,600 $ 72,728
Federal National Mortgage Association 3,859,480 340,599
413,327
INSURANCE - 2.0%
Allstate Corp. 1,101,800 33,467
American International Group, Inc. 36,100 3,854
General Re Corp. 284,600 36,251
John Alden Financial Corp. 315,700 5,722
MBIA, Inc. 54,200 3,401
Providian Corp. 432,200 14,749
Torchmark Corp. 337,800 13,174
Travelers, Inc. (The) 56,500 2,338
UNUM Corp. 523,600 22,449
135,405
SAVINGS & LOANS - 0.6%
Ahmanson (H.F.) & Co. 716,000 15,036
Golden West Financial Corp. 484,000 22,143
37,179
SECURITIES INDUSTRY - 1.6%
Lehman Brothers Holdings, Inc. 334,400 6,521
Merrill Lynch & Co., Inc. 814,000 37,037
Morgan Stanley Group, Inc. 313,100 21,760
Salomon, Inc. 177,000 6,394
United Asset Management Corp. 968,000 36,300
108,012
TOTAL FINANCE 1,075,260
HEALTH - 2.3%
DRUGS & PHARMACEUTICALS - 1.0%
Biogen, Inc. (a) 349,800 13,730
Carter-Wallace, Inc. 370,600 4,679
Elan Corp. PLC ADR (a) 415,400 14,695
Schering-Plough Corp. 427,100 32,193
65,297
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 0.3%
Acuson Corp. 70,500 $ 811
Baxter International, Inc. 616,200 21,413
22,224
MEDICAL FACILITIES MANAGEMENT - 1.0%
American Medical Response (a) 188,200 4,823
Columbia/HCA Healthcare Corp. 1,372,622 57,650
62,473
TOTAL HEALTH 149,994
HOLDING COMPANIES - 0.1%
CINergy Corp. 254,058 6,383
INDUSTRIAL MACHINERY & EQUIPMENT - 2.6%
ELECTRICAL EQUIPMENT - 0.5%
Cherry Corp.:
Class A (non-vtg.) (a) 537,300 7,791
Class B (a) (b) 368,300 5,064
General Electric Co. 348,100 19,494
32,349
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Caterpillar, Inc. 994,600 58,184
Deere & Co. 890,200 72,996
131,180
POLLUTION CONTROL - 0.1%
Browning-Ferris Industries, Inc. 115,900 3,825
International Recovery Corp. 5,514 101
3,926
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 167,455
MEDIA & LEISURE - 2.0%
BROADCASTING - 0.5%
British Sky Broadcasting Group ADR 127,700 3,065
People's Choice TV Corp. (a) 56,400 1,607
Tele-Communications, Inc. Class A (a) 1,234,500 23,610
Viacom, Inc. Class B (non-vtg.) (a) 54,300 2,491
30,773
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.1%
Royal Caribbean Cruises Ltd. 319,100 $ 7,619
LEISURE DURABLES & TOYS - 0.3%
Fleetwood Enterprises, Inc. 166,400 3,827
Outboard Marine Corp. 582,400 12,886
16,713
LODGING & GAMING - 0.1%
Circus Circus Enterprises, Inc. (a) 204,300 6,767
PUBLISHING - 0.1%
American Media, Inc. Class A 238,800 1,493
Gannett Co., Inc. 158,500 8,341
9,834
RESTAURANTS - 0.9%
Au Bon Pain, Inc. Class A (a) 89,700 1,211
Bertucci's, Inc. (a) (b) 666,100 5,662
Boston Chicken, Inc. (a) 119,200 2,369
Brinker International, Inc. (a) 285,700 4,893
Cracker Barrel Old Country Store, Inc. 403,100 8,566
McDonald's Corp. 496,200 17,367
Outback Steakhouse, Inc. (a) 853,400 21,548
61,616
TOTAL MEDIA & LEISURE 133,322
NONDURABLES - 5.0%
HOUSEHOLD PRODUCTS - 0.1%
Tambrands, Inc. 219,000 9,116
TOBACCO - 4.9%
Philip Morris Companies, Inc. 3,579,400 242,504
RJR Nabisco Holdings Corp. 2,829,960 77,470
319,974
TOTAL NONDURABLES 329,090
PRECIOUS METALS - 0.4%
Homestake Mining Co. 533,500 9,003
Santa Fe Pacific Gold Corp. 1,105,772 13,960
22,963
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 0.1%
TJX Companies, Inc. 725,800 $ 8,347
GENERAL MERCHANDISE STORES - 2.6%
Federated Department Stores, Inc. (a) 2,130,513 45,007
Sears, Roebuck & Co. 793,600 43,053
Value City Department Stores, Inc. (a) 462,600 4,163
Wal-Mart Stores, Inc. 3,228,600 76,679
168,902
GROCERY STORES - 0.1%
Food Lion, Inc. Class A 130,000 723
Stop & Shop Companies, Inc. (a) 123,300 3,283
4,006
RETAIL & WHOLESALE, MISCELLANEOUS - 2.7%
Best Buy Co., Inc. (a) 1,894,100 51,851
Circuit City Stores, Inc. 1,322,100 34,209
Good Guys, Inc. (a) 644,000 6,199
Home Depot, Inc. (The) 719,900 30,056
Office Depot, Inc. (a) 402,200 9,150
Officemax, Inc. (a) 429,000 10,993
Rex Stores Corp. (a) (b) 527,500 7,187
Staples, Inc. (a) 69,000 1,665
Toys "R" Us, Inc. (a) 1,180,000 29,795
181,105
TOTAL RETAIL & WHOLESALE 362,360
SERVICES - 0.2%
Borg Warner Security Corp. (a) 241,800 1,874
Kinder-Care Learning Centers, Inc. (a) 248,900 3,360
Pinkertons, Inc. (a) 151,300 2,496
Supercuts, Inc. (a) 447,300 4,249
Zebra Technologies Corp. Class A (a) 54,900 2,519
14,498
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TECHNOLOGY - 14.9%
COMMUNICATIONS EQUIPMENT - 0.2%
Cabletron Systems, Inc. (a) 159,450 $ 7,574
Cisco Systems, Inc. (a) 75,100 2,995
10,569
COMPUTER SERVICES & SOFTWARE - 1.0%
Landmark Graphics Corp. (a) 32,000 792
MicroAge, Inc. (a) 346,500 3,508
Microsoft Corp. (a) 751,400 61,427
SHL Systemhouse, Inc. (a) 484,500 3,149
68,876
COMPUTERS & OFFICE EQUIPMENT - 7.8%
Bay Networks, Inc. (a) 796,100 28,958
Compaq Computer Corp. (a) 5,673,300 215,585
Digital Equipment Corp. (a) 460,100 21,222
Hewlett-Packard Co. 675,800 44,687
International Business Machines Corp. 1,657,800 157,077
SCI Systems, Inc. (a) 636,100 12,961
Silicon Graphics, Inc. (a) 167,400 6,278
Sun Microsystems, Inc. (a) 389,500 15,531
Tandem Computers, Inc. (a) 109,500 1,396
Tech Data Corp. (a) 1,082,900 12,859
516,554
ELECTRONIC INSTRUMENTS - 0.2%
Anadigics, Inc. 4,900 66
Kulicke & Soffa Industries, Inc. (a) 246,995 10,466
Quad Systems Corp. (a) (b) 300,100 2,401
12,933
ELECTRONICS - 5.7%
Intel Corp. 2,543,300 260,370
Methode Electronics, Inc. Class A 307,600 5,306
Molex, Inc. 64,000 2,304
Motorola, Inc. 765,200 43,521
Solectron Corp. (a) (b) 2,101,300 61,726
373,227
TOTAL TECHNOLOGY 982,159
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 154,800 $ 10,430
Southwest Airlines Co. 137,700 3,184
13,614
RAILROADS - 2.4%
Burlington Northern, Inc. 482,700 28,721
Canadian Pacific Ltd. Ord. 1,071,800 16,500
CSX Corp. 873,800 69,576
Southern Pacific Rail Corp. (a) 2,506,500 43,550
158,347
TOTAL TRANSPORTATION 171,961
UTILITIES - 7.0%
CELLULAR - 2.4%
AirTouch Communications, Inc. (a) 799,600 21,489
Vodafone Group PLC sponsored ADR 4,288,100 136,683
158,172
ELECTRIC UTILITY - 1.7%
American Electric Power Co., Inc. 266,400 8,725
Baltimore Gas & Electric Co. 268,700 6,348
Carolina Power & Light Co. 235,300 6,471
Central & South West Corp. 221,300 5,450
Consolidated Edison Co. of New York, Inc. 248,500 6,896
Detroit Edison Company 182,900 5,167
Dominion Resources, Inc. 152,500 5,566
Duke Power Co. 159,100 6,284
Niagara Mohawk Power Corp. 233,700 3,243
Ohio Edison Co. 275,800 5,550
Pacific Gas & Electric Co. 195,500 5,254
PacifiCorp. 409,200 7,775
Peco Energy Co. 329,800 8,492
Public Service Enterprise Group, Inc. 230,600 6,342
SCEcorp 344,900 5,777
Southern Co. 455,900 9,403
Texas Utilities Co. 159,200 5,194
Unicom Corp. 243,600 6,395
114,332
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
(000S)
UTILITIES - CONTINUED
GAS - 0.0%
ENSERCH Corp. 150,000 $ 2,587
TELEPHONE SERVICES - 2.9%
Ameritech Corp. 1,032,600 46,467
Bell Atlantic Corp. 441,400 24,222
BellSouth Corp. 538,100 32,959
NYNEX Corp. 306,900 12,545
SBC Communications, Inc. 1,399,600 61,757
Telebras PN (Pfd. Reg.) 114,641,300 4,088
Telecom Argentina sponsored ADR Class B 20,900 914
Telefonica de Argentina SA sponsored ADR 73,200 1,720
Telefonos de Mexico SA sponsored ADR representing
shares Ord. Class L 71,900 2,175
186,847
TOTAL UTILITIES 461,938
TOTAL COMMON STOCKS
(Cost $4,651,048) 5,190,683
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 11.5%
PRINCIPAL
AMOUNT (000S)
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.2%
Financing Corp. stripped principal 0%, 4/5/19 $ 100,000 15,640
U.S. TREASURY OBLIGATIONS - 11.3%
8 1/8%, 8/15/19 450,000 481,851
stripped principal 0%, 8/15/19 539,000 86,704
U.S. Treasury Bill, yield at date of purchase
5.71%, 6/29/95 175,000 173,388
741,943
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (Cost $742,786) 757,583
REPURCHASE AGREEMENTS - 9.7%
MATURITY VALUE (NOTE 1)
AMOUNT (000S) (000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
4/28/95 due 5/1/95 $ 639,831 $ 639,515
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $6,033,349) $ 6,587,781
LEGEND
(a) Non-income producing
(b) Affiliated company (see Note 6 of Notes to Financial Statements).
INCOME TAX INFORMATION
At April 30, 1995, the aggregate cost of investment securities for income
tax purposes was $6,033,912,000. Net unrealized appreciation aggregated
$553,869,000, of which $683,847,000 related to appreciated investment
securities and $129,978,000 related to depreciated investment securities.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS (EXCEPT PER-SHARE AMOUNTS) APRIL 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 6,587,781
agreements of $639,515) (cost $6,033,349) -
See accompanying schedule
Receivable for investments sold 77,260
Receivable for fund shares sold 54,862
Dividends receivable 7,813
Interest receivable 7,474
Other receivables 48
TOTAL ASSETS 6,735,238
LIABILITIES
Payable for investments purchased $ 149,851
Payable for fund shares redeemed 7,867
Accrued management fee 3,621
Distribution fees payable 3,391
Other payables and accrued expenses 1,636
TOTAL LIABILITIES 166,366
NET ASSETS $ 6,568,872
Net Assets consist of:
Paid in capital $ 5,969,570
Undistributed net investment income 31,020
Accumulated undistributed net realized gain (loss) on 13,847
investments and foreign currency transactions
Net unrealized appreciation (depreciation) on 554,435
investments and assets and liabilities in foreign
currencies
NET ASSETS, for 244,501 shares outstanding $ 6,568,872
NET ASSET VALUE and redemption price per share $26.87
($6,568,872 (divided by) 244,501 shares)
Maximum offering price per share (100/95.25 of $26.87) $28.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 50,068
Dividends
Interest 39,773
TOTAL INCOME 89,841
EXPENSES
Management fee $ 16,327
Basic fee
Performance adjustment 2,059
Transfer agent fees 5,682
Distribution fees 17,170
Accounting fees and expenses 382
Non-interested trustees' compensation 20
Custodian fees and expenses 50
Registration fees 703
Audit 27
Legal 61
Reports to shareholders 182
Miscellaneous 20
Total expenses before reductions 42,683
Expense reductions (233) 42,450
NET INVESTMENT INCOME 47,391
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including realized loss of $3,060 20,231
on sales of investment in affiliated issuers)
Foreign currency transactions 17 20,248
Change in net unrealized appreciation (depreciation) on:
Investment securities 352,149
Assets and liabilities in foreign currencies 24 352,173
NET GAIN (LOSS) 372,421
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 419,812
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 47,391 $ 35,891
Net investment income
Net realized gain (loss) 20,248 216,367
Change in net unrealized appreciation (depreciation) 352,173 (846)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 419,812 251,412
FROM OPERATIONS
Distributions to shareholders (49,031) (6,006)
From net investment income
From net realized gain (210,650) (72,102)
TOTAL DISTRIBUTIONS (259,681) (78,108)
Share transactions 1,965,332 2,769,740
Net proceeds from sales of shares
Reinvestment of distributions 241,027 67,446
Cost of shares redeemed (396,286) (466,810)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 1,810,073 2,370,376
FROM SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,970,204 2,543,680
NET ASSETS
Beginning of period 4,598,668 2,054,988
End of period (including undistributed net investment $ 6,568,872 $ 4,598,668
income of $31,020 and $34,168, respectively)
OTHER INFORMATION
Shares
Sold 77,497 107,230
Issued in reinvestment of distributions 9,931 2,737
Redeemed (15,683) (18,134)
Net increase (decrease) 71,745 91,833
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED
APRIL 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, $ 26.62 $ 25.39 $ 21.14 $ 20.58 $ 12.99 $ 16.53
beginning of period
Income from
Investment
Operations
Net investment .20 .22 .08 .14 .06 .18 D
income
Net realized and 1.48 1.92 5.56 2.04 7.70 (2.50)
unrealized gain
(loss)
Total from 1.68 2.14 5.64 2.18 7.76 (2.32)
investment
operations
Less Distributions (.27) (.07) (.13) (.09) (.17) (.05)
From net investment
income
From net realized (1.16) (.84) (1.26) (1.53) - (1.17)
gain
Total distributions (1.43) (.91) (1.39) (1.62) (.17) (1.22)
Net asset value, end $ 26.87 $ 26.62 $ 25.39 $ 21.14 $ 20.58 $ 12.99
of period
TOTAL RETURN B, C 6.89% 8.71% 28.11% 12.09% 60.25% (15.05)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 6,569 $ 4,599 $ 2,055 $ 581 $ 213 $ 51
period (in millions)
Ratio of expenses to 1.64% 1.62% 1.64% 1.60% 1.73% 2.00%
average net assets A
Ratio of expenses to 1.65% 1.63% 1.65% 1.60% 1.73% 2.00%
average net assets A
before expense
reductions
Ratio of net 1.83% 1.12% .43% .80% .47% 1.49%
investment income A
to average net
assets
Portfolio turnover rate 44% 43% 69% 94% 142% 136%
A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO
$.09 PER SHARE.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1995 (Unaudited)
23. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Growth Opportunities Fund (the fund) is a fund of Fidelity
Advisor Series II (the trust) and is authorized to issue an unlimited
number of shares. The trust is registered under the Investment Company Act
of 1940, as amended (the 1940 Act), as an open-end management investment
company organized as a Massachusetts business trust. The following
summarizes the significant accounting policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities for which exchange quotations are not readily
available (and in certain cases debt securities which trade on an
exchange), are valued primarily using dealer-supplied valuations or at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Short-term securities maturing within sixty days of their purchase date are
valued at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes 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. Dividend income is recorded on the ex-dividend date,
except certain dividends from foreign securities where the ex-dividend date
may have passed, are recorded as soon as the fund is informed of the
ex-dividend date. Interest income, which includes accretion of original
issue discount, is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC),
partnerships, non-taxable dividends and losses deferred due to wash sales.
The fund also utilized earnings and profits distributed to shareholders on
redemption of shares as a part of the dividends paid deduction for income
tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain loss. Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
24. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY
CONTRACTS. The fund may use foreign currency contracts to facilitate
transactions in foreign securities and to manage the fund's currency
exposure. Contracts to buy generally are used to acquire exposure to
foreign currencies, while contracts to sell are used to hedge the fund's
investments against currency fluctuations. Also, a contract to buy or sell
can offset a previous contract. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or
2. OPERATING POLICIES -
CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
less from the date of purchase, and are collateralized by U.S. Treasury or
Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
25. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of securities, other than short-term securities,
aggregated $2,384,166,000 and $1,026,496,000, respectively, of which U.S.
government and government agency obligations aggregated $190,665,000 and
$40,237,000, respectively.
26. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
basic fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .2700% to .5200% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. The
basic fee is subject to a performance adjustment (up to a maximum of
(plus/minus) .20%) based on the fund's investment performance as compared
to the appropriate index over a specified period of time. For the period,
the management fee was equivalent to an annualized rate of .70% of average
net assets after the performance adjustment.
DISTRIBUTION AND SERVICE PLAN. Pursuant to the Distribution and Service
Plan (the Plan), and in accordance with Rule 12b-1 of the 1940 Act, the
fund pays Fidelity Distributors Corporation (FDC), an affiliate of FMR, a
distribution and service fee that is based on an annual rate of .65% of its
average net assets. For the period, the fund paid FDC $17,170,000 of which
$13,136,000 was paid to securities dealers, banks and other financial
institutions for selling shares of the fund and providing shareholder
support services.
In addition, FMR or FDC may use its resources to pay administrative and
promotional expenses related to the sale of the fund's shares. Subject to
the approval of the Board of Trustees, the Plan also authorizes payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services. No payments were made to third parties under
the Plan during the period.
SALES LOAD. FDC received sales charges for selling Class A shares of the
fund. The sales charge rates ranged from 2.00% to
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SALES LOAD - CONTINUED
4.75% based on purchase amounts of less than $1,000,000. Purchase amounts
of $1,000,000 or more are not charged a sales load. For the period, FDC
received $31,248,000 of which $26,567,000 was paid to securities dealers,
banks and other financial institutions.
TRANSFER AGENT FEES. State Street Bank and Trust Company (SSB) is the
transfer, dividend disbursing and shareholder servicing agent for the fund.
SSB has an arrangement for certain transfer, dividend disbursing and
shareholder servicing to be performed by Fidelity Investments Institutional
Operations Company (FIIOC), an affiliate of FMR. During the period November
1, 1994 to December 31, 1994, the fund paid fees based on the type, size,
number of accounts and the number of transactions made by shareholders.
Effective January 1, 1995, the Board of Trustees approved a revised
transfer agent contract pursuant to which the fund pays account fees and
asset-based fees that vary according to account size and type of account.
ACCOUNTING FEES. Fidelity Service Company (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.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms were $932,000 for the period.
27. EXPENSE REDUCTIONS.
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
$233,000 under this arrangement.
28. TRANSACTIONS WITH
AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies which are or
were affiliates are as follows:
SUMMARY OF TRANSACTIONS WITH AFFILIATED COMPANIES
AMOUNTS IN THOUSANDS
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Beazer Homes USA, Inc. (a) $ 2,665 $ - $ - $ 9,666
Bertucci's, Inc. (a) - - - 5,662
Cherry Corp. Class B (a) - - - 5,064
Merisel, Inc. - 10,990 - -
Quad Systems Corp. (a) 740 - - 2,401
Rex Stores Corp. (a) 1,073 - - 7,187
Solectron Corp. (a) 427 - - 61,726
TOTALS $ 4,905 $ 10,990 $ - $ 91,706
(a) Non-income producing
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
William J. Hayes, Vice President
George A. Vanderheiden, Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
Robert H. Morrison, Manager,
Security Transactions
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
New York, NY
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth
Opportunities Fund
Fidelity Advisor Strategic
Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income
Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund:
Money Market Portfolio
Daily Money Fund:
U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)
(2_FIDELITY_LOGOS)FIDELITY ADVISOR
(registered trademark)
GOVERNMENT INVESTMENT
FUND - CLASS A & CLASS B
SEMIANNUAL REPORT
APRIL 30, 1995
CONTENTS
PRESIDENT'S MESSAGE 3 Ned Johnson on investing
strategies.
PERFORMANCE 4 How the fund has done over time.
FUND TALK 11 The manager's review of fund
performance, strategy and outlook.
INVESTMENT CHANGES 14 A summary of major shifts in the
fund's investments over the past six
months.
INVESTMENTS 15 A complete list of the fund's
investments with their market
values.
FINANCIAL STATEMENTS 19 Statements of assets and liabilities,
operations, and changes in net
assets,
as well as financial highlights.
NOTES 24 Notes to the financial statements.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR
GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUND NOR FIDELITY
DISTRIBUTORS
CORPORATION IS A BANK. FOR MORE INFORMATION ON ANY FIDELITY ADVISOR FUND,
INCLUDING
CHARGES AND EXPENSES, CONTACT YOUR INVESTMENT PROFESSIONAL FOR A FREE
PROSPECTUS.
READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Although there have been some positive market indications so far in 1995,
no one can predict what lies ahead for investors. Last year, stocks posted
below-average returns and bonds had one of the worst years in history. This
downturn followed a period in which the investing environment was generally
very positive.
These market ups and downs are a normal part of investing, and there are
some basic principles that are helpful for investors to remember in
different types of markets.
Keeping in mind that the effects of interest rate changes on your bond
investments will only be "paper" gains or losses unless you sell your
shares, staying in your bond fund may be appropriate if your investment
horizon is at least a year or more. The longer your investing time frame,
the more likely it is that you will retain your principal investment
through both up and down markets. For example, a 10-year time frame, such
as saving for a college education, enables you to weather these ups and
downs in a long-term fund, which has higher potential returns. An
intermediate-length fund could be appropriate if your investment horizon is
two to four years, and a short-term bond fund could be the right choice if
you need your money in one or two years.
If your time horizon is less than a year, you might want to consider moving
some of your bond investment into a money market fund, which seeks income
and a stable share price by investing in high-quality, short-term
investments. Of course, there is no assurance that a money market fund will
achieve its goal, and it is important to remember that money market funds
are not insured or guaranteed by any agency of the U.S. government.
No matter what your investment horizon or portfolio diversity, it makes
good sense to follow a regular investment plan - investing a certain amount
of money at the same time each month or quarter - and to review your
portfolio periodically. A periodic investment plan will not, of course,
assure a profit or protect against a loss.
Remember to contact your investment professional if you need help with your
investments.
Best regards,
Edward C. Johnson 3d
ADVISOR GOVERNMENT INVESTMENT FUND - CLASS A
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Total return includes
changes in share price, plus reinvestment of any dividends (or income) and
capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at income to measure performance.
If Fidelity had not reimbursed certain class expenses during the periods
shown, the total returns and dividends would have been lower.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor Government Investment - Class 6.46% 6.76% 48.07% 73.35%
A
Advisor Government Investment - Class
A 1.41% 1.69% 41.04% 65.12%
(incl. max. 4.75% sales charge)
Lehman Brothers Government Bond Index 6.52% 6.51% 55.76% n/a
Salomon Brothers Treasury/Agency Index 6.56% 6.50% 55.80% n/a
Average General U.S. Government Bond 6.34% 5.32% 48.78% n/a
Fund
Consumer Price Index 1.61% 3.05% 17.84% 31.63%
CUMULATIVE TOTAL RETURNS show Class A's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 7, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Class A's returns to those of
the Lehman Brothers Government Bond Index and the Salomon Brothers
Treasury/ Agency Index - both broad measures of the performance of U.S.
government bonds. To measure how Class A's performance stacked up against
its peers, you can compare it to the average general U.S. government bond
fund, which reflects the performance of 176 funds with similar objectives
tracked by Lipper Analytical Services over the past six months. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges. Comparing Class A's performance to
the consumer price index (CPI) helps show how the class did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor Government Investment - Class A 6.76% 8.17% 6.84%
Advisor Government Investment - Class A
(incl. max. 4.75% sales charge) 1.69% 7.12% 6.21%
Lehman Brothers Government Bond Index 6.51% 9.27% n/a
Salomon Brothers Treasury/Agency Index 6.50% 9.27% n/a
Average General U.S. Government Bond Fund 5.32% 8.25% n/a
Consumer Price Index 3.05% 3.34% 3.82%
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 LIFE OF FUND
Fidelity AdvisorGovernment Bond I
01/31/87 10000.00 10000.00
02/28/87 10033.72 10067.58
03/31/87 9989.52 10007.75
04/30/87 9633.43 9761.47
05/31/87 9593.77 9719.26
06/30/87 9722.82 9833.05
07/31/87 9741.41 9812.75
08/31/87 9686.50 9757.46
09/30/87 9493.31 9568.34
10/31/87 9796.16 9940.43
11/30/87 9873.14 9989.58
12/31/87 9960.14 10108.72
01/31/88 10263.66 10108.72
02/29/88 10378.43 10551.06
03/31/88 10319.08 10442.08
04/30/88 10258.05 10386.25
05/31/88 10197.14 10312.26
06/30/88 10401.95 10540.11
07/31/88 10384.10 10468.52
08/31/88 10378.58 10489.36
09/30/88 10554.85 10718.54
10/31/88 10710.93 10907.39
11/30/88 10621.43 10778.37
12/31/88 10614.71 10819.51
01/31/89 10738.04 10957.07
02/28/89 10704.75 10867.86
03/31/89 10736.45 10934.37
04/30/89 10910.63 11168.90
05/31/89 11123.76 11432.27
06/30/89 11372.21 11813.71
07/31/89 11549.28 12063.20
08/31/89 11431.08 11860.19
09/30/89 11497.46 11911.21
10/31/89 11714.54 12219.46
11/30/89 11803.53 12337.79
12/31/89 11861.94 12358.63
01/31/90 11732.87 12183.67
02/28/90 11771.52 12207.98
03/31/90 11788.94 12205.30
04/30/90 11683.02 12097.66
05/31/90 12025.34 12435.02
06/30/90 12198.56 12631.89
07/31/90 12346.41 12793.49
08/31/90 12267.47 12615.33
09/30/90 12349.01 12736.33
10/31/90 12473.07 12944.41
11/30/90 12690.55 13231.30
12/31/90 12854.22 13435.91
01/31/91 12995.27 13580.15
02/28/91 13103.47 13657.88
03/31/91 13156.13 13727.33
04/30/91 13265.46 13877.98
05/31/91 13335.07 13931.94
06/30/91 13327.50 13912.17
07/31/91 13470.37 14077.25
08/31/91 13679.29 14403.66
09/30/91 13926.52 14705.77
10/31/91 14050.93 14834.52
11/30/91 14132.16 14983.31
12/31/91 14583.20 15493.76
01/31/92 14385.40 15252.56
02/29/92 14451.57 15312.12
03/31/92 14352.43 15222.64
04/30/92 14436.53 15318.54
05/31/92 14701.53 15601.14
06/30/92 14905.05 15824.72
07/31/92 15156.72 16223.52
08/31/92 15287.19 16374.71
09/30/92 15429.21 16606.30
10/31/92 15243.18 16366.70
11/30/92 15281.75 16338.38
12/31/92 15528.76 16613.51
01/31/93 15794.72 16966.37
02/28/93 16091.12 17306.14
03/31/93 16183.37 17364.11
04/30/93 16305.29 17497.66
05/31/93 16330.98 17478.43
06/30/93 16652.44 17866.28
07/31/93 16734.91 17975.27
08/31/93 17007.77 18376.47
09/30/93 17038.97 18446.72
10/31/93 17153.26 18516.44
11/30/93 16890.86 18313.43
12/31/93 16981.82 18384.22
01/31/94 17277.90 18635.84
02/28/94 16877.76 18241.31
03/31/94 16367.67 17831.02
04/30/94 16204.36 17690.79
05/31/94 16221.26 17668.08
06/30/94 16166.02 17627.48
07/31/94 16518.47 17951.49
08/31/94 16508.82 17954.96
09/30/94 16276.88 17702.01
10/31/94 16249.35 17688.65
11/30/94 16218.37 17656.33
12/31/94 16328.15 17763.71
01/31/95 16621.27 18094.40
02/28/95 16984.48 18483.85
03/31/95 17097.05 18599.78
04/28/95 17299.53 18842.86
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor Government Investment Fund - Class A on January 31, 1987, shortly
after the fund started, and paid the maximum 4.75% sales charge. As the
chart shows, by April 30, 1995, the value of your investment would have
grown to $16,478 - a 64.78% increase on your initial investment. For
comparison, look at how the Salomon Brothers Treasury/Agency Index did over
the same period. With dividends reinvested the same $10,000 investment
would have grown to $18,869 - an 88.69% increase. Beginning with this
report, the fund will compare its performance to the Salomon Brothers
Treasury/Agency Index rather than the Lehman Brothers Government Bond
Index. Although the difference in performance between the two indexes is
small, the Salomon Brothers Treasury/Agency Index includes fewer securities
and is more straightforward to monitor on a daily basis. For comparison
purposes, both indexes are shown on Performance: The Bottom Line, Page 4.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX
MONTHS
ENDED YEARS ENDED OCTOBER 31,
APRIL 30,
1995 1994 1993 1992 1991 1990
Dividend return 3.45% 5.01% 6.13% 7.03% 7.84% 8.20%
Capital appreciation 3.01% -10.28% 6.40% 1.46% 4.81% -1.72%
return
Total return 6.46% -5.27% 12.53% 8.49% 12.65% 6.48%
</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
PERIODS ENDED APRIL 30, 1995 PAST PAST 6 PAST
MONTH MONTHS YEAR
Dividends per share 4.86(cents) 29.91(cents) 56.57(cents)
Annualized dividend rate 6.41% 6.68% 6.23%
30-day annualized yield 6.18% - -
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 $9.23 over
the past month, $9.03 over the past six months or $9.08 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 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
includes the effect of Class A's maximum 4.75% sales charge. If the adviser
had not reimbursed certain class expenses during the periods shown, the
yield would have been 5.69%.
ADVISOR GOVERNMENT INVESTMENT FUND - CLASS B
PERFORMANCE: THE BOTTOM LINE
There are several ways to evaluate historical performance. You can look at
the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. Total return includes
changes in share price, plus reinvestment of any dividends (or income) and
capital gains (the profits the fund earns when it sells securities that
have grown in value). You can also look at income to measure performance.
If Fidelity had not reimbursed certain class expenses during the periods
shown, the total returns and dividends would have been lower.
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
Class A, 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. Class B's
contingent deferred sales charges included in the past 6 months, past 1
year, past 5 years and life of fund total return figures are 4%, 4%, 1% and
0%, respectively.
CUMULATIVE TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 6 PAST 1 PAST 5 LIFE OF
MONTHS YEAR YEARS FUND
Advisor Government Investment - Class 6.08% 5.93% 46.93% 72.01%
B
Advisor Government Investment - Class B
(incl. contingent deferred sales charge) 2.08% 1.93% 45.93% 72.01%
Lehman Brothers Government Bond Index 6.52% 6.51% 55.76% n/a
Salomon Brothers Treasury/Agency Index 6.56% 6.50% 55.80% n/a
Average General U.S. Government Bond 6.34% 5.32% 48.78% n/a
Fund
Consumer Price Index 1.61% 3.05% 17.84% 31.63%
CUMULATIVE TOTAL RETURNS show Class B's performance in percentage terms
over a set period - in this case, six months, one year, five years, or
since the fund started on January 7, 1987. For example, if you invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare Class B's returns to those of
the Lehman Brothers Government Bond Index and the Salomon Brothers
Treasury/ Agency Index - both broad measures of the performance of U.S.
government bonds. To measure how Class B's performance stacked up against
its peers, you can compare it to the average general U.S. government bond
fund, which reflects the performance of 176 funds with similar objectives
tracked by Lipper Analytical Services over the past six months. These
benchmarks include reinvested dividends and capital gains, if any, and
exclude the effects of sales charges. Comparing Class B's performance to
the consumer price index (CPI) helps show how the class did compared to
inflation. (The CPI returns begin on the month end closest to the fund's
start date.)
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED APRIL 30, 1995 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
Advisor Government Investment - Class 5.93% 8.00% 6.74%
B
Advisor Government Investment - Class B
(incl. contingent deferred sales charge) 1.93% 7.85% 6.74%
Lehman Brothers Government Bond Index 6.51% 9.27% n/a
Salomon Brothers Treasury/Agency Index 6.50% 9.27% n/a
Average General U.S. Government Bond 5.32% 8.25% n/a
Fund
Consumer Price Index 3.05% 3.34% 3.82%
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 LIFE OF FUND
Fidelity AdvisoGovernment Bond
01/31/87 10000.00 10000.00
02/28/87 10033.72 10067.58
03/31/87 9989.52 10007.75
04/30/87 9633.43 9761.47
05/31/87 9593.77 9719.26
06/30/87 9722.82 9833.05
07/31/87 9741.41 9812.75
08/31/87 9686.50 9757.46
09/30/87 9493.31 9568.34
10/31/87 9796.16 9940.43
11/30/87 9873.14 9989.58
12/31/87 9960.14 10108.72
01/31/88 10263.66 10108.72
02/29/88 10378.43 10551.06
03/31/88 10319.08 10442.08
04/30/88 10258.05 10386.25
05/31/88 10197.14 10312.26
06/30/88 10401.95 10540.11
07/31/88 10384.10 10468.52
08/31/88 10378.58 10489.36
09/30/88 10554.85 10718.54
10/31/88 10710.93 10907.39
11/30/88 10621.43 10778.37
12/31/88 10614.71 10819.51
01/31/89 10738.04 10957.07
02/28/89 10704.75 10867.86
03/31/89 10736.45 10934.37
04/30/89 10910.63 11168.90
05/31/89 11123.76 11432.27
06/30/89 11372.21 11813.71
07/31/89 11549.28 12063.20
08/31/89 11431.08 11860.19
09/30/89 11497.46 11911.21
10/31/89 11714.54 12219.46
11/30/89 11803.53 12337.79
12/31/89 11861.94 12358.63
01/31/90 11732.87 12183.67
02/28/90 11771.52 12207.98
03/31/90 11788.94 12205.30
04/30/90 11683.02 12097.66
05/31/90 12025.34 12435.02
06/30/90 12198.56 12631.89
07/31/90 12346.41 12793.49
08/31/90 12267.47 12615.33
09/30/90 12349.01 12736.33
10/31/90 12473.07 12944.41
11/30/90 12690.55 13231.30
12/31/90 12854.22 13435.91
01/31/91 12995.27 13580.15
02/28/91 13103.47 13657.88
03/31/91 13156.13 13727.33
04/30/91 13265.46 13877.98
05/31/91 13335.07 13931.94
06/30/91 13327.50 13912.17
07/31/91 13470.37 14077.25
08/31/91 13679.29 14403.66
09/30/91 13926.52 14705.77
10/31/91 14050.93 14834.52
11/30/91 14132.16 14983.31
12/31/91 14583.20 15493.76
01/31/92 14385.40 15252.56
02/29/92 14451.57 15312.12
03/31/92 14352.43 15222.64
04/30/92 14436.53 15318.54
05/31/92 14701.53 15601.14
06/30/92 14905.05 15824.72
07/31/92 15156.72 16223.52
08/31/92 15287.19 16374.71
09/30/92 15429.21 16606.30
10/31/92 15243.18 16366.70
11/30/92 15281.75 16338.38
12/31/92 15528.76 16613.51
01/31/93 15794.72 16966.37
02/28/93 16091.12 17306.14
03/31/93 16183.37 17364.11
04/30/93 16305.29 17497.66
05/31/93 16330.98 17478.43
06/30/93 16652.44 17866.28
07/31/93 16734.91 17975.27
08/31/93 17007.77 18376.47
09/30/93 17038.97 18446.72
10/31/93 17153.26 18516.44
11/30/93 16890.86 18313.43
12/31/93 16981.82 18384.22
01/31/94 17277.90 18635.84
02/28/94 16877.76 18241.31
03/31/94 16367.67 17831.02
04/30/94 16204.36 17690.79
05/31/94 16221.26 17668.08
06/30/94 16166.02 17627.48
07/31/94 16490.32 17951.49
08/31/94 16483.86 17954.96
09/30/94 16219.51 17702.01
10/31/94 16181.56 17688.65
11/30/94 16140.10 17656.33
12/31/94 16238.48 17763.71
01/31/95 16519.44 18094.40
02/28/95 16873.62 18483.85
03/31/95 16975.10 18599.78
04/28/95 17165.37 18842.86
$10,000 OVER LIFE OF FUND: Let's say you invested $10,000 in Fidelity
Advisor Government Investment Fund - Class B on January 31, 1987, shortly
after the fund started. As the chart shows, by April 30, 1995, the value of
your investment would have grown to $17,165 - a 71.65% increase on your
initial investment. For comparison, look at how the Salomon Brothers
Treasury/Agency Index did over the same period. With dividends reinvested
the same $10,000 investment would have grown to $18,869 - an 88.69%
increase. Beginning with this report, the fund will compare its performance
to the Salomon Brothers Treasury/Agency Index rather than the Lehman
Brothers Government Bond Index. Although the difference in performance
between the two indexes is small, the Salomon Brothers Treasury/Agency
Index includes fewer securities and is more straightforward to monitor on a
daily basis. For comparison purposes, both indexes are shown on
Performance: The Bottom Line, Pages 7 and 8.
UNDERSTANDING
PERFORMANCE
How a fund did yesterday is
no guarantee of how it will do
tomorrow. Bond prices, for
example, generally move in
the opposite direction of
interest rates. In turn, the
share price, return, and yield
of a fund that invests in
bonds will vary. That means if
you sell your shares during a
market downturn, you might
lose money. But if you can
ride out the market's ups and
downs, you may have a gain.
(checkmark)
TOTAL RETURN COMPONENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX YEARS ENDED OCTOBER 31,
MONTHS
ENDED
APRIL 30,
1995 1994 1993 1992 1991 1990
Dividend 3.06% 4.72% 6.13% 7.03% 7.84% 8.20%
return
Capital appreciation 3.02% -10.38% 6.40% 1.46% 4.81% -1.72%
return
Total return 6.08% -5.66% 12.53% 8.49% 12.65% 6.48%
</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 APRIL 30, 1995 PAST PAST 6 LIFE OF
MONTH MONTHS CLASS
Dividends per share 4.27(cents) 26.57(cents) 42.58(cents)
Annualized dividend rate 5.63% 5.94% 5.63%
30-day annualized yield 5.70% - -
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 $9.22 over the past month, $9.02 over the
past six months, and $9.05 over the life of Class. The 30-day annualized
YIELD is a standard formula for all funds based on the yields of the bonds
in the fund, averaged over the past 30 days. This figure shows you the
yield characteristics of the fund's investments at the end of the period.
It also helps you compare funds from different companies on an equal basis.
The offering share price used in the calculation of the yield excludes the
effect of Class B's contingent deferred sales charge. If the adviser had
not reimbursed certain class expenses during the periods shown, the yield
would have been 4.35%.
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS:
On February 13, Robert Ives (right photo) became portfolio manager of
Fidelity Advisor Government Investment Fund. The following is an interview
with Curt Hollingsworth - who managed the fund during most of the period
covered by this report - with some comments from Bob Ives on his outlook
and strategy.
Q. CURT, HOW HAS THE FUND PERFORMED?
C.H. For the six months ended April 30, 1995, the fund's Class A shares
and Class B shares had total returns of 6.46% and 6.08%, respectively. For
the 12 months ended April 30, 1995, the fund's Class A and Class B shares
returned 6.76% and 5.93%, respectively. During the same periods, the
average general government bond fund returned 6.34% and 5.32%,
respectively, as tracked by Lipper Analytical Services, and the Salomon
Brothers Treasury/Agency Index returned 6.56% and 6.50%, respectively.
Q. THE PAST SIX MONTHS HAVE BEEN A PARTICULARLY STRONG PERIOD FOR THE BOND
MARKET. WHAT DROVE ITS RECENT RALLY?
A. The Federal Reserve Board increased short-term interest rates only twice
during the past six months, after having raised them five times from
February through the end of October. Also, there were indications that the
economy was slowing down, so the market became less fearful about possible
inflation, which eats away at a bond's fixed payments. Longer-term interest
rates, in particular, have rallied a fair amount, meaning they have fallen,
and bonds within that maturity spectrum have increased in price.
Shorter-term bond yields have also fallen - and prices have risen - but not
as much.
Q. WHAT WAS YOUR STRATEGY DURING THIS PERIOD?
A. I kept the fund's duration - which measures how sensitive its share
price is to changes in interest rates - neutral over the past six months. A
neutral duration means that I'm not betting that interest rates will rise
or fall. Funds with shorter durations - meaning that the managers thought
that interest rates would continue to rise - probably underperformed during
the period. So, having a neutral duration helped the fund perform in line
with the average fund of its type. Going forward, I'll be measuring the
fund's performance more closely against the Salomon Brothers
Treasury/Agency Index and, as a result, will generally keep the fund's
duration in line with that index.
Q. YOU PARED BACK THE FUND'S STAKE IN MORTGAGE SECURITIES BY ABOUT HALF
DURING THE PAST SIX MONTHS. WHAT'S THE REASONING BEHIND THAT MOVE?
A. Before November, I had emphasized mortgage securities because they
offered a yield advantage over comparable U.S. Treasury securities. But by
the end of 1994, the yield advantage of owning mortgage securities became
less and less, so I started selling them to take profits. In their place I
bought U.S. Treasury and agency securities. As of April 30, 1995, only
20.5% of the fund was invested in mortgage securities, while 58.4% and
19.4%, respectively, was invested in U.S. Treasury and agency securities.
Q. WHAT AGENCY ISSUES DID YOU FIND MOST ATTRACTIVE?
A. Securities issued by Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation made up about one-quarter of the
fund's stake in agency issues at the end of the period. I bought them at a
time when there was a fairly heavy supply and as such, their prices were
relatively cheap. Many of these securities have appreciated. What's more,
the yield advantage of owning these bonds grew over the period, so they
added extra yield to the fund.
Q. TURNING TO YOU BOB, WHAT CHANGES HAVE YOU MADE TO THE PORTFOLIO SINCE
TAKING OVER?
B.I. Let me start by saying that the changes I have made so far reflect
current market conditions and opportunities, rather than a difference in
investment philosphy with Curt. My strategy probably will be similar to
his, so there should be a fair amount of continuity. That said, I've added
to the fund's stake in agency securities and mortgage securities because
they regained some of their yield advantage over Treasuries. Within the
mortgage sector, I've recently emphasized collateralized mortgage
obligations, or CMOs, rather than Ginnie Maes. CMOs are securities that
comprise several mortgages which are separated into what are known as
tranches. Each tranche may have a different maturity.
Q. DID YOU ALTER THE FUND'S MATURITY STRUCTURE?
A. Yes, because in my view the market appears to be placing too high a
probability on the notion that recent evidence of an economic slowdown will
mean the Federal Reserve Board is finished raising interest rates. However,
I believe we may see further interest rate hikes. As a result, I moved the
fund toward a defensive strategy known as a "barbell" maturity structure.
That strategy involves heavily weighting two ends of the maturity spectrum
and investing little in between. Given all the possibilities over the next
few months, I think a barbell structure can help reduce downside risk,
while at the same time it can help increase the fund's potential for gains.
Q. CAN THE BOND MARKET CONTINUE AT ITS STRONG RECENT PACE?
A. I think it's unclear where the economy goes from here - into a recession
or back to growing at a moderate pace. Consumer spending - which drives
about two-thirds of the economy - has slowed. What consumers do going
forward will have very important implications for the economy. I'll be
watching economic data over the coming months, trying to see if the economy
is moving one way or the other. That said, I believe that going forward it
may be difficult for the bond market to match the returns we've seen so far
this year.
FUND FACTS
GOAL: high current income
by investing primarily in
obligations issued or
guaranteed by the U.S.
government
START DATE: January 7, 1987
SIZE: as of April 30, 1995,
more than $170 million
MANAGER: Robert Ives, since
February 1995; joined
Fidelity in 1991
(checkmark)
ROBERT IVES ON HIS INVESTMENT
PHILOSOPHY:
"I generally don't position the
fund to take advantage of
rising or falling interest rates.
Instead, I keep the fund's
duration - a measure of how
sensitive its share price is to
changes in interest rates - in
line with the market. In my
view, finding sectors - and
individual issues within those
sectors - that offer the best
value is the most prudent way
to achieve total return. With
this strategy I try to buy
securities when they are
inexpensive - based on what
I believe to be their actual
value - before the market
comes to the same
conclusion. I look for
opportunities with good
risk/reward trade-offs -
those situations where I feel
there is a combination of low
risk and higher potential for
gain. I also seek to diversify
my investments, so that the
fund's performance is not
overly dependent on the
performance of a particular
type or class of security."
INVESTMENT CHANGES
COUPON DISTRIBUTION AS OF APRIL 30, 1995
% OF FUND'S INVESTMENTS % OF FUND'S INVESTMENTS
6 MONTHS AGO
4 - 4.99% 5.0 0.2
5 - 5.99% 21.4 0.0
6 - 6.99% 14.2 13.1
7 - 7.99% 7.7 9.8
8 - 8.99% 30.5 6.8
9 - 9.99% 12.6 9.4
10 - 10.99% 0.9 15.9
11% and over 6.0 40.7
COUPON DISTRIBUTION SHOWS THE RANGE OF STATED INTEREST RATES ON THE FUND'S
INVESTMENTS, EXCLUDING REPURCHASE AGREEMENTS.
AVERAGE YEARS TO MATURITY AS OF APRIL 30, 1995
6 MONTHS AGO
Years 8.8 10.2
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 APRIL 30, 1995
6 MONTHS AGO
Years 4.7 5.1
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 APRIL 30, 1995 AS OF OCTOBER 31, 1994
20
Row: 1, Col: 1, Value: 4.0
Row: 1, Col: 2, Value: 76.0
Row: 1, Col: 3, Value: 20.0
Row: 1, Col: 1, Value: 4.1
Row: 1, Col: 2, Value: 55.0
Row: 1, Col: 3, Value: 20.0
Row: 1, Col: 4, Value: 20.9
Mortgage-backed
securities 20.5%
U.S. government
and government
agency obligations 77.8%
Short-term
investments 1.7%
Mortgage-backed
securities 40.9%
U.S. government
and government
agency obligations 55.0%
Short-term
investments 4.1%
INVESTMENTS APRIL 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 77.8%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 58.4%
8%, 10/15/96 $ 5,590,000 $ 5,706,160
4 3/8%, 11/15/96 6,025,000 5,837,683
7 1/4%, 11/30/96 3,750,000 3,789,263
8%, 1/15/97 95,000 97,241
6 3/4%, 2/28/97 12,700,000 12,739,624
5 5/8%, 1/31/98 12,285,000 11,949,128
5 3/8%, 5/31/98 4,700,000 4,519,332
7 1/8%, 9/30/99 3,930,000 3,967,453
6 3/8%, 8/15/02 3,300,000 3,181,926
6 1/4%, 2/15/03 2,025,000 1,928,185
10 3/4%, 5/15/03 20,000 24,462
11 7/8%, 11/15/03 200,000 260,624
12 3/8%, 5/15/04 1,630,000 2,198,723
9%, 11/15/18 7,090,000 8,274,243
8 7/8%, 2/15/19 22,910,000 26,439,515
8 1/8%, 8/15/19 700,000 749,546
12%, 8/15/23 4,200,000 5,841,276
97,504,384
U.S. GOVERNMENT AGENCY OBLIGATIONS - 19.4%
Federal Agricultural Mortgage Corp. 7.48%, 11/27/00 1,250,000 1,267,375
Federal Home Loan Bank:
7.59%, 12/23/96 750,000 760,195
5.60%, 2/23/99 (callable) (a) 1,200,000 1,130,250
Federal Home Loan Mortgage Corp.:
6.47%, 7/07/97 270,000 268,017
5.40%, 11/1/00 250,000 228,720
6.20%, 4/15/03 350,000 327,306
Federal National Mortgage Association:
5.19%, 7/20/98 (callable) 4,700,000 4,446,459
5.30%, 8/25/98 (callable) 1,060,000 1,005,344
4.70%, 9/10/98 (callable) 935,000 869,477
4.38%, 10/23/98 (callable) (a) 240,000 224,959
4.94%, 10/30/98 (callable) 960,000 897,000
Government Trust Certificates:
(assets of Trust guaranteed by U.S. Government through
Defense Security Assistance Agency):
Class 1-B, 9 1/8%, 11/15/96 300,000 304,653
Class 1-C, 9 1/4%, 11/15/01 455,000 488,429
Class T-2, 9 5/8%, 5/15/02 210,000 226,932
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY OBLIGATIONS - CONTINUED
Government Trust Certificates - continued
(assets of Trust guaranteed by U.S. Government
through Export-Import Bank):
Series 1992-A, 7.02%, 9/1/04 $ 422,750 $ 419,146
Series 1994-F, 8.178%, 12/15/04 4,873,234 5,029,733
Private Export Funding Corp.:
5.65%, 3/15/03 192,000 181,553
8.35%, 1/31/01 2,800,000 2,945,964
State of Israel (guaranteed by U.S. Government through
Agency for International Development):
7 3/4%, 4/1/98 122,065 123,835
4 7/8%, 9/15/98 520,000 487,175
6%, 2/15/99 110,000 106,269
7 1/8%, 8/15/99 2,000,000 2,001,710
8%, 11/15/01 2,000,000 2,073,480
6 1/8%, 3/15/03 600,000 558,375
8 1/2%, 4/1/06 490,000 520,625
Student Loan Marketing Association 8.14%, 10/15/03 300,000 313,090
U.S. Housing & Urban Development:
8.24%, 8/1/02 4,000,000 4,202,500
8.27%, 8/1/03 415,000 436,917
Tennessee Valley Authority 8 1/4%, 11/15/96 350,000 357,767
Twelve Federal Land Banks 7.95%, 10/21/96 190,000 193,325
32,396,580
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $128,647,175) 129,900,964
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - 10.3%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.5%
6 1/2%, 5/1/08 540,072 517,621
8 1/2%, 8/1/09 to 2/1/10 735,935 747,936
9%, 10/1/08 to 10/1/20 1,687,429 1,743,081
9 1/2%, 2/1/08 to 7/1/21 1,813,647 1,898,778
10 1/2%, 1/1/16 to 12/1/20 1,424,456 1,526,317
12 1/2%, 2/1/10 to 6/1/19 943,560 1,043,234
7,476,967
U.S. GOVERNMENT AGENCY - MORTGAGE-BACKED SECURITIES - CONTINUED
PRINCIPAL VALUE
AMOUNT (NOTE 1)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.2%
6%, 8/1/08 $ 190,676 $ 178,162
8 1/4%, 12/1/01 697,960 721,516
8 1/2%, 8/1/16 to 1/1/17 571,183 586,510
9 1/2%, 2/1/10 to 4/1/16 334,499 352,672
12 1/2%, 8/1/15 75,577 83,890
1,922,750
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.6%
9%, 6/15/16 to 7/15/17 7,318,825 7,643,213
13 1/2%, 7/15/11 96,286 109,044
7,752,257
TOTAL U.S. GOVERNMENT AGENCY -
MORTGAGE-BACKED SECURITIES
(Cost $17,043,858) 17,151,974
U.S. GOVERNMENT AGENCY - COLLATERALIZED MORTGAGE OBLIGATIONS - 10.0%
Federal Home Loan Mortgage Corporation:
sequential pay Series 1353, Class A, 5 1/2%, 11/15/04 101,047 96,500
planned amortization class:
Series 1404-C, 6.40%, 2/15/05 875,000 846,562
Series 1203-G, 5%, 7/15/05 3,300,000 3,040,125
Federal National Mortgage Association:
planned amortization class:
Series 1992, Class 155-D, 6.20%, 11/25/01 200,000 194,531
Series 1992 187-B, 5 1/2%, 9/25/03 3,007,340 2,928,397
Series 1992 179-E, 6.10%, 9/25/04 2,960,000 2,836,975
Series 1993 18-PC, 5 1/2%, 3/25/01 1,900,000 1,861,703
Series 1993-28, Class PD, 5 1/4%, 10/25/01 500,000 485,000
Series 1992, Class 193-D, 5 3/4%, 12/25/01 2,600,000 2,502,500
Series 1993, Class 11-C, 5 3/4%, 4/25/02 1,400,000 1,385,125
Federal National Mortgage Association Z Bond
Series 1987-2, 11%, 11/25/17 450,534 489,534
TOTAL U.S. GOVERNMENT AGENCY -
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $16,435,672) 16,666,952
COMMERCIAL MORTGAGE SECURITIES - 0.2%
PRINCIPAL VALUE
AMOUNT (NOTE 1)
Federal National Mortgage Association commercial
Series 1994-M3, Class A, 7.71%, 4/1/06
(Cost $368,875) $ 367,612 $ 370,886
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
(000S)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.93%, dated
4/28/95 due 5/1/95 $ 2,821,394 2,820,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $165,315,580) $ 166,910,776
LEGEND
29. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
INCOME TAX INFORMATION
At April 30, 1995, the aggregate cost of investment securities for income
tax purposes was $165,315,580. Net unrealized appre-
ciation aggregated $1,595,196, of which $2,009,582 related to appreciated
investment securities and $414,386 related to depreciated investment
securities.
At October 31, 1994, the fund had a capital loss carryforward of
approximately $4,569,000 all of which will expire on October 31, 2002.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNTS IN THOUSANDS APRIL 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase $ 166,910,776
agreements of $2,820,000) (cost $165,315,580) -
See accompanying schedule
Cash 691,044
Receivable for investments sold 27,793
Interest receivable 2,585,200
Receivable from investment adviser for expense 48,027
reductions
TOTAL ASSETS 170,262,840
LIABILITIES
Distributions payable $ 97,991
Accrued management fee 62,848
Distribution fees payable 38,245
Other payables and accrued expenses 51,675
TOTAL LIABILITIES 250,759
NET ASSETS $ 170,012,081
Net Assets consist of:
Paid in capital $ 174,105,782
Undistributed net investment income 92,188
Accumulated undistributed net realized gain (loss) (5,781,085)
on investments
Net unrealized appreciation (depreciation) on 1,595,196
investments
NET ASSETS $ 170,012,081
CALCULATION OF MAXIMUM OFFERING PRICE $9.23
CLASS A:
NET ASSET VALUE and redemption price per share
($163,613,939 (divided by) 17,726,233 shares)
Maximum offering price per share (100/95.25 of $9.23) $9.69
CLASS B: $9.22
NET ASSET VALUE and offering price per share
($6,398,142 (divided by) 693,878 shares) A
</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>
AMOUNTS IN THOUSANDS SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 5,385,826
Interest
EXPENSES
Management fee $ 319,939
Transfer agent fees 228,492
Class A
Class B 4,892
Distribution fees
Class A 170,890
Class B 19,122
Accounting fees and expenses 28,814
Non-interested trustees' compensation 323
Custodian fees and expenses 21,763
Registration fees
Class A 25,619
Class B 18,367
Audit 10,490
Legal 5,475
Reports to shareholders 27,426
Miscellaneous 4,199
Total expenses before reductions 885,811
Expense reductions (270,875) 614,936
NET INVESTMENT INCOME 4,770,890
REALIZED AND UNREALIZED GAIN (LOSS) (1,211,625)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on 5,696,423
investment securities
NET GAIN (LOSS) 4,484,798
NET INCREASE (DECREASE) IN NET ASSETS RESULTING $ 9,255,688
FROM OPERATIONS
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED APRIL 30, OCTOBER 31,
1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 4,770,890 $ 5,647,267
Net investment income
Net realized gain (loss) (1,211,625) (5,172,703)
Change in net unrealized appreciation (depreciation) 5,696,423 (5,050,214)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING 9,255,688 (4,575,650)
FROM OPERATIONS
Distributions to shareholders from:
Net investment income
Class A (4,512,080) (4,961,635)
Class B (110,220) (17,915)
Net realized gain - Class A - (932,924)
In excess of net realized gain - Class A - (205,902)
TOTAL DISTRIBUTIONS (4,622,300) (6,118,376)
Share transactions - net increase (decrease) 48,863,395 57,333,656
TOTAL INCREASE (DECREASE) IN NET ASSETS 53,496,783 46,639,630
NET ASSETS
Beginning of period 116,515,298 69,875,668
End of period (including under (over) distribution of $ 170,012,081 $ 116,515,298
net investment income of $92,188 and $(56,402),
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS - CLASS A
SIX MONTHS YEARS ENDED OCTOBER 31,
ENDED
APRIL 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, $ 8.960 $ 10.140 $ 9.730 $ 9.590 $ 9.150 $ 9.310
beginning of period
Income from
Investment
Operations
Net investment .308 .515 E .567 .666 .700 .735
income
Net realized and .261 (1.031) .601 .125 .419 (.160)
unrealized gain
(loss) on
investments
Total from .569 (.516) 1.168 .791 1.119 .575
investment
operations
Less Distributions
From net investment (.299) (.504) (.558) (.651) (.679) (.735)
D
income
From net realized - (.130) (.200) - - -
gain D
In excess of net - (.030) - - - -
realized gain on
investments
Total distributions (.299) (.664) (.758) (.651) (.679) (.735)
Net asset value, end $ 9.230 $ 8.960 $ 10.140 $ 9.730 $ 9.590 $ 9.150
of period
TOTAL RETURN B, C 6.46% (5.27) 12.53% 8.49% 12.65% 6.48%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of $ 163,614 $ 114,453 $ 69,876 $ 23,281 $ 13,058 $ 9,822
period (000 omitted)
Ratio of expenses to .86% .74% .68% 1.10% 1.10% 1.10%
average net assets A
Ratio of expenses to 1.23% 1.47% 1.32% 1.79% 2.46% 2.74%
average net assets A
before expense
reductions
Ratio of net 6.87% 6.18% 6.11% 6.98% 7.47% 8.04%
investment income A
to average net
assets
Portfolio turnover 378% 313% 333% 315% 54% 31%
A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
E EFFECTIVE NOVEMBER 1, 1993, THE FUND BEGAN REFLECTING IN NET INVESTMENT
INCOME PER SHARE CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX
DIFFERENCES
IN ACCORDANCE WITH NEW GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
FINANCIAL HIGHLIGHTS - CLASS B
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31,
APRIL 30, 1995
(UNAUDITED) 1994 E
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 8.950 $ 9.100
Income from Investment Operations
Net investment income .283 .144
Net realized and unrealized gain (loss) on investments .253 (.137)
Total from investment operations .536 .007
Less Distributions
From net investment income (.266) (.157) D
Net asset value, end of period $ 9.220 $ 8.950
TOTAL RETURN B, C 6.08% 0.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 6,398 $ 2,062
Ratio of expenses to average net assets 1.60% 1.70%
A A
Ratio of expenses to average net assets before expense 2.84% 2.62%
reductions A A
Ratio of net investment income to average net assets 6.13% 5.22%
A A
Portfolio turnover 378% 313%
A
</TABLE>
A ANNUALIZED
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF
LESS THAN ONE YEAR ARE NOT ANNUALIZED.
D THE AMOUNT SHOWN REFLECTS CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
E FOR THE PERIOD JUNE 30, 1994 (COMMENCEMENT OF SALES OF CLASS B SHARES) TO
OCTOBER 31, 1994.
NOTES TO FINANCIAL STATEMENTS
For the period ended April 30, 1995 (Unaudited)
30. SIGNIFICANT ACCOUNTING
POLICIES.
Fidelity Advisor Government Investment Fund (the fund) is a fund of
Fidelity Advisor Series II (the trust) and is authorized to issue an
unlimited number of shares. The trust is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company organized as a Massachusetts business trust.
The fund offers Class A and Class B 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.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes all of its taxable income for its fiscal
year. The schedule of investments includes information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are 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, which may result in distribution
reclassifications, are primarily due to differing treatments for paydown
gains/losses on certain securities, market discount and losses deferred due
to wash sales.
1. SIGNIFICANT ACCOUNTING
POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized
and unrealized gain (loss). Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
31. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR), may
transfer uninvested cash balances into one or more joint trading accounts.
These balances are invested in one or more repurchase agreements that
mature in 60 days or less from the date of purchase, and are collateralized
by U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the fund's
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
32. PURCHASES AND SALES
OF INVESTMENTS.
Purchases and sales of long-term U.S. government and government agency
obligations aggregated $296,649,933 and $249,213,855, respectively.
33. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a monthly
fee that is calculated on the basis of a group fee rate plus a fixed
individual fund fee rate applied to the average net assets of the fund. The
group fee rate is the weighted average of a series of rates and is based on
the monthly average net assets of all the mutual funds advised by FMR. The
rates ranged from .1200% to .3700% for the period. In the event that these
rates were lower than the contractual rates in effect during the period,
FMR voluntarily implemented the above rates, as they resulted in the same
or a lower management fee. The annual individual fund fee rate is .30%. For
the period, the management fee was equivalent to an annualized rate of .46%
of average net assets.
4. 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 $170,890 and $19,122 under the Class A Plan and
Class B Plan, respectively, of which $163,802 and $4,734 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 $436,540 on sales of Class A shares of the fund, of which
$371,002 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 $4,924 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) and
Fidelity Investments Institutional Operations Company (FIIOC), an affiliate
of FMR (collectively referred to as the Transfer Agents) are the transfer,
dividend disbursing, and shareholder servicing agents for the fund's Class
A and Class B shares, respectively. During the period November 1, 1994 to
December 31, 1994, the Transfer Agents received fees based on the type,
size, number of accounts and the number of transactions made by
shareholders of the respective classes of the fund. Effective January 1,
1995, the Board of Trustees approved a revised transfer agent contract
pursuant to which the Transfer Agents receive account fees and asset-based
fees that vary according to the account size and type of account of the
shareholders of the respective classes of the fund. With respect to the
Class A
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
TRANSFER AGENT FEES - CONTINUED
shares, State Street has delegated certain transfer, dividend paying, and
shareholder services to FIIOC for which FIIOC receives its allocable share
of all such fees. FIIOC pays for typesetting, printing and mailing of all
shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
34. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse certain transfer agent, distribution
and registration expenses above a specified percentage of average net
assets for Class A and Class B. During the period, this expense limitation
ranged from an annual rate of .74% to .95% of average net assets for Class
A and ranged from an annual rate of 1.49% to 1.70% of average net assets
for Class B. For the period, the reimbursements reduced the expenses of
Class A and Class B by $247,494 and $23,381, respectively.
35. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED APRIL 30,
OCTOBER 31, APRIL 30, OCTOBER 31
1995 1994 A 1995 1994 A
CLASS A
Shares sold 8,468,767 10,771,285 $ 76,652,257 $ 101,402,900
Reinvestment of distributions 436,407 546,844 3,957,982 5,129,034
Shares redeemed (3,954,504) (5,434,881) (35,946,281) (51,299,776)
Net increase (decrease) 4,950,670 5,883,248 $ 44,663,958 $ 55,232,158
CLASS B
Shares sold 512,727 250,049 $ 4,648,033 $ 2,278,237
Reinvestment of distributions 8,556 1,572 77,715 14,174
Shares redeemed (57,764) (21,262) (526,311) (190,913)
Net increase (decrease) 463,519 230,359 $ 4,199,437 $ 2,101,498
A SHARE TRANSACTIONS FOR THE CLASS B ARE FOR THE PERIOD JUNE 30, 1994
(COMMENCEMENT OF SALE OF SHARES) TO APRIL 30, 1995.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, President
J. Gary Burkhead, Senior Vice President
Arthur S. Loring, Secretary
Stephen P. Jonas, Treasurer
John H. Costello, Assistant Treasurer
Leonard M. Rush, Assistant Treasurer
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox*
Phyllis Burke Davis*
Richard J. Flynn*
Edward C. Johnson 3d
E. Bradley Jones*
Donald J. Kirk*
Peter S. Lynch
Edward H. Malone*
Marvin L. Mann*
Gerald C. McDonough*
Thomas R. Williams*
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENTS
State Street Bank and Trust Company
Boston, MA - Class A
Fidelity Investments Institutional
Operations Company
Boston, MA - Class B
CUSTODIAN
The Bank of New York
New York, NY
* INDEPENDENT TRUSTEES
GROWTH FUNDS
Fidelity Advisor Overseas Fund
Fidelity Advisor Equity Portfolio Growth
Fidelity Advisor Global Resources Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor Strategic Opportunities Fund
GROWTH AND INCOME FUNDS
Fidelity Advisor Equity Income Fund
Fidelity Advisor Income & Growth Fund
INCOME FUNDS
Fidelity Advisor Emerging Markets Income Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Strategic Income Fund
Fidelity Advisor Government Investment Fund
Fidelity Advisor Limited Term Bond Fund
Fidelity Advisor Short Fixed-Income Fund
TAX-EXEMPT FUNDS
Fidelity Advisor High Income Municipal Fund
Fidelity Advisor Limited Term Tax-Exempt Fund
Fidelity Advisor Short-Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Daily Money Fund: Money Market Portfolio
Daily Money Fund: U.S. Treasury Portfolio
Daily Tax-Exempt Money Fund
(REGISTERED TRADEMARK)