FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO
ANNUAL REPORT
NOVEMBER 30, 1993
AN INTERVIEW WITH
CURT HOLLINGSWORTH,
PORTFOLIO MANAGER OF
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE
GOVERNMENT PORTFOLIO
Q. CURT, HOW DID THE FUND PERFORM FOR THE YEAR ENDED NOVEMBER 30?
A. The fund had a total return - income and changes in share price - of
6.53%. The average short-term government bond fund returned 6.74% for the
same period, according to Lipper Analytical Services.
Q. WHY DID THE FUND FALL SHORT OF THE AVERAGE?
A. Like other short-term government funds, falling interest rates boosted
the prices of bonds in the fund. However, during the past year, the fund
invested fairly heavily in mortgage-backed securities issued by the
Government National Mortgage Association (GNMA). Over the past six months,
the fund's stake in these bonds averaged more than 50%. Many competing
funds held far fewer. While mortgage securities traditionally pay higher
yields than Treasury issues, their prices didn't rise as quickly as
Treasuries when interest rates dropped this year. That's because millions
of homeowners who refinanced their mortgages at lower rates prepaid their
current loans as rates declined, and that money was returned to GNMA
investors as a return of principal. So instead of holding a bond that
became more valuable as rates fell, the fund got some of its cash back
early. In hindsight, I wish I'd bought fewer GNMAs and more Treasuries.
Q. HOW DOES THE FUND CONTROL THE RISK OF MORTGAGE PREPAYMENTS?
A. I try to limit prepayment risk by investing in GNMAs with varying
coupons - stated interest rates. Generally, high-coupon GNMAs have a higher
risk of prepayment because they're backed by mortgages with high rates -
the loans that homeowners are most likely to refinance when rates fall.
Prepayments have the biggest impact when they happen more quickly than
investors were expecting if they bought the bond at a premium price -
higher than face value - or more slowly than they were expecting if they
bought the bond at a discount - lower than face value. We use a computer
model that predicts how quickly prepayment will happen on any given
mortgage pool like GNMAs. The fund buys mostly premium mortgage bonds, and
I try to pick those that are going to prepay more slowly than expected by
other investors.
Q. WHAT OTHER STRATEGIES DO YOU USE?
A. Perhaps the most important is a technique called duration averaging.
Duration measures the sensitivity of a bond's price to changes in interest
rates. The longer the duration, the more a bond's price will rise when
rates are falling - or fall when rates are rising. With duration averaging,
I try to buy longer-term issues after their prices have declined, which
increases the fund's duration. On November 30, the fund's duration was 2.2
years. That means if rates had risen one percentage point, the fund's share
price at that time - $9.89 - would have fallen about 2.2% to $9.67. Of
course, if rates had fallen one percentage point, the fund's share price
would have risen roughly 2.2%. For the duration averaging strategy to work,
however, you need a pretty accurate forecast of where inflation is heading.
Q. ISN'T IT HARD TO PREDICT INFLATION?
A. Yes, but we have a computer model to help us. It analyzes several
long-term indicators - including money supply, the strength of the dollar
and commodity prices - to help tell us where inflation is going.
Forecasting inflation isn't easy, but I think predicting short-term swings
in interest rates is much tougher. Investors tend to get hurt in the bond
market when they try to predict where interest rates are heading over the
next day, week or month. That's awfully difficult to do, and we don't try
it. That's the whole idea behind duration averaging. It's a disciplined way
to invest without having to guess where interest rates are going.
Q. WHAT'S THE INFLATION MODEL TELLING YOU NOW, AND WHAT'S YOUR OUTLOOK?
A. Right now, the model is suggesting inflation should remain low - in the
2 to
2 1/2% range over the next six months. Despite what seems to some like an
economic surge lately, I think the economy is settling into a pattern of
slow and steady growth. I expect short-term interest rates to remain
stable, possibly rising a bit. This type of environment tends to help
mortgage investments, in particular, deliver higher total returns than
Treasuries by virtue of their higher yields. That's why I'm holding steady
on my stake in GNMAs.
PERFORMANCE UPDATE
$100,000 OVER LIFE OF FUND
Inst Sht Gov LB 1-3 Govt
11/30/86 100000.00 100000.00
12/31/86 100232.45 100220.00
01/31/87 100984.52 100921.54
02/28/87 101297.04 101375.69
03/31/87 101534.49 101588.58
04/30/87 100733.60 100877.46
05/31/87 101025.36 101018.68
06/30/87 102031.84 102139.99
07/31/87 102646.77 102701.76
08/31/87 102870.97 102855.81
09/30/87 102770.50 102475.25
10/31/87 104186.29 104555.50
11/30/87 104953.26 105235.11
12/31/87 105853.42 105940.18
01/31/88 107712.94 107518.69
02/29/88 108817.07 108443.35
03/31/88 108720.94 108671.08
04/30/88 108785.98 108790.62
05/31/88 108647.19 108736.22
06/30/88 109881.56 109823.59
07/31/88 110106.53 109878.50
08/31/88 110213.92 110142.21
09/30/88 111588.10 111419.86
10/31/88 112484.85 112545.20
11/30/88 112515.67 112263.83
12/31/88 112780.96 112510.81
01/31/89 113748.44 113399.65
02/28/89 113857.26 113410.99
03/31/89 114282.69 113887.32
04/30/89 115949.63 115743.68
05/31/89 117612.62 117375.67
06/30/89 119764.14 119558.85
07/31/89 121326.05 121316.37
08/31/89 120733.67 120600.60
09/30/89 121440.29 121300.08
10/31/89 123395.24 123180.24
11/30/89 124456.69 124288.86
12/31/89 125011.51 124761.16
01/31/90 124905.34 124910.87
02/28/90 125514.30 125572.90
03/31/90 126068.16 125949.62
04/30/90 126226.71 126251.89
05/31/90 128132.86 128196.17
06/30/90 129431.74 129542.23
07/31/90 130900.35 131109.69
08/31/90 131407.26 131581.69
09/30/90 132295.68 132608.03
10/31/90 133615.12 134079.98
11/30/90 135084.38 135380.55
12/31/90 136609.15 136978.04
01/31/91 137853.22 138279.33
02/28/91 138891.94 139164.32
03/31/91 139756.92 140096.72
04/30/91 141155.69 141441.65
05/31/91 142195.47 142290.30
06/30/91 142497.86 142816.77
07/31/91 143853.21 144045.00
08/31/91 146120.12 146004.01
09/30/91 147346.73 147551.65
10/31/91 148929.67 149145.21
11/30/91 150365.93 150681.41
12/31/91 154016.63 152971.76
01/31/92 152549.86 152772.90
02/29/92 153239.30 153231.22
03/31/92 153175.73 153185.25
04/30/92 154315.48 154579.24
05/31/92 156283.47 156016.82
06/30/92 158139.65 157592.59
07/31/92 159806.46 159404.91
08/31/92 161526.84 160696.09
09/30/92 163504.68 162206.63
10/31/92 161646.76 161282.05
11/30/92 161973.72 161040.13
12/31/92 163773.02 162537.80
01/31/93 165722.10 164244.45
02/28/93 167247.91 165558.41
03/31/93 168029.82 166071.64
04/30/93 168658.87 167084.67
05/31/93 169019.67 166683.67
06/30/93 170363.42 167933.80
07/31/93 170873.06 168303.25
08/31/93 171939.59 169700.17
09/30/93 172350.92 170243.21
10/31/93 172624.56 170617.74
11/30/93 172552.28 170651.87
$100,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO ON NOVEMBER 30, 1986,
SHORTLY AFTER THE FUND STARTED. BY NOVEMBER 30, 1993, THE VALUE OF YOUR
INVESTMENT WOULD HAVE GROWN TO $172,552 - A 72.55% INCREASE ON YOUR INITIAL
INVESTMENT. FOR COMPARISON, LOOK AT HOW A $100,000 INVESTMENT IN THE LEHMAN
BROTHERS 1-3 YEAR GOV'T. BOND INDEX, AN UNMANAGED INDEX (WITH DIVIDENDS
REINVESTED), DID OVER THE SAME PERIOD. IT WOULD HAVE GROWN TO $170,652 - A
70.65% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
FIDELITY
INSTITUTIONAL
SHORT-INTERMEDIATE
GOVERNMENT
PORTFOLIO
LEHMAN BROTHERS
1-3 YEAR GOV'T.
BOND INDEX
FOR THE PERIOD ENDED NOVEMBER 30, 1993
One-year total return* 6.53% 5.95%
Five-year average annual total return* 8.93% 8.73%
Life of fund average annual total return* 8.11% n/a
FOR THE PERIOD ENDED NOVEMBER 30, 1993
One-year total return* 6.53% 5.95%
Five-year cumulative total return* 53.36% 51.97%
Life of fund cumulative total return* 73.40% n/a
CUMULATIVE TOTAL RETURNS
FIDELITY
INSTITUTIONAL
SHORT-INTERMEDIATE
GOVERNMENT
PORTFOLIO
FOR THE PERIOD ENDED NOVEMBER 30, 1993
30-day annualized net yield 4.22%
One-year dividends per share 59.17(cents)
One-year dividend rate** 5.93%
YIELD AND DIVIDENDS
* TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY. FIGURES FOR MORE THAN ONE YEAR ASSUME
A STEADY COMPOUNDED RATE OF RETURN AND ARE NOT THE FUND'S YEAR-BY-YEAR
RESULTS, WHICH FLUCTUATED OVER THE PERIODS SHOWN. LIFE OF FUND FIGURES ARE
FROM COMMENCEMENT OF OPERATIONS, NOVEMBER 10, 1986, TO THE PERIODS LISTED
ABOVE. THE LEHMAN BROTHERS 1-3 YEAR GOVERNMENT BOND INDEX, AN UNMANAGED
INDEX, IS A BROAD MEASURE OF THE PERFORMANCE OF SHORT-TERM GOVERNMENT
BONDS. IT INCLUDES REINVESTED DIVIDENDS AND CAPITAL GAINS, IF ANY.
** THE DIVIDEND RATE REFLECTS ACTUAL DIVIDENDS PAID DURING THE PERIOD. IT
IS BASED ON AN AVERAGE SHARE PRICE OF $9.97.
ALL PERFORMANCE NUMBERS ARE HISTORICAL; THE FUND'S SHARE PRICE, YIELD AND
RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
MARKET RECAP
By December 1, 1992, the bond market had gotten over the jitters tied to
the unknown plans of a newly-elected president, and begun a year of sharp
gains tied to low inflation, falling interest rates and slow growth in the
U.S. economy. Through December and into the new year, the market signaled
its approval of Mr. Clinton's plans to tackle the budget deficit and fight
inflation. The yield on the benchmark 30-year Treasury bond fell from 7.57%
on December 1 to 6.73% on March 8, 1993. After a brief inflation scare in
late spring, bond investors focused on continued high unemployment and slow
growth, and interest rates resumed their downward trend. The yield on the
30-year Treasury dropped below 6% in early September, and hit a three
decade low in mid-October, yielding 5.79%. Soon after, strengthening
economic numbers fueled more nervousness over inflation. Interest rates
rose in late October and into November, driving bond prices down and
dampening results for the year, overall. However, the Lehman Brothers
Government Treasury Long Term Index shows long-term Treasuries returned a
strong 20.08% for the 12 months ended November 30, 1993. Corporate junk
bonds - which benefited from a strengthening economy - rose 18.58%, as
measured by the Salomon Brothers Composite High Yield Index. Mortgage
securities continued to lag other fixed-income investments, reflecting the
impact of mortgage refinancing by millions of homeowners. The Salomon
Brothers Mortgage Index rose 7.53%. The Lehman Brothers Aggregate Bond
Index, a broad measure of bond performance, returned 10.89% for the year.
Globally, falling interest rates and low inflation fueled strong returns in
both developed countries and, more notably, in emerging markets. The
Salomon Brothers World Government Bond Index - which includes U.S. issues -
rose 12.99% for the year. The J.P. Morgan Emerging Market Bond Index was up
39.11%.
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO
INVESTMENTS/NOVEMBER 30, 1993
(Showing Percentage of Total Value of Investment in Securities)
PRINCIPAL VALUE PRINCIPAL VALUE
AMOUNT (NOTE 1) AMOUNT (NOTE 1)
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 58.7%
U.S. TREASURY OBLIGATIONS - 51.5%
5 7/8%, 5/15/95 $ 28,300,000 $ 29,056,176 912827F3
6%, 12/31/97 4,250,000 4,418,682 912827J2
9 1/4%, 8/15/98 32,800,000 38,437,336 912827WN
4 3/4%, 9/30/98 20,750,000 20,432,317 912827M4
7 7/8%, 2/15/00 24,035,000 25,124,086 912810BS
8 3/8%, 8/15/00 61,250,000 65,326,953 912810BV
182,795,550
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.2%
FEDERAL AGRICULTURE MORTGAGE CORPORATION
6.44%, 5/28/96 3,500,000 3,647,656
FEDERAL NATIONAL MORTGAGE ASSOCIATION
7.70%, 2/12/96, Callable in1994 5,000,000 5,028,100 313586V5
9.40%, 8/10/98 600,000 705,186 313586ZU
euro:
0%, 11/30/94 1,826,000 1,761,542 31361L9K
8.45%, 11/4/96 3,000,000 3,282,000 313586XX
TENNESSEE VALLEY AUTHORITY
8 1/4%, 11/15/96 10,136,000 11,102,062 880591BC
25,526,546
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $210,365,318) 208,322,096
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - 38.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.7%
5 1/2%, 5/1/98 98,517 99,010 31289HXJ
6%, 2/1/98 to 5/1/98 583,539 593,752 31289HXP
6 1/2%, 4/1/98 620,641 637,511 31289HXZ
7%, 2/1/97 to 12/1/97 721,217 745,783 31289CFR
7 1/2%, 12/1/96 390,612 405,014 31281Y6G
8%, 9/1/96 234,387 243,470 31281WCJ
8 1/2%, 3/1/96 to 8/1/07 1,560,055 1,629,555 31282UBH
9%, 11/1/21 to 3/1/22 318,321 337,479 313945QB
10 1/2%, 9/1/16 to 9/1/20 678,944 751,465 31295WDG
12%, 9/1/11 to 10/1/13 126,563 143,650 31340LC5
12 1/4%, 11/1/14 331,883 375,858 31341DKB
12 1/2%, 11/1/12 to 3/1/14 3,175,862 3,606,575 31340W6W
9,569,122
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 21.6%
6%, 7/1/00 $ 99,505 $ 100,313 31369VR5
6 1/2%, 12/1/23 (a) 1,600,000 1,577,248 9931144T
6 1/2%, 7/1/00 to 7/1/08 1,363,473 1,382,947 31369XSS
7%, 6/1/00 to 11/1/23 14,517,007 14,715,999 313615NC
7 1/2%, 3/1/99 to 10/1/23 18,227,331 18,745,685 31370EJN
8%, 5/1/99 to 12/1/23 14,022,282 14,626,370 31365DRS
8 1/2%, 10/1/98 to 9/1/23 6,549,315 6,877,311 31365SNH
9%, 11/1/97 to 1/1/23 12,686,204 13,447,068 31370HJF
9 1/2%, 5/1/09 to 11/1/21 1,151,969 1,244,485 31360AJ9
10%, 12/1/04 to1 /1/17 2,725,015 2,986,770 31369D7M
11%, 8/1/15 1,000,761 1,125,857 31360HUK
76,830,053
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 14.2%
6 1/2%, 12/15/23 300,000 295,548 36216L9X
7%, 1/15/23 to 9/15/23 3,715,319 3,755,929 36203KPU
7 1/2%, 1/15/23 to 10/15/23 5,822,241 5,998,722 36224SUX
8%, 12/15/16 to 7/15/21 5,185,450 5,426,894 362153RV
8 1/2%, 5/15/16 to 1/15/23 1,198,153 1,263,703 36223GQS
9%, 1/15/05 to 7/15/22 6,654,071 7,078,344 362157BX
9 1/2%, 9/15/20 3,995,840 4,299,245 362200KM
10%, 7/15/10 to 9/15/21 2,818,710 3,093,542 36223SLZ
10 1/2%, 1/15/18 to 12/15/20 493,242 553,665 36218JGT
11%, 12/15/09 to 12/15/15 6,454,623 7,346,693 3620764Y
11 1/2%, 10/15/10 to 8/15/13 636,006 731,412 362098XM
12 1/2%, 4/15/10 to 6/15/15 8,862,841 10,347,227 362069TH
13%, 8/15/14 338,028 397,386 36214S5X
50,588,310
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $137,658,455) 136,987,485
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 2.8%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 3.24% dated
11/30/93 due 12/1/93 $ 9,767,879 9,767,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $357,790,773) $ 355,076,581
LEGEND:
(a) Security purchased on a delayed delivery basis. (see Note 2 of Notes
to Financial Statements).
INCOME TAX INFORMATION:
At November 30, 1993, the aggregate cost of investment securities for
income tax purposes was $357,790,773. Net unrealized depreciation
aggregated $2,714,192, of which $640,002 related to appreciated investment
securities and $3,354,194 related to depreciated investment securities.
The fund hereby designates $56,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
For the year ended November 30, 1993, the net realized gain (loss) on
mortgage-backed security paydowns treated as ordinary income for income tax
purposes was $3,100,000.
For the period, 51.9% of the fund's dividends to shareholders were derived
from interest on U.S. government obligations.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
DRAFT
<TABLE>
<CAPTION>
<S> <C>
<C>
November 30, 1993
ASSETS
Investment in securities, at value (including repurchase agreements of $9,767,000)
(cost $357,790,773) (Notes 1 and $ 355,076,581
2) - See accompanying schedule
Cash 42
Receivable for investments sold 126,746
Interest receivable 4,439,046
Total assets 359,642,415
LIABILITIES
Payable for investments purchased $ 12,679,641
Regular delivery
Delayed delivery (Note 2) 1,612,756
Payable for fund shares redeemed 147,087
Dividends payable 138,559
Accrued management fee 129,129
Total liabilities 14,707,172
NET ASSETS $ 344,935,243
Net Assets consist of:
Paid in capital $ 345,628,937
Undistributed net investment
income 4,620,905
Accumulated undistributed net realized
gain (loss) on investments (2,600,407)
Net unrealized appreciation
(depreciation) on investment securities (2,714,192)
NET ASSETS, for 34,886,758 shares
outstanding $ 344,935,243
NET ASSET VALUE, offering price and
redemption price per share ($344,935,243
(divided by) 34,886,758 shares) $9.89
</TABLE>
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended November 30, 1993
INVESTMENT INCOME $ 19,366,159
Interest
EXPENSES
Management fee (Note 4) $ 1,146,451
Non-interested trustees' compensation 1,622
Interest (Note 5) 6,653
Total expenses 1,154,726
Net investment income 18,211,433
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3) (2,769,737)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on investment securities (955,551)
Net gain (loss) (3,725,288)
Net increase (decrease) in net assets resulting from operations $ 14,486,145
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C>
<C>
YEARS ENDED NOVEMBER
30,
1993 1992
INCREASE (DECREASE) IN NET ASSETS
Operations $ 18,211,433 $ 13,791,379
Net investment income
Net realized gain (loss)
on investments (2,769,737) 4,174,115
Change in net unrealized
appreciation (depreciation)
on investments (955,551) (4,522,712)
Net increase (decrease) in net
assets resulting from operations 14,486,145 13,442,782
Distributions to shareholders
from net investment income (14,931,133) (12,512,086)
Share transactions 411,321,789 142,860,904
Net proceeds from sales of
shares
Reinvestment of distributions
from net investment income 12,868,380 10,279,875
Cost of shares redeemed (267,728,359) (136,380,678)
Net increase (decrease)
in net assets resulting from
share transactions 156,461,810 16,760,101
Total increase (decrease)
in net assets 156,016,822 17,690,797
NET ASSETS
Beginning of period 188,918,421 171,227,624
End of period (including
undistributed net investment
income of $4,620,905 and
$1,340,605, respectively) $ 344,935,243 $ 188,918,421
OTHER INFORMATION
Shares
Sold 41,264,034 14,457,804
Issued in reinvestment
of distributions from
net investment income 1,290,945 1,042,737
Redeemed (26,852,251) (13,840,372)
Net increase (decrease) 15,702,728 1,660,169
</TABLE>
Financial Highlights
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED NOVEMBER 30,
1993 1992 1991 1990 1989
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.850 $ 9.770 $ 9.480 $ 9.520 $ 9.440
Income from Investment Operations .654 .721 .747 .813 .875
Net investment income
Net realized and unrealized gain
(loss) on investments (.022) .014 .286 (.040) .080
Total from investment operations .632 .735 1.033 .773 .955
Less Distributions (.592) (.655) .743) (.813) (.875)
From net investment income
Net asset value, end of period $ 9.890 $ 9.850 $ 9.770 $ 9.480 $ 9.520
TOTAL RETURN 6.53% 7.72% 11.31% 8.54% 10.61%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $ 344,935 $ 188,918 $ 171,228 $ 142,211 $ 151,574
Ratio of expenses to average
net assets .45% .45% .45% .45% .45%
Ratio of net investment income
to average net assets 7.14% 7.29% 7.77% 8.65% 9.26%
Portfolio turnover rate 351% 355% 192% 252% 689%
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 1993
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Institutional Short-Intermediate Government Portfolio (the fund)
is a fund of Fidelity Advisor Series IV (the trust) (formerly Fidelity
Income 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:
On November 10, 1993, the creation of a second class of shares, Fidelity
Institutional Short-Intermediate Government Portfolio II, was approved by
the Board of Trustees. Offering of these shares is expected to commence on
December 30, 1993. Both classes of shares will have equal rights as to
earnings, assets and voting privileges except that each class bears
different distribution expenses. Each class will have exclusive voting
rights with respect to its distribution plans.
SECURITY VALUATION. Securities are valued based upon a computerized matrix
system and/or appraisals by a pricing service, both of which consider
market transactions and dealer-supplied valuations. Short-term securities
maturing within sixty days are valued either at amortized cost or original
cost plus accrued interest, both of which approximate current value.
Securities 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 declared daily and paid
monthly from net investment income. Distributions from realized gains, if
any, are recorded on the ex-dividend date. Mortgage security paydown gains
(losses) are taxable as ordinary income and, therefore, increase (decrease)
taxable ordinary income available for distribution.
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.
REPURCHASE AGREEMENTS. The fund, through its custodian, receives delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. The fund's investment
adviser, Fidelity Management & Research Company (FMR), is responsible
for determining that the value of these underlying securities remains at
least equal to the resale price.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with other
registered investment companies having management contracts with FMR, may
transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements that are
collateralized by U.S. Treasury or Federal Agency obligations.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The fund
may receive compensation for interest forgone on entering into delayed
delivery transactions. The fund identifies securities as segregated in its
custodial records with a value at least equal to the amount of the purchase
commitment.
3. PURCHASES AND SALES OF INVESTMENTS.
Purchases and sales of long term U.S. government and government agency
obligations aggregated $1,066,113,564 and $893,798,089, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management &
Research Company (FMR) pays all expenses except the compensation of the
non-interested Trustees and certain exceptions such as interest, taxes,
brokerage commissions, extraordinary expenses and, effective December 30,
1993, 12b-1 fees for Fidelity Institutional Short-Intermediate Government
Portfolio II. FMR receives a fee that is computed daily at an annual rate
of .45% of the fund's average net assets.
DISTRIBUTION AND SERVICE PLAN. Effective December 30, 1993, Pursuant to the
Distribution and Service Plan (the Plan), and in accordance with Rule 12b-1
of the 1940 Act, Fidelity Institutional Short-Intermediate Government
Portfolio II will pay Fidelity Distributors Corporation (FDC), an affiliate
of FMR, a distribution and service fee that will be based on an annual rate
of .25% of its average net assets.
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 may authorize payments to
third parties that assist in the sale of the fund's shares or render
shareholder support services.
5. 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 $8,466,000 and $4,003,250
respectively. The weighted average interest rate was 3.73%.
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. NEITHER THE FUND NOR
FIDELITY DISTRIBUTORS CORPORATION IS A
BANK AND FUND SHARES ARE NOT BACKED OR GUARANTEED BY ANY BANK OR INSURED BY
THE FDIC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Fidelity Advisor Series IV and the Shareholders of
Fidelity Institutional Short-Intermediate Government Portfolio:
We have audited the accompanying statement of assets and liabilities of
Fidelity Advisor Series IV: Fidelity Institutional Short- Intermediate
Government Portfolio, including the schedule of portfolio investments, as
of November 30, 1993, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1993 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Institutional Short-Intermediate
Government Portfolio as of November 30, 1993, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
December 22, 1993
DISTRIBUTIONS
The Board of Trustees of Fidelity Institutional Short-Intermediate
Government Portfolio voted to pay on December 20, 1993, to shareholders of
record at the opening of business on December 17, 1993, a distribution of
$.01 derived from capital gains realized from sales of portfolio
securities.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Curtis Hollingsworth, VICE PRESIDENT
Gary L. French, TREASURER
John H. Costello, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND
SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional
Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
