FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO: CLASS I
ANNUAL REPORT
NOVEMBER 30, 1994
PERFORMANCE UPDATE
$100,000 OVER LIFE OF FUND
Fidelity InstitutionLehman Brothers 1-3
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
12/31/93 173380.55 171334.48
01/31/94 174965.57 172396.75
02/28/94 173462.45 171345.13
03/31/94 170555.21 170471.27
04/30/94 169678.01 169823.48
05/31/94 169851.74 170061.23
06/30/94 170052.90 170486.38
07/31/94 171933.29 172020.76
08/31/94 172405.48 172588.43
09/30/94 171630.60 172191.48
10/31/94 171952.98 172587.52
11/30/94 171334.87 171862.65
$100,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO (CLASS I) ON NOVEMBER
30, 1986, SHORTLY AFTER THE FUND STARTED. BY NOVEMBER 30, 1994, YOUR
INVESTMENT WOULD HAVE GROWN TO $171,335 - A 71.34% 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 $171,863 - A
71.86% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
LEHMAN BROTHERS
1-3 YEAR GOV'T.
BOND INDEX
CLASS I
FOR THE PERIOD ENDED NOVEMBER 30, 1994
One-year total return* -0.71% 0.72%
Five-year average annual total return* 6.60% 6.69%
Life of fund average annual total return* 6.97% n/a
FOR THE PERIOD ENDED NOVEMBER 30, 1994
One-year total return* -0.71% 0.72%
Five-year cumulative total return* 37.67% 38.22%
Life of fund cumulative total return* 72.18% n/a
CUMULATIVE TOTAL RETURNS
CLASS I
FOR THE PERIOD ENDED NOVEMBER 30, 1994
30-day annualized net yield 6.73%
One-year dividends per share 60.17(cents)
One-year annualized dividend rate** 6.29%
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
(THE LEHMAN BROTHERS RETURNS BEGIN ON THE MONTH END CLOSEST TO THE FUNDS
START DATE.) IT INCLUDES REINVESTED DIVIDENDS AND CAPITAL GAINS, IF ANY.
ON DECEMBER 30, 1993, THE FUND BEGAN OFFERING CLASS II SHARES, AT WHICH
TIME A .25% 12B-1 FEE WAS IMPOSED. PERFORMANCE INFORMATION FOR CLASS II
PRIOR TO DECEMBER 30, 1993 REFLECTS THE PERFORMANCE OF CLASS I AND,
THEREFORE, DOES NOT REFLECT THE CLASS II 12B-1 FEE WHICH, IF INCLUDED,
WOULD HAVE LOWERED CLASS II'S PERFORMANCE. FOR THE PERIOD ENDED NOVEMBER
30, 1994, CLASS II AVERAGE ANNUAL TOTAL RETURNS WERE -0.93%, 6.55% AND
6.94% FOR ONE YEAR, FIVE YEARS AND LIFE OF FUND, RESPECTIVELY. CUMULATIVE
TOTAL RETURNS WERE -0.93%, 37.35% AND 71.79% FOR ONE YEAR, FIVE YEARS AND
LIFE OF THE FUND, RESPECTIVELY. CLASS II'S 30-DAY ANNUALIZED NET YIELD WAS
6.48%.
** THE DIVIDEND RATE REFLECTS ACTUAL DIVIDENDS PAID DURING THE PERIOD. IT
IS BASED ON AN AVERAGE SHARE PRICE OF $9.56.
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.
AN INTERVIEW WITH
CURT HOLLINGSWORTH,
PORTFOLIO MANAGER OF
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE
GOVERNMENT PORTFOLIO I
Q. CURT, HOW DID THE FUND PERFORM?
A. It had a negative return, although it did beat the average fund. Total
return reflects monthly interest payments and changes in share price, and
can include capital gains that occur when the fund profits from selling
bonds that have grown in value. For the 12 months ended November 30, 1994,
the fund had a cumulative total return of -0.71%. According to Lipper
Analytical Services, the average short-term government bond fund had a
return of -1.51% for the same period.
Q. WHAT HAS THE BOND MARKET ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS?
A. Interest rates have gone up quite a bit in a short period of time,
causing bond prices to fall. This is the main reason the fund had a
negative return. The Federal Reserve Board raised short-term interest rates
six times from February through December, actions designed to head off
inflation. Investors and the Fed have been concerned about inflation
because the economy has been strong and commodity prices have been rising.
Inflation eats away at a bond's fixed-income payments. As a result, bond
yields have been rising and bond prices have been falling.
Q. YET THE FUND PERFORMED BETTER THAN ITS COMPETITORS.
A. Right, mainly through careful sector weighting and security selection.
Earlier in the period, I employed a defensive barbell strategy - heavily
weighting the two ends of the maturity spectrum - with most of the fund in
cash and short-term investments on one end and securities with longer
maturities on the other. Toward the end of the period, I switched to a
ladder strategy, spacing the maturities of the bonds evenly along the
maturity spectrum. This is a more neutral structure.
Q. WHAT OTHER CHANGES HAVE YOU MADE TO THE FUND'S STRUCTURE?
A. I reduced the percentage of the fund in mortgage-backed securities over
the course of the period, because their prices had dropped less than
comparable Treasury notes during the market downturn, causing them to have
less relative value. At the same time, U.S. government agency issues became
more attractive, so I've increased the fund's investments there. The fund's
cash position has decreased as well, as I've moved to a laddered structure.
The fund's investments in Treasury bonds also have increased, as a result
of the moves I've described.
Q. THINKING BACK, DO YOU HAVE ANY REGRETS?
A. The fund would have added value if it had stayed in a barbell structure
a bit longer. That's because the yields on 3-year Treasury bonds continued
to rise quickly. Remember, bond yields and prices move in opposite
directions. If the fund had stayed in the barbell, it wouldn't have been
exposed to that area.
Q. WHAT ABOUT DERIVATIVES? HAVE YOU USED THEM?
A. While the fund has the authority to use futures contracts or other
derivatives, I haven't used them much because I've been able to implement
my strategies without them. However, on November 30, the fund did have a
0.5% stake in collateralized mortgage obligations or CMOs, which are
technically considered derivatives. These are more complicated types of
mortgage-backed bonds that funds sometimes use instead of conventional
mortgage securities. I should note that the effect of the fund's small
investment in these securities on its performance was negligible.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I believe the Fed will probably continue to raise short-term interest
rates. At the same time, the yield curve has flattened substantially. That
means that while short-term yields have continued to rise, those for the
30-year Treasury bond have stabilized and at times fallen. This is a sign
that the Fed's moves are welcomed by long-term bond investors, or, that its
inflation-fighting resolve is credible. Yields on short-term bonds could
continue to rise, and may even surpass long-term yields.
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO
INVESTMENTS/NOVEMBER 30, 1994
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 - 62.3%
U.S. TREASURY OBLIGATIONS - 50.4%
9 1/4%, 1/15/96 $ 102,900,000 $ 105,279,048
7 7/8%, 2/15/96 9,100,000 9,172,527
8 7/8%, 11/15/97 9,900,000 10,217,097
9 1/4%, 8/15/98 46,530,000 48,725,751
173,394,423
U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.9%
Federal Agricultural Mortgage Corporation
6.44%, 5/28/96 3,500,000 3,463,915
Federal Home Loan Bank 7.65%, 10/28/99 7,400,000 7,294,402
Federal National Mortgage Association
euro 8.45%, 11/4/96 3,000,000 3,045,210
9.4%, 8/10/98 600,000 632,436
0%, 11/30/99 610,000 410,353
Government Trust Certificates Class 1-B
(assets of Trust guaranteed by U.S.
Government through Defense Security
Assistance) 9 1/8%, 11/15/96 850,000 864,042
Government Trust Certificates,
Series 1992-A (assets of Trust
guaranteed by U.S. Government
through Export-Import Bank)
7.02%, 9/1/04 1,335,000 1,269,084
Government Trust Certificates, Series
1994-F (assets of Trust guaranteed by
U.S. Government through Export-Import
Bank) 8.187%, 12/15/04 14,000,000 13,934,375
State of Israel (guaranteed by U.S.
Government through Agency of
International Development):
4 7/8%, 9/15/98 3,250,000 2,927,031
7 3/4%, 4/01/98 5,169,717 5,192,334
7 3/4%, 11/15/99 1,700,000 1,681,300
Tennessee Valley Authority 8 1/4%,
11/15/96 500,000 505,655
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 41,220,137
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $222,214,072) 214,614,560
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - 30.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.9%
5 1/2%, 5/1/98 $ 95,785 $ 90,366
6%, 2/1/98 to 5/1/98 471,466 448,186
6 1/2%, 4/1/98 to 5/1/08 2,407,888 2,236,115
7%, 2/1/97 to 12/1/97 478,629 464,870
7 1/2%, 12/1/96 268,756 264,639
8%, 9/1/96 to 12/1/09 3,018,127 2,966,293
8 1/2%, 3/1/96 to 5/1/17 4,761,857 4,757,567
9%, 12/1/07 to 3/1/22 4,355,162 4,402,487
9 1/2%, 6/1/17 to 2/1/23 4,859,915 5,028,342
10%, 12/1/11 to 6/1/20 1,444,050 1,510,449
10 1/2%, 1/1/16 to 12/1/20 5,120,661 5,436,871
11%, 6/1/13 to 1/1/19 92,827 99,900
11 1/2%, 9/1/15 52,357 57,429
11 3/4%, 7/1/13 57,130 62,359
12%, 9/1/11 to 10/1/13 59,066 64,854
12 1/4%, 11/1/14 204,862 223,902
12 1/2%, 8/1/10 to 6/1/19 5,380,107 6,119,226
34,233,855
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.6%
6%, 9/1/08 688,630 616,537
6 1/2%, 7/1/00 to 6/1/09 1,324,825 1,230,716
7%, 6/1/00 to 6/1/24 13,391,253 12,259,862
7 1/2%, 3/1/99 to 5/1/08 3,666,829 3,522,591
8%, 5/1/99 to 11/1/09 3,420,546 3,360,500
8 1/4%, 12/1/01 (a) 1,909,000 1,912,580
8 1/2%, 10/1/98 to 9/1/23 4,129,114 4,086,534
9%, 11/1/97 to 8/1/21 2,737,323 2,769,347
9 1/5%, 5/1/09 to 11/1/21 720,549 746,788
10%, 1/1/17 1,815,472 1,922,367
12 1/2%, 3/1/16 323,668 365,340
12 3/4%, 10/1/13 134,811 151,831
32,944,993
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 11.0%
7 1/2%, 1/15/23 to 3/15/24 15,911,613 14,633,844
8%, 12/15/16 to 7/15/24 8,984,167 8,590,506
8 1/2%, 5/15/16 to 4/15/17 749,044 738,417
9%, 1/15/05 to 12/15/20 5,848,404 5,893,015
10%, 7/15/10 to 12/15/17 675 1,156
10 1/2%, 1/15/18 to 12/15/20 326,867 353,250
11%, 10/15/13 83,439 89,905
11 1/2%, 3/15/13 to 8/15/13 230,134 256,310
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - continued
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
12 1/2%, 4/15/10 to 12/15/14 $ 5,565,320 $ 6,344,902
13%, 8/15/14 to 11/15/14 467,762 533,530
13 1/2%, 7/15/11 100,974 117,130
15%, 7/15/12 to 9/15/12 129,696 153,691
37,705,656
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $109,147,771) 104,884,504
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
U.S. GOVERNMENT AGENCY - 0.5%
Federal National Mortgage Association
Series 1987-2, Z tranche, 11%, 11/25/17
(Cost $1,633,657) 1,506,543 1,621,416
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 6.7%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 23,129,668 23,126,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $356,121,500) $ 344,246,480
LEGEND:
(a) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION:
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $356,429,031. Net unrealized depreciation
aggregated $12,182,551, of which $106,561 related to appreciated investment
securities and $12,289,112 related to depreciated investment securities.
At November 30, 1994, the fund had a capital loss carryforward of
approximately $14,816,000 which will expire on November 30, 2002.
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
Leonard M. Rush, ASSISTANT TREASURER
Arthur S. Loring, SECRETARY
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND
SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional
Operations Company
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO: CLASS II
ANNUAL REPORT
NOVEMBER 30, 1994
PERFORMANCE UPDATE
$100,000 OVER LIFE OF FUND
Fidelity InstitutionLehman Brothers 1-3
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
12/31/93 173380.55 171334.48
01/31/94 174929.29 172396.75
02/28/94 173390.37 171345.13
03/31/94 170448.64 170471.27
04/30/94 169535.49 169823.48
05/31/94 169673.83 170061.23
06/30/94 169839.31 170486.38
07/31/94 171682.12 172020.76
08/31/94 172299.40 172588.43
09/30/94 171307.85 172191.48
10/31/94 171594.09 172587.52
11/30/94 170941.85 171862.65
$100,000 OVER LIFE OF FUND: LET'S SAY YOU INVESTED $100,000 IN FIDELITY
INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO II (CLASS II) ON
NOVEMBER 30, 1986, WHEN THE FUND STARTED. BY NOVEMBER 30, 1994, YOUR
INVESTMENT WOULD BE VALUED AT $170,942 - A 70.94% 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 BE VALUED AT $171,863 - A
71.86% INCREASE.
AVERAGE ANNUAL TOTAL RETURNS
LEHMAN BROTHERS
1-3 YEAR GOV'T.
BOND INDEX
CLASS II
FOR THE PERIOD ENDED NOVEMBER 30, 1994
One-year total return* -0.93% 0.72%
Five-year average annual total return* 6.55% 6.69%
Life of fund average annual total return* 6.94% n/a
FOR THE PERIOD ENDED NOVEMBER 30, 1994
One-year total return* -0.93% 0.72%
Five-year cumulative total return* 37.35% 38.22%
Life of fund cumulative total return* 71.79% n/a
CUMULATIVE TOTAL RETURNS
CLASS II
FOR THE PERIOD ENDED NOVEMBER 30, 1994
30-day annualized net yield 6.48%
Life of fund dividends per share 53.24(cents)
Annualized dividend rate** 6.09%
YIELD AND DIVIDENDS
ON DECEMBER 30, 1993, THE FUND BEGAN OFFERING CLASS II SHARES, AT WHICH
TIME A .25% 12B-1 FEE WAS IMPOSED. PERFORMANCE INFORMATION FOR CLASS II
PRIOR TO DECEMBER 30, 1993 REFLECTS PERFORMANCE OF CLASS I AND, THEREFORE,
DOES NOT REFLECT THE CLASS II 12B-1 FEE WHICH, IF INCLUDED, WOULD HAVE
LOWERED CLASS II'S PERFORMANCE.
* TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS, IF ANY. AVERAGE ANNUAL TOTAL RETURN 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, DECEMBER
30, 1993, 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.
FOR THE PERIOD ENDED NOVEMBER 30, 1994, FIDELITY INSTITUTIONAL
SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO (CLASS I) AVERAGE ANNUAL TOTAL
RETURNS WERE -0.71%, 6.60%, AND 6.97% FOR ONE YEAR, FIVE YEARS, AND LIFE OF
FUND, RESPECTIVELY. FOR THE PERIOD ENDED NOVEMBER 30, 1994, CLASS I
CUMULATIVE TOTAL RETURNS WERE -0.71%, 37.67%, AND 72.18% FOR ONE YEAR, FIVE
YEARS, AND LIFE OF FUND, RESPECTIVELY. CLASS I'S 30-DAY ANNUALIZED NET
YIELD WAS 6.73%.
** THE DIVIDEND RATE REFLECTS ACTUAL DIVIDENDS PAID DURING THE PERIOD. IT
IS BASED ON AN AVERAGE SHARE PRICE OF $9.53.
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.
AN INTERVIEW WITH
CURT HOLLINGSWORTH,
PORTFOLIO MANAGER OF
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE
GOVERNMENT PORTFOLIO II
Q. CURT, HOW DID THE FUND PERFORM?
A. It had a negative return, although it did beat the average fund. Total
return reflects monthly interest payments and changes in share price, and
can include capital gains that occur when the fund profits from selling
bonds that have grown in value. For the 12 months ended November 30, 1994,
the fund had a cumulative total return of -0.93%. According to Lipper
Analytical Services, the average short-term government bond fund had a
return of -1.99% for the same period.
Q. WHAT HAS THE BOND MARKET ENVIRONMENT BEEN LIKE OVER THE PAST SIX MONTHS?
A. Interest rates have gone up quite a bit in a short period of time,
causing bond prices to fall. This is the main reason the fund had a
negative return. The Federal Reserve Board raised short-term interest rates
six times from February through December, actions designed to head off
inflation. Investors and the Fed have been concerned about inflation
because the economy has been strong and commodity prices have been rising.
Inflation eats away at a bond's fixed-income investments. As a result, bond
yields have been rising and bond prices have been falling.
Q. YET THE FUND PERFORMED BETTER THAN ITS COMPETITORS.
A. Right, mainly through careful sector weighting and security selection.
Earlier in the period, I employed a defensive barbell strategy - heavily
weighting the two ends of the maturity spectrum - with most of the fund in
cash and short-term investments on one end and securities with longer
maturities on the other. Toward the end of the period, I switched to a
ladder strategy, spacing the maturities of the bonds evenly along the
maturity spectrum. This is a more neutral structure.
Q. WHAT OTHER CHANGES HAVE YOU MADE TO THE FUND'S STRUCTURE?
A. I reduced the percentage of the fund in mortgage-backed securities over
the course of the period, because their prices had dropped less than
comparable Treasury notes during the market downturn, causing them to have
less relative value. At the same time U.S. government agency issues became
more attractive, so I've increased the fund's investments there. The fund's
cash position has decreased as well, as I've moved to a laddered structure.
The fund's investments in Treasury bonds also have increased, as a result
of the moves I've described.
Q. THINKING BACK, DO YOU HAVE ANY REGRETS?
A. The fund would have added value if it had stayed in a barbell structure
a bit longer. That's because yields on 3-year Treasury bonds continued to
rise quickly. Remember, bond yields and prices move in opposite directions.
If the fund had stayed in the barbell, it wouldn't have been exposed to
that area.
Q. WHAT ABOUT DERIVATIVES? HAVE YOU USED THEM?
A. While the fund has the authority to use futures contracts or other
derivatives, I haven't used them much because I've been able to implement
my strategies without them. However, on November 30, the fund did have a
0.5% stake in collateralized mortgage obligations or CMOs, which are
technically considered derivatives. These are more complicated types of
mortgage-backed bonds that funds sometimes use instead of conventional
mortgage securities. I should note that the effect of the fund's small
investment in these securities on its performance was negligible.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I believe the Fed will probably continue to raise short-term interest
rates. At the same time, the yield curve has flattened substantially. That
means that while short-term yields have continued to rise, those for the
30-year Treasury bond have stabilized and at times fallen. This is a sign
that the Fed's moves are welcomed by long-term bond investors, or, that its
inflation-fighting resolve is starting to pay off. Yields on short-term
bonds could continue to rise, and may even surpass long-term yields.
FIDELITY INSTITUTIONAL SHORT-INTERMEDIATE GOVERNMENT PORTFOLIO
INVESTMENTS/NOVEMBER 30, 1994
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 - 62.3%
U.S. TREASURY OBLIGATIONS - 50.4%
9 1/4%, 1/15/96 $ 102,900,000 $ 105,279,048
7 7/8%, 2/15/96 9,100,000 9,172,527
8 7/8%, 11/15/97 9,900,000 10,217,097
9 1/4%, 8/15/98 46,530,000 48,725,751
173,394,423
U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.9%
Federal Agricultural Mortgage Corporation
6.44%, 5/28/96 3,500,000 3,463,915
Federal Home Loan Bank 7.65% 10/28/99 7,400,000 7,294,402
Federal National Mortgage Association
euro 8.45%, 11/4/96 3,000,000 3,045,210
9.4%, 8/10/98 600,000 632,436
0%, 11/30/99 610,000 410,353
Government Trust Certificates Class 1-B
(assets of Trust guaranteed by U.S.
Government through Defense Security
Assistance) 9 1/8%, 11/15/96 850,000 864,042
Government Trust Certificates,
Series 1992-A (assets of Trust
guaranteed by U.S. Government
through Export-Import Bank)
7.02%, 9/1/04 1,335,000 1,269,084
Government Trust Certificates, Series
1994-F (assets of Trust guaranteed by
U.S. Government through Export-Import
Bank) 8.187%, 12/15/04 14,000,000 13,934,375
State of Israel (guaranteed by U.S. Government
through Agency of International Development):
4 7/8%, 9/15/98 3,250,000 2,927,031
7 3/4%, 4/01/98 5,169,717 5,192,334
7 3/4%, 11/15/99 1,700,000 1,681,300
Tennessee Valley Authority 8 1/4%,
11/15/96 500,000 505,655
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS 41,220,137
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS
(Cost $222,214,072) 214,614,560
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - 30.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.9%
5 1/2%, 5/1/98 $ 95,785 $ 90,366
6%, 2/1/98 to 5/1/98 471,466 448,186
6 1/2%, 4/1/98 to 5/1/08 2,407,888 2,236,115
7%, 2/1/97 to 12/1/97 478,629 464,870
7 1/2%, 12/1/96 268,756 264,639
8%, 9/1/96 to 12/1/09 3,018,127 2,966,293
8 1/2%, 3/1/96 to 5/1/17 4,761,857 4,757,567
9%, 12/1/07 to 3/1/22 4,355,162 4,402,487
9 1/2%, 6/1/17 to 2/1/23 4,859,915 5,028,342
10%, 12/1/11 to 6/1/20 1,444,050 1,510,449
10 1/2%, 1/1/16 to 12/1/20 5,120,661 5,436,871
11%, 6/1/13 to 1/1/19 92,827 99,900
11 1/2%, 9/1/15 52,357 57,429
11 3/4%, 7/1/13 57,130 62,359
12%, 9/1/11 to 10/1/13 59,066 64,854
12 1/4%, 11/1/14 204,862 223,902
12 1/2%, 8/1/10 to 6/1/19 5,380,107 6,119,226
34,233,855
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.6%
6%, 9/1/08 688,630 616,537
6 1/2%, 7/1/00 to 6/1/09 1,324,825 1,230,716
7%, 6/1/00 to 6/1/24 13,391,253 12,259,862
7 1/2%, 3/1/99 to 5/1/08 3,666,829 3,522,591
8%, 5/1/99 to 11/1/09 3,420,546 3,360,500
8 1/4%, 12/1/01 (a) 1,909,000 1,912,580
8 1/2%, 10/1/98 to 9/1/23 4,129,114 4,086,534
9%, 11/1/97 to 8/1/21 2,737,323 2,769,347
9 1/5%, 5/1/09 to 11/1/21 720,549 746,788
10%, 1/1/17 1,815,472 1,922,367
12 1/2%, 3/1/16 323,668 365,340
12 3/4%, 10/1/13 134,811 151,831
32,944,993
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 11.0%
7 1/2%, 1/15/23 to 3/15/24 15,911,613 14,633,844
8%, 12/15/16 to 7/15/24 8,984,167 8,590,506
8 1/2%, 5/15/16 to 4/15/17 749,044 738,417
9%, 1/15/05 to 12/15/20 5,848,404 5,893,015
10%, 7/15/10 to 12/15/17 675 1,156
10 1/2%, 1/15/18 to 12/15/20 326,867 353,250
11%, 10/15/13 83,439 89,905
11 1/2%, 3/15/13 to 8/15/13 230,134 256,310
PRINCIPAL VALUE
AMOUNT (NOTE 1)
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES - continued
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - CONTINUED
12 1/2%, 4/15/10 to 12/15/14 $ 5,565,320 $ 6,344,902
13%, 8/15/14 to 11/15/14 467,762 533,530
13 1/2%, 7/15/11 100,974 117,130
15%, 7/15/12 to 9/15/12 129,696 153,691
37,705,656
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Cost $109,147,771) 104,884,504
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
U.S. GOVERNMENT AGENCY - 0.5%
Federal National Mortgage Association
Series 1987-2 Z tranche, 11%, 11/25/17
(Cost $1,633,657) 1,506,543 1,621,416
MATURITY
AMOUNT
REPURCHASE AGREEMENTS - 6.7%
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.71% dated
11/30/94 due 12/1/94 $ 23,129,668 23,126,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $356,121,500) $ 344,246,480
LEGEND:
(a) Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION:
At November 30, 1994, the aggregate cost of investment securities for
income tax purposes was $356,429,031. Net unrealized depreciation
aggregated $12,182,551, of which $106,561 related to appreciated investment
securities and $12,289,112 related to depreciated investment securities.
At November 30, 1994, the fund had a capital loss carryforward of
approximately $14,816,000 which will expire on November 30, 2002.
Statement of Assets and Liabilities
DRAFT
November 30, 1994
ASSETS
Investment in securities, at value $ 344,246,480
(including repurchase
agreements of $23,126,000)
(cost $356,121,500) - See
accompanying schedule
Cash 230,088
Receivable for investments sold 5,641,072
Interest receivable 6,210,605
Total assets 356,328,245
LIABILITIES
Payable for investments $ 10,894,381
purchased
Regular delivery
Delayed delivery 4,119,370
Payable for fund shares 1,159,655
redeemed
Dividends payable 139,535
Accrued management fee 128,106
Distribution fees payable 145
Total liabilities 16,441,192
NET ASSETS $ 339,887,053
Net Assets consist of:
Paid in capital $ 366,683,545
Undistributed net investment 219,388
income
Accumulated undistributed net (15,140,860)
realized gain (loss) on
investments
Net unrealized appreciation (11,875,020)
(depreciation) on investments
NET ASSETS $ 339,887,053
CLASS I: $9.21
NET ASSET VALUE, offering price
and redemption price per share
($339,788,461 (divided by) 36,878,726
shares)
CLASS II: $9.21
NET ASSET VALUE, offering price
and redemption price per share
($98,592 (divided by) 10,702 shares)
Statement of Operations
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended November 30, 1994
INVESTMENT INCOME $ 26,552,479
Interest
EXPENSES
Management fee $ 1,589,438
Distribution fees - Class II 226
Non-interested trustees' compensation 2,119
Interest 531
Total expenses 1,592,314
Net investment income 24,960,165
REALIZED AND UNREALIZED GAIN (LOSS) (17,869,674)
Net realized gain (loss) on investment securities
Change in net unrealized appreciation (depreciation) on investment securities (9,160,828)
Net gain (loss) (27,030,502)
Net increase (decrease) in net assets resulting from operations $ (2,070,337)
</TABLE>
Statement of Changes in Net Assets
DRAFT
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 24,960,165 $ 18,211,433
Net investment income
Net realized gain (loss) (17,869,674) (2,769,737)
Change in net unrealized appreciation (depreciation) (9,160,828) (955,551)
Net increase (decrease) in net assets resulting from operations (2,070,337) 14,486,145
Distributions to shareholders from:
Net investment income
Class I (22,380,525) (14,931,133)
Class II (5,500) -
In excess of net realized gain - Class I (314,479) -
Total Distributions (22,700,504) (14,931,133)
Net increase (decrease) in net assets resulting from share transactions 19,722,651 156,461,810
Total increase (decrease) in net assets (5,048,190) 156,016,822
NET ASSETS
Beginning of period 344,935,243 188,918,421
End of period (including undistributed net investment income of $219,388 and $4,620,905, $ 339,887,053 $ 344,935,243
respectively)
</TABLE>
FINANCIAL HIGHLIGHTS
DRAFT
CLASS II CLASS I
YEAR ENDED YEARS ENDED NOVEMBER 30,
NOVEMBER 30,
1994 C 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.880 $ 9.890 $ 9.850 $ 9.770 $ 9.480 $ 9.520
Income from Investment Operations
Net investment income .524 .597 .654 .721 .747 .813
Net realized and unrealized gain (loss) on investments (.662) (.665) (.022) .014 .286 (.040)
Total from investment operations (.138) (.068) .632 .735 1.033 .773
Less Distributions
From net investment income (.532) (.602) (.592) (.655) (.743) (.813)
In excess of net realized gain - (.010) - - - -
Total distributions (.532) (.612) (.592) (.655) (.743) (.813)
Net asset value, end of period $ 9.210 $ 9.210 $ 9.890 $ 9.850 $ 9.770 $ 9.480
TOTAL RETURN B (1.41)% (.71)% 6.53% 7.72% 11.31% 8.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 99 $ 339,788 $ 344,935 $ 188,918 $ 171,228 $ 142,211
Ratio of expenses to average net assets .70% A .45% .45% .45% .45% .45%
Ratio of net investment income to average net assets 6.79% A 7.06% 7.14% 7.29% 7.77% 8.65%
Portfolio turnover 303% 303% 351% 355% 192% 252%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FOR THE PERIOD DECEMBER 30, 1993 (COMMENCEMENT OF SALES OF CLASS II
SHARES) TO NOVEMBER 30, 1994.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 1994
1. SIGNIFICANT ACCOUNTING POLICIES.
Fidelity Institutional Short-Intermediate Government Portfolio (the fund)
is a fund of Fidelity Advisor Series IV (the trust) and is authorized to
issue an unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
The fund offers Class I and Class II shares, each of which has equal rights
as to assets and voting privileges except that Class II bears a
distribution expense directly. Each class has exclusive voting rights with
respect to its distribution plan. The fund commenced sale of Class II
shares on December 30, 1993. Investment income, realized and unrealized
capital gains and losses, and expenses (other than expenses incurred under
Class II's Distribution and Service Plan) 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.
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 the fiscal
year. The schedule of investments include information regarding income
taxes under the caption "Income Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of original
issue discount, is accrued as earned.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends are declared separately for each class,
while capital gain distributions are declared at the fund level and
allocated to each class on a prorata basis based on the number of shares
held by each class on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
market discount, paydown gains/losses on certain securities 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 net investment income per share. Accumulated undistributed net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective December
1,1993, the fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, amounts as of the beginning of the fiscal year have been
reclassified to reflect an increase in paid in capital of $1,331,924, a
decrease in undistributed net investment income of $4,229,250 and a
decrease in accumulated net realized loss on investments of $2,897,326.
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 fund, along with other affiliated
entities of FMR, may transfer uninvested cash balances into one or more
joint trading account. 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.
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
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 $953,710,730 and $951,032,114, respectively.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR pays all expenses,
except the compensation of the non-interested Trustees and certain
exceptions such as interest, taxes, brokerage commissions and extraordinary
expenses and effective December 30, 1993, 12b-1 fees for Class II. FMR
receives a fee that is computed daily at an annual rate of .45% of each
fund's average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the 1940
Act, the Trustees have adopted a distribution plan with respect to the
fund's Class II shares ("Class II 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% of
the average net assets. For the period, the fund paid FDC $226.
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 $3,316,000 and $2,719,000,
respectively. The weighted average interest rate was 3.5%.
6. SHARE TRANSACTIONS.
Share transactions for both classes were as follows:
SHARES DOLLARS
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994(A) 1993 1994(A) 1993
CLASS I
Shares sold 14,781,825 41,264,034 $ 142,171,327 $ 411,321,789
Reinvestment of distributions from net investment income 2,187,213
1,290,945 20,788,384 12,868,380
Shares redeemed (14,977,070) (26,852,251) (143,342,560) (267,728,359)
Net increase (decrease) 1,991,968 15,702,728 $ 19,617,151 $ 156,461,810
CLASS II
Shares sold 10,121 - $ 100,000 -
Reinvestment of distributions from net investment income 581 - 5,500 -
Net increase (decrease) 10,702 - $ 105,500 -
(a) Share transactions for Class II are for the period December 30, 1993
(commencement of sale of shares) to November 30, 1994.
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 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.
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, 1994, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended (Class I) and for the period December
30, 1993 (commencement of Class II shares) to November 30, 1994 (Class II).
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Fidelity Advisor Series IV: Fidelity Institutional Short-Intermediate
Government Portfolio as of November 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended (Class I ) and for the
period December 30, 1993 (commencement of sale of Class II shares) to
November 30,1994 (Class II), in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 9, 1995
DISTRIBUTIONS
39.87% of the dividends during the fiscal year was derived from interest on
U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 1995 of the applicable
percentage for use in preparing 1994 income tax returns.
INVESTMENT 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
FINANCIAL HIGHLIGHTS CLASS A
DRAFT
CLASS II C
YEAR ENDED
NOVEMBER
30,
1994
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 9.880
Income from Investment Operations
Net investment income .588
Net realized and unrealized gain (loss) on investments (.716)
Total from investment operations (.128)
Less Distributions
From net investment income (.532)
From net realized gain (.010)
Total distributions (.542)
Net asset value, end of period $ 9.210
TOTAL RETURN B (.93)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 99
Ratio of expenses to average net assets .72% A
Ratio of net investment income to average net assets 6.78% A
Portfolio turnover 303%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
C FOR THE PERIOD DECEMBER 31, 1993 (COMMENCEMENT OF SALES OF CLASS II
SHARES) TO NOVEMBER 30, 1994.
